<PAGE>
AIM EQUITY FUNDS, INC.
INSTITUTIONAL CLASSES
ANNUAL REPORT
OCTOBER 31, 1995
AIM CHARTER FUND
[LOGO AIM CONSTELLATION FUND
APPEARS HERE] AIM WEINGARTEN FUND
Fund Management Company
<PAGE>
TABLE OF CONTENTS
A MESSAGE FROM THE CHAIRMAN 1
AIM CHARTER FUND
Important Fund Disclosures 2
Management's Discussion & Analysis 3
Schedule of Investments 5
Statement of Assets and Liabilities 16
Statement of Operations 17
Statement of Changes in Net Assets 18
Notes to Financial Statements 19
Independent Auditors' Report 23
Directors & Officers 24
AIM CONSTELLATION FUND
Important Fund Disclosures 25
Management's Discussion & Analysis 26
Schedule of Investments 28
Statement of Assets and Liabilities 40
Statement of Operations 41
Statement of Changes in Net Assets 42
Notes to Financial Statements 43
Independent Auditors' Report 47
Directors & Officers 48
AIM WEINGARTEN FUND
Important Fund Disclosures 49
Management's Discussion & Analysis 50
Schedule of Investments 52
Statement of Assets and Liabilities 62
Statement of Operations 63
Statement of Changes in Net Assets 64
Notes to Financial Statements 65
Independent Auditors' Report 69
Directors & Officers 70
<PAGE>
A Message from
the Chairman
Dear Fellow Shareholder:
It was, we are pleased to report, an exemplary year for AIM
Equity Funds, Inc. For the year ended October 31, 1995, the
Funds managed to outperform their respective benchmark
[PHOTO OF indexes as well as results charted for similar funds. As a
CHARLES T. BAUER result, the Funds' performance was widely recognized in such
CHAIRMAN OF THE publications as: The Wall Street Journal, Investor's Business
BOARD OF THE FUND Daily, Barron's, and Kiplinger's Personal Finance Magazine.
APPEARS HERE]
A more complete discussion of market conditions during the
reporting period and each Fund's investment strategy is
offered in MANAGEMENT'S DISCUSSION & ANALYSIS sections later in this report. For
the record, key indexes posted the following one-year total returns for the
reporting period: the Dow Jones Industrial Average and the Standard & Poor's
500, two major market averages, 24.92% and 26.36%, respectively; and the NASDAQ
Composite and the Russell 2000, two measures of small company stock performance,
33.26% and 18.35%, respectively.
AIM CHARTER FUND
AIM Charter Fund, which invests for growth and income, delivered a strong total
return of 27.45% for the Institutional Class of shares, including reinvested
distributions of $0.565, for the fiscal year. The Fund not only outperformed the
S&P 500, but also the 19.96% total return posted for the same period by similar
growth and income funds as measured by the Lipper Growth and Income Fund Index.
The Fund's net assets grew during the period from $1.60 billion to $2.07
billion.
AIM CONSTELLATION FUND
AIM Constellation Fund, which invests in mid-size and smaller companies,
delivered an outstanding total return of 34.09% for the Institutional Class for
the fiscal year, exceeding the 33.26% posted by the NASDAQ Composite Index, the
best-performing market index for the period. In addition to outperforming the
major market indexes, the S&P 500 and the DJIA, the Fund also outpaced the
Standard & Poor's 400 Mid-Cap Index, which posted a total return of 21.18% for
the reporting period. The Fund experienced impressive growth in net assets
during the reporting period--from $3.77 billion to $7.14 billion.
AIM WEINGARTEN FUND
With a total return for the Institutional Class of 28.69%, including reinvested
distributions of $1.905, AIM Weingarten Fund decisively outperformed the major
market indexes in the fiscal year ended October 31, 1995. The Fund, which
invests in large-capitalization companies, also surpassed the 23.98% gain posted
by similar growth funds, as measured by the Lipper Growth Index. As a result of
the Fund's strong market showing during the reporting period, its net assets
climbed from $4.01 billion to $4.66 billion.
It has, indeed, been a memorable year for AIM Equity Funds, Inc. and AIM
overall. Since January, AIM's assets under management have grown from
approximately $27 billion to more than $40 billion, and we now serve more than 2
million shareholders.
It is our hope that you continue to rely on the Institutional Classes of AIM
Equity Funds, Inc. to help build your financial future. As always, we are ready
to respond to your questions or comments about this report. Please call Client
Services at 800-659-1005 during normal business hours.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE>
Important
Fund Disclosures
AIM CHARTER FUND
For shareholders who seek growth and income by investing primarily in stocks of
large-cap, well-run companies with a history of stable and improving earnings
and generally increasing dividend payouts.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
* AIM Charter Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
* One-year performance includes reinvested distributions of $0.565 per share.
* The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
* Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
* Lipper Analytical Services, Inc., is an independent mutual fund performance
monitor. The unmanaged Lipper Growth and Income Fund Index represents an
average of the performance of the 30 largest growth and income mutual funds.
* Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Dow Jones
Industrial Average (DJIA) is an unmanaged composite of the performance of 30
large-company stocks. The NASDAQ (National Association of Securities Dealers
Automated Quotation System) Composite Index is a group of more than 4,500
unmanaged over-the-counter securities widely regarded by investors to be
representative of the small- and medium-sized company stock universe.
* An investment cannot be made in any indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
For Periods ended October 31, 1995
1 Year 27.45%
3 Years 13.59
Inception (7/30/91) 11.87
AIM Charter Fund Lipper Growth
Date (Institutional Class) & Income Index S&P 500
- ------ -------------------- -------------- -------
7/30/91 10,000 10,000 10,000
10/91 10,512 10,316 10,231
10/92 10,988 11,234 11,247
10/93 12,898 13,424 12,921
10/94 12,637 13,848 13,421
10/95 16,105 16,612 16,959
Past performance is no guarantee of comparable future results.
2
C H A R T E R
<PAGE>
Management's
Discussion & Analysis
FINANCIAL AND TECHNOLOGY STOCKS PROPEL
MARKETS TO RECORD LEVELS
------------------
. . .a diversified
portfolio of
defensive and
economically
sensitive stocks
and its
earnings-driven
philosophy were
key factors
in the Fund's
success . .
------------------
- ---------------------------------------------
PORTFOLIO COMPOSITION
45% DEFENSIVE (FINANCIALS, HEALTH CARE,
UTILITIES, NON-DURABLES, "BABY BELLS")
25% CYCLICALS (AEROSPACE, CHEMICALS,
CAPITAL GOODS, RETAIL)
30% TECHNOLOGY (SEMICONDUCTORS, ELECTRONIC
COMPONENTS/MISC.)
- ---------------------------------------------
Healthy corporate profits exceeded analysts' expectations and propelled stocks
through record highs in 1995. The strength was broad-based, resuscitating large-
capitalization stocks, which had been out of favor for three years. The popular
DJIA sailed past 4000 on February 23, 1995, and then topped 5000 on November 21,
1995.
Spearheaded by the powerful technology stock advance, the broader NASDAQ
overtook its large-cap cousins in June of 1995 to finish the reporting period
well ahead of the pack.
The stars of the technology group were inarguably the semiconductor stocks. As
of June 30, 1995, semiconductor stocks were up an astonishing 94% in just six
months, according to Barron's. Other technology sectors were also strong, such
as aerospace and defense, software, and industrial technology companies. Also
strong were beneficiaries of stable interest rates such as banks and thrifts,
and consumer cyclical stocks in airlines, leisure and recreation companies, and
restaurants.
In September and October, the market took a well-deserved respite as concern
surfaced that third-quarter 1995 earnings reports, particularly in the
technology group, would fall below expectations. Some earnings disappointment in
such big names as Intel, Microsoft, Nokia, and IBM, among others, initiated
profit-taking, which temporarily suspended the market's advance. Of the
companies reporting earnings in the third quarter of 1995, I/B/E/S International
Inc. reported in The Wall Street Journal that 55% were higher than analysts'
expectations, with 14% on target, and 31% below expectations. These results
compared favorably with second-quarter reports, of which 57% exceeded
expectations and 30% were below target.
With investor confidence renewed, at least for the near term, the market
gathered strength for its next advance. Focus turned from corporate earnings to
the growing gridlock in Congress over the proposals to balance the burgeoning
budget. The Federal Reserve Board declined to implement its much-anticipated
interest rate cut pending some positive resolution to the budget debate.
YOUR INVESTMENT PORTFOLIO
AIM Charter Fund's balanced approach in developing a diversified portfolio of
defensive and economically sensitive stocks and its earnings-driven philosophy
were key factors in the Fund's success during the reporting period.
Staying within its growth-and-income focus, the Fund made a strategic decision
to add a small number of attractive non-dividend-paying stocks in the
technology, financial, health care and consumer cyclical sectors. This strategy
was partly in response to the fact that dividend yields on many common stocks
have been at historically low levels and that the Fund was able to supplement
the income stream through its investments in convertible securities.
Noncyclical stocks, those less subject to fluctuation with the business cycle
such as financials, health care and non-durables, composed approximately 45% of
the Fund's holdings. Among these were regional Bell operating companies, often
called the Baby Bells; a number of solid utilities, including Duke Power and FPL
Group; and selected medical and pharmaceutical industry stocks. The Fund's
holdings in the financial sector, including
See important Fund disclosure on page 2.
3
C H A R T E R
<PAGE>
- -------------------------------------------------------
Top 10 Holdings (Excluding U.S. Treasuries)*
(as of 10/31/95)
1. PHILIP MORRIS COMPANIES, INC.
2. TEXAS INSTRUMENTS, INC.
3. XEROX CORP.
4. PFIZER INC.
5. JOHNSON & JOHNSON
6. A T & T CORP.
7. MICRON TECHNOLOGY INC.
8. COMPUTER ASSOCIATES INTERNATIONAL, INC.
9. PEPSICO INC.
10. APPLIED MATERIALS, INC.
*may include equities, bonds, and convertible bonds.
- -------------------------------------------------------
insurance firms and brokerage houses such as Merrill Lynch and Morgan Stanley,
have benefited from 1995's relatively stable interest-rate environment.
Technology stocks, which compose approximately 30% of the portfolio, made a
major contribution to AIM Charter Fund's sterling performance. A number of the
Fund's technology holdings are in convertible bonds, which contribute to the
Fund's income component while permitting it to participate in this sector's
robust growth. Portfolio holdings include such well-known companies as Texas
Instruments and Hewlett Packard.
The remaining 25% of the Fund's portfolio focused on cyclical industries such
as aerospace, capital goods and retailers. Recent additions to the portfolio
include Liz Claiborne and Baby Superstore Inc., which recently reported
surprisingly strong earnings.
In addition, the Fund also profited from a number of special situations
resulting from the surge in merger and acquisition activity. For example, the
Fund had owned stock of both Chase and Chemical when the mega-merger of those
two banks was announced. It held Clark Equipment stock when that firm was
purchased by Ingersoll Rand. The Fund also held AT&T common stock at the time
that corporate giant announced its reorganization.
As of October 31, 1995, the Fund's portfolio comprised 201 securities. Of
course, the portfolio's composition is subject to change, and there is no
guarantee the Fund will continue to hold these same securities.
OUTLOOK FOR THE FUTURE
At this writing, the market has surpassed the Dow 5000 level. Yet many analysts
maintain that this aging bull market--the Dow has gone a record 61 months
without experiencing a 10% correction--may have plenty of steam left. Barron's
recently reported analysts' estimates that projected the Dow well past 5500
during the coming year.
Of course, a significant complement of market strategists also believe a
correction is due.
Rather than make any projections of future market performance, AIM remains
committed to its disciplined investment strategy, which helps us determine, on a
company-by-company basis, which stocks to own and which to sell--without the
guesswork of market timing.
See important Fund disclosure on page 2.
4
C H A R T E R
<PAGE>
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
COMMON STOCKS - 75.72%
ADVERTISING/BROADCASTING - 0.37%
120,000 Omnicom Group, Inc. $ 7,665,000
- ---------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.71%
240,000 Boeing Co. (The) 15,750,000
- ---------------------------------------------------------------------
160,000 Rockwell International Corp. 7,120,000
- ---------------------------------------------------------------------
140,000 United Technologies Corp. 12,425,000
- ---------------------------------------------------------------------
35,295,000
- ---------------------------------------------------------------------
APPLIANCES - 0.47%
240,000 Newell Co. 5,790,000
- ---------------------------------------------------------------------
84,300 Premark International, Inc. 3,898,875
- ---------------------------------------------------------------------
9,688,875
- ---------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS) - 1.03%
280,000 Chrysler Corp. 14,455,000
- ---------------------------------------------------------------------
240,000 Ford Motor Co. 6,900,000
- ---------------------------------------------------------------------
21,355,000
- ---------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.24%
140,000 Echlin Inc. 5,005,000
- ---------------------------------------------------------------------
BANKING - 0.34%
240,000 Norwest Corp. 7,080,000
- ---------------------------------------------------------------------
BANKING (MONEY CENTER) - 1.57%
180,000 BankAmerica Corp. 10,350,000
- ---------------------------------------------------------------------
160,000 Chemical Banking Corp. 9,100,000
- ---------------------------------------------------------------------
200,000 Citicorp 12,975,000
- ---------------------------------------------------------------------
32,425,000
- ---------------------------------------------------------------------
BEVERAGES - 1.28%
500,000 PepsiCo Inc. 26,375,000
- ---------------------------------------------------------------------
BUILDING MATERIALS - 0.87%
200,000 Black & Decker Corp. (The) 6,775,000
- ---------------------------------------------------------------------
400,000 Masco Corp. 11,250,000
- ---------------------------------------------------------------------
18,025,000
- ---------------------------------------------------------------------
BUSINESS SERVICES - 1.28%
160,000 Diebold, Inc. 8,480,000
- ---------------------------------------------------------------------
320,000 Equifax, Inc. 12,480,000
- ---------------------------------------------------------------------
200,000 Manpower Inc. 5,425,000
- ---------------------------------------------------------------------
26,385,000
- ---------------------------------------------------------------------
</TABLE>
5
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
CHEMICALS - 0.87%
140,000 Dow Chemical Co. $ 9,607,500
- ---------------------------------------------------------------------
140,000 Eastman Chemical Co. 8,330,000
- ---------------------------------------------------------------------
17,937,500
- ---------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 1.01%
200,000 Grace (W.R.) & Co. 11,150,000
- ---------------------------------------------------------------------
140,000 IMC Global, Inc. 9,800,000
- ---------------------------------------------------------------------
20,950,000
- ---------------------------------------------------------------------
COMPUTER MAINFRAMES - 0.94%
200,000 International Business Machines Corp. 19,450,000
- ---------------------------------------------------------------------
COMPUTER MINI/PCS - 2.22%
200,000 COMPAQ Computer Corp.(a) 11,150,000
- ---------------------------------------------------------------------
240,000 Dell Computer Corp.(a) 11,190,000
- ---------------------------------------------------------------------
120,000 Hewlett Packard Co. 11,115,000
- ---------------------------------------------------------------------
160,000 Sun Microsystems, Inc.(a) 12,480,000
- ---------------------------------------------------------------------
45,935,000
- ---------------------------------------------------------------------
COMPUTER NETWORKING - 1.20%
120,000 Cabletron Systems, Inc.(a) 9,435,000
- ---------------------------------------------------------------------
120,000 Cisco Systems, Inc.(a) 9,300,000
- ---------------------------------------------------------------------
320,000 ECI Telecommunications Ltd. 6,080,000
- ---------------------------------------------------------------------
24,815,000
- ---------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.85%
240,000 Adaptec, Inc.(a) 10,680,000
- ---------------------------------------------------------------------
200,000 Read-Rite Corp.(a) 6,975,000
- ---------------------------------------------------------------------
17,655,000
- ---------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.94%
240,000 BMC Software, Inc.(a) 8,550,000
- ---------------------------------------------------------------------
500,000 Computer Associates International, Inc. 27,500,000
- ---------------------------------------------------------------------
200,000 NetManage, Inc.(a) 4,075,000
- ---------------------------------------------------------------------
40,125,000
- ---------------------------------------------------------------------
CONGLOMERATES - 0.37%
180,000 Allied-Signal Inc. 7,650,000
- ---------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.30%
120,000 Duracell International, Inc. 6,285,000
- ---------------------------------------------------------------------
</TABLE>
6
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
COSMETICS & TOILETRIES - 1.52%
120,000 Gillette Co. (The) $ 5,805,000
- --------------------------------------------------------------------------
240,000 Procter & Gamble Co. 19,440,000
- --------------------------------------------------------------------------
140,000 Tambrands Inc. 6,265,000
- --------------------------------------------------------------------------
31,510,000
- --------------------------------------------------------------------------
ELECTRIC POWER - 2.28%
200,000 Baltimore Gas & Electric Co. 5,350,000
- --------------------------------------------------------------------------
160,000 Carolina Power & Light Co. 5,240,000
- --------------------------------------------------------------------------
120,000 Duke Power Co. 5,370,000
- --------------------------------------------------------------------------
160,000 FPL Group, Inc. 6,700,000
- --------------------------------------------------------------------------
240,000 General Public Utilities Corp. 7,500,000
- --------------------------------------------------------------------------
120,000 Houston Industries, Inc. 5,565,000
- --------------------------------------------------------------------------
120,000 Northern States Power Co. 5,670,000
- --------------------------------------------------------------------------
240,000 Southern Co. 5,730,000
- --------------------------------------------------------------------------
47,125,000
- --------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 3.03%
320,000 AMP Inc. 12,560,000
- --------------------------------------------------------------------------
160,000 General Electric Co. 10,120,000
- --------------------------------------------------------------------------
120,000 Honeywell, Inc. 5,040,000
- --------------------------------------------------------------------------
200,000 Parker-Hannifin Corp. 6,750,000
- --------------------------------------------------------------------------
240,000 Philips Electronics N.V.-New York Shares-ADR 9,270,000
- --------------------------------------------------------------------------
160,000 Tektronix, Inc. 9,480,000
- --------------------------------------------------------------------------
280,000 Teradyne, Inc.(a) 9,345,000
- --------------------------------------------------------------------------
62,565,000
- --------------------------------------------------------------------------
ELECTRONIC/DEFENSE - 0.82%
240,000 Loral Corp. 7,110,000
- --------------------------------------------------------------------------
160,000 Sundstrand Corp. 9,800,000
- --------------------------------------------------------------------------
16,910,000
- --------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS - 1.37%
200,756 Arrow Electronics, Inc.(a) 10,188,367
- --------------------------------------------------------------------------
240,000 Avnet, Inc. 12,090,000
- --------------------------------------------------------------------------
140,000 Wyle Electronics 5,967,500
- --------------------------------------------------------------------------
28,245,867
- --------------------------------------------------------------------------
</TABLE>
7
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
FINANCE (ASSET MANAGEMENT) - 1.26%
280,000 Merrill Lynch & Co., Inc. $ 15,540,000
- ---------------------------------------------------------------------
120,000 Morgan Stanley Group, Inc. 10,440,000
- ---------------------------------------------------------------------
25,980,000
- ---------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 4.27%
240,000 American Express Co. 9,750,000
- ---------------------------------------------------------------------
400,000 Countrywide Credit Industries, Inc. 8,850,000
- ---------------------------------------------------------------------
160,000 Federal Home Loan Corp. 11,080,000
- ---------------------------------------------------------------------
140,000 Federal National Mortgage Association 14,682,500
- ---------------------------------------------------------------------
126,100 Firstar Corp. 4,460,788
- ---------------------------------------------------------------------
300,000 Green Tree Financial Corp. 7,987,500
- ---------------------------------------------------------------------
240,000 Household International, Inc. 13,500,000
- ---------------------------------------------------------------------
320,000 MBNA Corp. 11,800,000
- ---------------------------------------------------------------------
320,000 Mercury Finance Co. 6,160,000
- ---------------------------------------------------------------------
88,270,788
- ---------------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.31%
240,000 Greenpoint Financial Corp. 6,480,000
- ---------------------------------------------------------------------
FOOD/PROCESSING - 0.68%
220,000 Nabisco Holdings Corp. 5,912,500
- ---------------------------------------------------------------------
240,000 Quaker Oats Co. 8,190,000
- ---------------------------------------------------------------------
14,102,500
- ---------------------------------------------------------------------
HOMEBUILDING - 0.25%
160,000 Centex Corp. 5,240,000
- ---------------------------------------------------------------------
HOTELS/MOTELS - 0.25%
140,000 Marriott International, Inc. 5,162,500
- ---------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 2.57%
220,000 Aetna Life & Casualty Co. 15,482,500
- ---------------------------------------------------------------------
320,000 Allstate Financial Corp. 11,760,000
- ---------------------------------------------------------------------
160,000 CIGNA Corp. 15,860,000
- ---------------------------------------------------------------------
200,000 Travelers Group, Inc. 10,100,000
- ---------------------------------------------------------------------
53,202,500
- ---------------------------------------------------------------------
LEISURE & RECREATION - 0.36%
320,000 Carnival Corp. 7,440,000
- ---------------------------------------------------------------------
</TABLE>
8
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
MACHINERY (HEAVY) - 0.96%
140,000 Case Corp. $ 5,337,500
- --------------------------------------------------------------------------
260,000 Caterpillar Inc. 14,592,500
- --------------------------------------------------------------------------
19,930,000
- --------------------------------------------------------------------------
MEDICAL (DRUGS) - 8.16%
240,000 American Home Products Corp. 21,270,000
- --------------------------------------------------------------------------
240,000 Glaxo Wellcome PLC-ADR 6,510,000
- --------------------------------------------------------------------------
400,000 Johnson & Johnson 32,600,000
- --------------------------------------------------------------------------
160,000 Lilly (Eli) & Co. 15,460,000
- --------------------------------------------------------------------------
600,000 Pfizer Inc. 34,425,000
- --------------------------------------------------------------------------
120,000 Rhone-Poulenc Rorer, Inc. 5,655,000
- --------------------------------------------------------------------------
400,000 Schering-Plough Corp. 21,450,000
- --------------------------------------------------------------------------
300,000 SmithKline Beecham PLC-ADR 15,562,500
- --------------------------------------------------------------------------
400,000 Teva Pharmaceuticals Industries Ltd.-ADR 15,700,000
- --------------------------------------------------------------------------
168,632,500
- --------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 1.33%
200,000 Columbia/HCA Healthcare Corp. 9,825,000
- --------------------------------------------------------------------------
200,000 Horizon/CMS Healthcare Corp.(a) 4,050,000
- --------------------------------------------------------------------------
200,000 Integrated Health Services, Inc. 4,575,000
- --------------------------------------------------------------------------
160,000 U.S. Healthcare Corp. 6,160,000
- --------------------------------------------------------------------------
100,846 Vencor, Inc.(a) 2,798,477
- --------------------------------------------------------------------------
27,408,477
- --------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 0.10%
100,000 De Rigo S.p.A.-ADR(a) 2,062,500
- --------------------------------------------------------------------------
METALS (MISCELLANEOUS) - 0.54%
220,000 Aluminum Co. of America 11,220,000
- --------------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.67%
360,000 Williams Companies, Inc. 13,905,000
- --------------------------------------------------------------------------
OFFICE AUTOMATION - 2.01%
320,000 Xerox Corp. 41,520,000
- --------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.21%
240,000 USX-Marathon Group 4,260,000
- --------------------------------------------------------------------------
OIL & GAS SERVICES - 0.52%
500,000 Occidental Petroleum Corp. 10,750,000
- --------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 0.32%
160,000 Halliburton Co. 6,640,000
- --------------------------------------------------------------------------
</TABLE>
9
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
PAPER & FOREST PRODUCTS - 1.58%
240,000 Albany International Corp.-Class A $ 4,980,000
- -------------------------------------------------------------------
140,000 Champion International Corp. 7,490,000
- -------------------------------------------------------------------
120,000 Kimberly-Clark Corp. 8,715,000
- -------------------------------------------------------------------
200,000 Mead Corp. (The) 11,525,000
- -------------------------------------------------------------------
32,710,000
- -------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.24%
200,000 Patriot American Hospitality, Inc.(a) 4,875,000
- -------------------------------------------------------------------
RESTAURANTS - 0.55%
200,000 Outback Steakhouse, Inc.(a) 6,275,000
- -------------------------------------------------------------------
260,000 Wendy's International, Inc. 5,167,500
- -------------------------------------------------------------------
11,442,500
- -------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.55%
240,000 Safeway Inc.(a) 11,340,000
- -------------------------------------------------------------------
RETAIL (STORES) - 2.77%
120,000 Circuit City Stores, Inc. 4,005,000
- -------------------------------------------------------------------
160,000 Gap, Inc. (The) 6,300,000
- -------------------------------------------------------------------
1,200,000 Intimate Brands, Inc.(a) 20,100,000
- -------------------------------------------------------------------
400,000 Limited (The), Inc. 7,350,000
- -------------------------------------------------------------------
98,600 Pep Boys - Manny, Moe & Jack 2,156,875
- -------------------------------------------------------------------
300,000 Sears, Roebuck & Co. 10,200,000
- -------------------------------------------------------------------
200,000 Shopko Stores, Inc. 2,150,000
- -------------------------------------------------------------------
100,000 Tandy Corp. 4,937,500
- -------------------------------------------------------------------
57,199,375
- -------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 0.60%
240,000 Varian Associates, Inc. 12,330,000
- -------------------------------------------------------------------
SEMICONDUCTORS - 7.22%
200,000 Analog Devices, Inc.(a) 7,225,000
- -------------------------------------------------------------------
500,000 Applied Materials, Inc.(a) 25,062,500
- -------------------------------------------------------------------
240,000 Intel Corp. 16,770,000
- -------------------------------------------------------------------
400,000 Micron Technology Inc. 28,250,000
- -------------------------------------------------------------------
200,000 National Semiconductor Corp.(a) 4,875,000
- -------------------------------------------------------------------
900,000 Texas Instruments, Inc. 61,425,000
- -------------------------------------------------------------------
240,000 VLSI Technology, Inc.(a) 5,640,000
- -------------------------------------------------------------------
149,247,500
- -------------------------------------------------------------------
</TABLE>
10
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
TELECOMMUNICATIONS - 3.03%
500,000 A T & T Corp. $ 32,000,000
- -------------------------------------------------------------------------------
300,000 DSC Communications Corp.(a) 11,100,000
- -------------------------------------------------------------------------------
100,000 Nokia Corp.-Class A-ADR 5,575,000
- -------------------------------------------------------------------------------
400,000 Telefonaktiebolaget L.M. Ericsson-ADR 8,543,760
- -------------------------------------------------------------------------------
160,000 Tellabs, Inc.(a) 5,440,000
- -------------------------------------------------------------------------------
62,658,760
- -------------------------------------------------------------------------------
TELEPHONE - 2.74%
200,000 Ameritech Corp. 10,800,000
- -------------------------------------------------------------------------------
160,000 BellSouth Corp. 12,240,000
- -------------------------------------------------------------------------------
200,000 Cincinnati Bell, Inc. 5,875,000
- -------------------------------------------------------------------------------
320,000 GTE Corp. 13,200,000
- -------------------------------------------------------------------------------
260,000 SBC Communications, Inc. 14,527,500
- -------------------------------------------------------------------------------
56,642,500
- -------------------------------------------------------------------------------
TEXTILES - 0.28%
205,500 Liz Claiborne, Inc. 5,831,061
- -------------------------------------------------------------------------------
TOBACCO - 3.51%
800,000 Philip Morris Companies Inc. 67,600,000
- -------------------------------------------------------------------------------
160,000 RJR Nabisco Holdings Corp. 4,920,000
- -------------------------------------------------------------------------------
72,520,000
- -------------------------------------------------------------------------------
Total Common Stocks 1,565,460,703
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 11.33%
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.49%
$10,000,000 Magna International Inc., Conv. Sub. Deb., 5.00%,
10/15/02 10,150,000
- -------------------------------------------------------------------------------
BUSINESS SERVICES - 0.42%
4,000,000 Career Horizons Inc., Conv. Bonds, 7.00%,
11/01/02(b)
(Acquired 10/16/95-10/27/95; cost $4,015,000) 4,060,000
- -------------------------------------------------------------------------------
4,000,000 Olsten Corp., Conv. Sub. Deb., 4.875%, 05/15/03 4,692,000
- -------------------------------------------------------------------------------
8,752,000
- -------------------------------------------------------------------------------
CHEMICALS - 0.26%
6,000,000 Sandoz Capital BVI Ltd., Sr. Conv. Deb., 2.00%,
10/06/02(b)
(Acquired 09/28/95; cost $4,947,600) 5,310,000
- -------------------------------------------------------------------------------
</TABLE>
11
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
PRINCIPAL
AMOUNT MARKET VALUE
COMPUTER NETWORKING - 0.75%
$ 8,000,000 Bay Networks Inc., Conv. Sub. Deb., 5.25%,
05/15/03(b)
(Acquired 09/26/95-10/02/95; cost $8,407,500) $ 9,020,000
- -------------------------------------------------------------------------------
4,000,000 3Com Corp., Conv. Sub. Notes, 10.25%, 11/10/01(b)
(Acquired 11/08/94; cost $4,000,000) 6,410,000
- -------------------------------------------------------------------------------
15,430,000
- -------------------------------------------------------------------------------
COMPUTER PERIPHERALS - 1.03%
10,000,000 EMC Corp., Conv. Sub. Notes, 4.25%, 01/01/01 10,000,000
- -------------------------------------------------------------------------------
5,000,000 Sanmina Corp., Conv. Sub. Notes, 5.50%,
08/15/02(b)
(Acquired 08/10/95-09/22/95; cost $5,064,375) 5,750,000
- -------------------------------------------------------------------------------
5,000,000 Seagate Technology Inc., Conv. Sub. Deb., 6.75%,
05/01/12 5,625,000
- -------------------------------------------------------------------------------
21,375,000
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.83%
20,000,000 Silicon Graphics Inc., Sr. Conv. Sub. Deb.,
4.15%, 11/02/13(b)(c)
(Acquired 10/26/93-09/22/95; cost $9,835,480) 11,143,000
- -------------------------------------------------------------------------------
20,000,000 SoftKey International Inc., Conv. Notes, 5.50%,
11/01/00(b)
(Acquired 10/17/95-10/30/95; cost $19,788,820) 16,900,000
- -------------------------------------------------------------------------------
6,000,000 Sterling Software Inc., Conv. Sub. Deb., 5.75%,
02/01/03 9,882,000
- -------------------------------------------------------------------------------
37,925,000
- -------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.79%
4,000,000 Checkpoint Systems Inc., Conv. Sub. Deb., 5.25%,
11/01/05(b)
(Acquired 10/17/95-10/27/95; cost $4,005,625) 4,060,000
- -------------------------------------------------------------------------------
5,000,000 Dovatron International, Inc., Conv. Sub. Notes,
6.00%, 10/15/02(b)
(Acquired 10/06/95-10/09/95; cost $5,108,750) 5,137,500
- -------------------------------------------------------------------------------
7,500,000 Integrated Device Technology, Inc., Conv. Sub.
Notes, 5.50%, 06/01/02 7,162,500
- -------------------------------------------------------------------------------
16,360,000
- -------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.42%
4,000,000 Thermo Electron Corp., Sr. Conv. Deb., 4.625%,
08/01/97(b)
(Acquired 09/28/94; cost $5,779,440) 8,653,000
- -------------------------------------------------------------------------------
MEDICAL (DRUGS) - 0.78%
10,000,000 ICN Pharmaceuticals Inc., Conv. Sub. Notes,
8.50%, 11/15/99 11,183,000
- -------------------------------------------------------------------------------
5,000,000 Ivax Corp., Conv. Deb., 6.50%, 11/15/01(b)
(Acquired 10/19/95-10/20/95; cost $5,095,000) 4,912,500
- -------------------------------------------------------------------------------
16,095,500
- -------------------------------------------------------------------------------
</TABLE>
12
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
PRINCIPAL
AMOUNT MARKET VALUE
MEDICAL (PATIENT SERVICES) - 1.15%
$ 4,000,000 Genesis Health Ventures, Sr. Conv. Sub. Deb.,
6.00%, 11/30/03 $ 5,300,000
- -------------------------------------------------------------------------------
5,000,000 Healthsouth Rehabilitation Corp., Conv. Sub.
Deb., 5.00%, 04/01/01 7,446,750
- -------------------------------------------------------------------------------
6,000,000 Integrated Health Services Inc., Conv. Sub. Deb.,
6.00%, 01/01/03 5,698,800
- -------------------------------------------------------------------------------
5,000,000 Prime Hospitality Corp., Conv. Sub. Notes, 7.00%,
04/15/02 5,275,000
- -------------------------------------------------------------------------------
23,720,550
- -------------------------------------------------------------------------------
OFFICE AUTOMATION - 0.26%
4,000,000 Danka Business Systems, Conv. Sub. Deb., 6.75%,
04/01/02(b)
(Acquired 03/06/95; cost $4,000,000) 5,280,000
- -------------------------------------------------------------------------------
RETAIL (STORES) - 0.72%
5,000,000 Baby Superstore Inc., Conv. Sub. Notes, 4.875%,
10/01/00 5,187,500
- -------------------------------------------------------------------------------
10,000,000 Federated Department Stores, Conv. Notes, 5.00%,
10/01/03 9,800,000
- -------------------------------------------------------------------------------
14,987,500
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 2.43%
8,000,000 Altera Corp., Conv. Sub. Notes, 5.75%,
06/15/02(b)
(Acquired 06/16/95-10/05/95; cost $8,851,250) 10,780,000
- -------------------------------------------------------------------------------
2,000,000 LAM Research Corp., Conv. Sub. Deb., 6.00%,
05/01/03 4,905,000
- -------------------------------------------------------------------------------
2,500,000 LSI Logic Corp., Conv. Sub. Notes, 5.50%,
03/15/01(b)
(Acquired 03/30/94-10/11/95; cost $7,170,340) 9,737,500
- -------------------------------------------------------------------------------
20,000,000 Motorola Inc., Sub. Liquid Yield Option Notes,
2.25%, 09/27/13(c) 16,400,000
- -------------------------------------------------------------------------------
10,000,000 Solectron Corp., Conv. Liquid Yield Option Notes,
7.00%, 05/05/12(c) 8,400,000
- -------------------------------------------------------------------------------
50,222,500
- -------------------------------------------------------------------------------
Total Convertible Corporate Bonds 234,261,050
- -------------------------------------------------------------------------------
SHARES
CONVERTIBLE PREFERRED STOCKS - 6.97%
AUTOMOBILE (MANUFACTURERS) - 0.52%
160,000 General Motors Corp.-Class C, $3.25 Dep. Conv.
Pfd. 10,720,000
- -------------------------------------------------------------------------------
BANKING (MONEY CENTER) - 0.52%
60,000 Citicorp-$5.375 Dep. Conv. Pfd. 10,671,780
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 0.56%
120,000 Ceridian Corp.-$2.75 Conv. Pfd. 11,700,000
- -------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 0.79%
150,000 American General Delaware-Series A, $3.00 Conv.
Pfd. 7,762,500
- -------------------------------------------------------------------------------
160,000 United Companies Finance LP-$2.97 Conv. Pfd.
PRIDES 8,560,000
- -------------------------------------------------------------------------------
16,322,500
- -------------------------------------------------------------------------------
</TABLE>
13
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
FINANCE (CONSUMER CREDIT) - 0.88%
200,000 First USA-$1.9922 Conv. Pfd. $ 8,300,000
- -------------------------------------------------------------------------------
160,000 SunAmerica Inc.-Series E, $3.10 Dep. Conv. Pfd. 9,920,000
- -------------------------------------------------------------------------------
18,220,000
- -------------------------------------------------------------------------------
FUNERAL SERVICES - 0.85%
250,000 SCI Financial LLC-Series A, $3.125 Conv. Pfd. 17,625,000
- -------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 0.21%
100,000 Allstate Inc.-$2.30 Conv. Pfd. 4,350,000
- -------------------------------------------------------------------------------
LEISURE & RECREATION - 0.21%
400,000 Bally Entertainment Corp.-$0.89 Conv. Pfd. PRIDES 4,450,000
- -------------------------------------------------------------------------------
OFFICE PRODUCTS - 0.33%
80,000 Alco Standard Corp.-Series BB, $5.04 Dep. Conv.
Pfd. ACES 6,840,000
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.29%
160,000 Bowater Inc.-Series B, $1.645 Dep. Conv. Pfd.
PRIDES 6,000,000
- -------------------------------------------------------------------------------
POLLUTION CONTROL - 0.13%
80,000 Browning-Ferris Industries-$2.5828 Conv. Pfd.
ACES 2,630,000
- -------------------------------------------------------------------------------
PUBLISHING - 0.31%
200,000 Time Warner Financing-$1.24 Conv. Pfd. PERCS 6,400,000
- -------------------------------------------------------------------------------
RETAIL (STORES) - 0.24%
120,000 Best Buy Capital-$3.25 Conv. Pfd. 4,890,000
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 0.85%
200,000 National Semiconductors-$3.25 Conv. Pfd. 17,500,000
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.28%
120,000 LCI International, Inc.-$1.25 Exch. Conv. Pfd. 5,745,000
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks 144,064,280
- -------------------------------------------------------------------------------
</TABLE>
14
C H A R T E R
<PAGE>
<TABLE>
<C> <S> <C>
PRINCIPAL
AMOUNT MARKET VALUE
U.S. TREASURY NOTES - 3.81%
$ 6,500,000 7.25%, 11/30/96 $ 6,608,030
- -------------------------------------------------------------------------------
6,500,000 7.50%, 12/31/96 6,636,955
- -------------------------------------------------------------------------------
6,500,000 7.50%, 01/31/97 6,645,145
- -------------------------------------------------------------------------------
6,500,000 6.875%, 02/28/97 6,603,220
- -------------------------------------------------------------------------------
6,500,000 6.625%, 03/31/97 6,589,440
- -------------------------------------------------------------------------------
6,500,000 6.50%, 04/30/97 6,581,185
- -------------------------------------------------------------------------------
6,500,000 6.125%, 05/31/97 6,547,515
- -------------------------------------------------------------------------------
6,500,000 5.625%, 06/30/97 6,501,105
- -------------------------------------------------------------------------------
6,500,000 5.875%, 07/31/97 6,527,690
- -------------------------------------------------------------------------------
6,500,000 6.00%, 08/31/97 6,541,340
- -------------------------------------------------------------------------------
6,500,000 5.75%, 09/30/97 6,517,550
- -------------------------------------------------------------------------------
6,500,000 5.625%, 10/31/97 6,504,095
- -------------------------------------------------------------------------------
Total U.S. Treasury Notes 78,803,270
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.73%(d)
955,097 Daiwa Securities America Inc., 5.90%, 11/01/95(e) 955,097
- -------------------------------------------------------------------------------
35,000,000 Lehman Brothers Government Securities, Inc.,
5.92%, 11/01/95(f) 35,000,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements 35,955,097
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.56% 2,058,544,400
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.44% 9,002,438
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $2,067,546,838
===============================================================================
</TABLE>
Abbreviations:
ACES - Automatically Convertible Equity Securities
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depositary
Exch. - Exchangeable
Pfd. - Preferred
PERCS - Preferred Equity Redemptive Cumulative Stock
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Sr. - Senior
Sub. - Subordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) 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 October 31, 1995 was
$107,153,500, which represented 5.18% of the net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(e) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,641. Collateralized by $353,853,000 U.S. Treasury obligations,
8.375% due 08/15/08.
(f) Joint repurchase agreement entered into 10/31/95 with a maturity value of
$100,016,444. Collateralized by $92,004,000 U.S. Treasury obligations,
6.50% to 9.125% due 04/30/99 to 05/31/99.
See Notes to Financial Statements.
15
C H A R T E R
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,774,220,816) $ 2,058,544,400
- --------------------------------------------------------------------------
Receivables for:
Investments sold 80,911,499
- --------------------------------------------------------------------------
Capital stock sold 12,279,189
- --------------------------------------------------------------------------
Dividends and interest 5,525,541
- --------------------------------------------------------------------------
Investment for deferred compensation plan 13,493
- --------------------------------------------------------------------------
Other assets 73,648
- --------------------------------------------------------------------------
Total assets 2,157,347,770
- --------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 82,514,084
- --------------------------------------------------------------------------
Capital stock reacquired 4,814,964
- --------------------------------------------------------------------------
Deferred compensation 13,493
- --------------------------------------------------------------------------
Accrued advisory fees 1,110,756
- --------------------------------------------------------------------------
Accrued administrative services fees 8,544
- --------------------------------------------------------------------------
Accrued distribution fees 721,859
- --------------------------------------------------------------------------
Accrued transfer agent fees 343,072
- --------------------------------------------------------------------------
Accrued operating expenses 274,160
- --------------------------------------------------------------------------
Total liabilities 89,800,932
- --------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 2,067,546,838
==========================================================================
NET ASSETS:
Class A $ 1,974,417,019
==========================================================================
Class B $ 67,591,852
==========================================================================
Institutional Class $ 25,537,967
==========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------------------------
Outstanding 185,803,605
==========================================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------------------------
Outstanding 6,365,612
==========================================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------------------------
Outstanding 2,396,343
==========================================================================
CLASS A:
Net asset value and redemption price per share $10.63
==========================================================================
Offering price per share:
(Net asset value of $10.63 divided by 94.50%) $11.25
==========================================================================
CLASS B:
Net asset value and offering price per share $10.62
==========================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $10.66
==========================================================================
</TABLE>
See Notes to Financial Statements.
16
C H A R T E R
<PAGE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 31,720,012
- --------------------------------------------------------------------------
Interest 15,080,737
- --------------------------------------------------------------------------
Total investment income 46,800,749
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 10,890,335
- --------------------------------------------------------------------------
Administrative services fees 109,054
- --------------------------------------------------------------------------
Custodian fees 150,968
- --------------------------------------------------------------------------
Directors' fees 17,234
- --------------------------------------------------------------------------
Distribution fees-Class A 5,007,160
- --------------------------------------------------------------------------
Distribution fees-Class B 94,462
- --------------------------------------------------------------------------
Transfer agent fees-Class A 2,906,528
- --------------------------------------------------------------------------
Transfer agent fees-Class B 19,728
- --------------------------------------------------------------------------
Transfer agent fees-Institutional Class 1,224
- --------------------------------------------------------------------------
Other 623,804
- --------------------------------------------------------------------------
Total expenses 19,820,497
- --------------------------------------------------------------------------
Net investment income 26,980,252
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 179,469,513
- --------------------------------------------------------------------------
Futures contracts (344,344)
- --------------------------------------------------------------------------
179,125,169
- --------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 202,231,210
- --------------------------------------------------------------------------
Foreign currencies (8)
- --------------------------------------------------------------------------
Futures contracts (1,251,000)
- --------------------------------------------------------------------------
2,000,981,202
- --------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 380,106,371
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 407,086,623
==========================================================================
</TABLE>
See Notes to Financial Statements.
17
C H A R T E R
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 26,980,252 $ 37,921,889
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies and futures
contracts 179,125,169 56,414,638
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities, foreign
currencies and futures contracts 200,981,202 (136,629,171)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 407,086,623 (42,292,644)
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income:
Class A (34,589,802) (28,712,940)
- ------------------------------------------------------------------------------
Class B (55,355) --
- ------------------------------------------------------------------------------
Institutional Class (536,096) (485,084)
- ------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investments:
Class A (57,274,888) (28,113,934)
- ------------------------------------------------------------------------------
Class B (12,593) --
- ------------------------------------------------------------------------------
Institutional Class (759,222) (384,536)
- ------------------------------------------------------------------------------
Net equalization credits (charges):
Class A (284,916) (147,034)
- ------------------------------------------------------------------------------
Class B 24,584 --
- ------------------------------------------------------------------------------
Institutional Class (13,270) 335
- ------------------------------------------------------------------------------
Share transactions-net:
Class A 86,486,354 (12,596,188)
- ------------------------------------------------------------------------------
Class B 66,768,426 --
- ------------------------------------------------------------------------------
Institutional Class (206,795) (1,032,133)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets 466,633,050 (113,764,158)
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,600,913,788 1,714,677,946
- ------------------------------------------------------------------------------
End of period $2,067,546,838 $1,600,913,788
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,606,658,340 $1,453,610,355
- ------------------------------------------------------------------------------
Undistributed net investment income 102,563 8,577,166
- ------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies
and futures contracts 176,462,351 55,383,885
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities and futures contracts 284,323,584 83,342,382
- ------------------------------------------------------------------------------
$2,067,546,838 $1,600,913,788
==============================================================================
</TABLE>
See Notes to Financial Statements.
18
C H A R T E R
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity 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 four diversified portfolios:
AIM Charter Fund, AIM Weingarten Fund, AIM Constellation Fund and AIM
Aggressive Growth Fund. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and the Institutional Class. 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 following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements.
A. Security Valuations - Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible bonds are valued
at the mean between the closing bid and asked prices obtained from a broker-
dealer. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the closing bid
and asked prices. Debt obligations that are issued or guaranteed by the U.S.
Treasury are valued on the basis of prices provided by an independent
pricing service. Prices provided by the pricing service may be determined
without exclusive reliance on quoted prices, and may reflect appropriate
factors such as yield, type of issue, coupon rate and maturity date.
Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations are not readily available 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.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. 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.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
E. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
G. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
19
C H A R T E R
<PAGE>
H. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and the change in the value of the contracts may not correlate with
changes in the value of the securities being hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees
paid by the Fund to AIM to the extent necessary to reduce the fees paid by the
Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of the Fund's average daily net assets
in excess of $150 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion. Under the terms of a master
sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM
Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
These agreements require AIM to reduce its fees or, if necessary, make payments
to the Fund to the extent required to satisfy any expense limitations imposed
by the securities laws or regulations thereunder of any state in which the
Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1995, AIM
was reimbursed $109,054 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A and Class B shares. During the year
ended October 31, 1995, AFS was paid $1,568,721 for such services. During the
year ended October 31, 1995, the Fund paid A I M Institutional Fund Services,
Inc. ("AIFS") $587 for shareholder and transfer agency services with respect to
the Institutional Class. Effective July 1, 1995, AIFS became the exclusive
transfer agent for the Institutional Class of the Fund.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own Class A shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and
own Class B shares of the Fund. Any amounts not paid as a service fee under
such 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. AIM Distributors may, from time to time,
assign, transfer or pledge to one or more designees, its right to all or a
designated portion of (a) compensation received by AIM Distributors from the
Fund pursuant to the Class B Plan (but not AIM Distributors' duties and
obligations pursuant to the Class B Plan), and (b) any contingent deferred
sales charges received by AIM Distributors related to the Class B shares.
During the year ended October 31, 1995 for the Class A shares and the period
June 26, 1995 (date sales commenced) through October 31, 1995 for the Class B
shares, the Class A shares and the Class B shares paid AIM Distributors
$5,007,160 and $94,462, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,316,019 from sales of Class A
shares of the Fund during the year ended October 31, 1995. Such commissions are
not an expense of the Fund. They are deducted from, and are not included, in
the proceeds from sales of Class A shares. During the year ended October 31,
1995, AIM Distributors received commissions of $18,452 in contingent deferred
sales charges imposed on redemptions of Class A and Class B shares. Certain
officers and directors of the Company are officers and directors of AIM, AIM
Capital, AIM Distributors, AFS, AIFS and FMC.
20
C H A R T E R
<PAGE>
During the year ended October 31, 1995, the Fund paid legal fees of $6,853 for
services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $28,500,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. During the period July 20, 1995 (effective date of Credit
Agreement) through October 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended October 31,
1995 was $2,717,900,855 and $2,713,027,662, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1995, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $307,302,292
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (26,174,954)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $281,127,338
===========================================================================
</TABLE>
Cost of investments for tax purposes is $1,777,417,062.
NOTE 6 - CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1995
and 1994 were as follows:
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
Sold:
Class A 40,727,782 $396,439,839 40,711,895 $363,174,892
- ---------------------- ----------- ------------ ----------- ------------
Class B* 6,409,868 67,237,422 -- --
- ---------------------- ----------- ------------ ----------- ------------
Institutional Class 335,121 3,269,772 280,235 2,507,705
- ---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of dividends:
Class A 10,283,705 77,653,310 4,862,946 43,539,217
- ---------------------- ----------- ------------ ----------- ------------
Class B* 5,996 64,162 -- --
- ---------------------- ----------- ------------ ----------- ------------
Institutional Class 134,103 1,130,381 83,958 753,348
- ---------------------- ----------- ------------ ----------- ------------
Reacquired:
Class A (42,561,203) (387,606,795) (46,996,269) (419,310,297)
- ---------------------- ----------- ------------ ----------- ------------
Class B* (50,252) (533,158) -- --
- ---------------------- ----------- ------------ ----------- ------------
Institutional Class (519,822) (4,606,948) (476,063) (4,293,186)
- ---------------------- ----------- ------------ ----------- ------------
14,765,298 $153,047,985 (1,533,298) $(13,628,321)
====================== =========== ============ =========== ============
</TABLE>
* Class B shares commenced sales on June 26, 1995.
21
C H A R T E R
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Institutional Class during the four-year period ended October 31, 1995 and
the period July 30, 1991 (date operations commenced) through October 31, 1991.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 8.93 $ 9.48 $ 8.38 $ 8.42 $7.92
- ------------------------------ ------- ------- ------- ------ -----
Income from investment
operations:
Net investment income 0.23 0.25 0.19 0.20 0.05
- ------------------------------ ------- ------- ------- ------ -----
Net gains (losses) on
securities (both realized
and unrealized) 2.07 (0.44) 1.23 0.16 0.45
- ------------------------------ ------- ------- ------- ------ -----
Total from investment
operations 2.30 (0.19) 1.42 0.36 0.50
- ------------------------------ ------- ------- ------- ------ -----
Less distributions:
Dividends from net investment
income (0.24) (0.20) (0.32) (0.17) --
- ------------------------------ ------- ------- ------- ------ -----
Distributions from capital
gains (0.33) (0.16) -- (0.23) --
- ------------------------------ ------- ------- ------- ------ -----
Total distributions (0.57) (0.36) (0.32) (0.40) --
- ------------------------------ ------- ------- ------- ------ -----
Net asset value, end of period $ 10.66 $ 8.93 $ 9.48 $ 8.38 $8.42
============================== ======= ======= ======= ====== =====
Total return(a) 27.45% (2.02)% 17.39% 4.53% 6.31%
============================== ======= ======= ======= ====== =====
Net assets, end of period
(000s omitted) $25,538 $21,840 $24,196 $7,800 $ 775
============================== ======= ======= ======= ====== =====
Ratio of expenses to average
net assets 0.74%(b) 0.73% 0.79% 0.87% 1.00%(c)
============================== ======= ======= ======= ====== =====
Ratio of net investment income
to average net assets 1.98%(b) 2.76% 2.26% 2.44% 2.43%(c)
============================== ======= ======= ======= ====== =====
Portfolio turnover rate 161% 126% 144% 95% 144%
============================== ======= ======= ======= ====== =====
</TABLE>
(a) For periods less than one year, total return is not annualized.
(b) Ratios are based on average net assets of $21,840,593.
(c) Annualized.
22
C H A R T E R
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Charter Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Charter Fund (a portfolio of AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1995, the related statement of operations for
the year then ended, and the statement of changes in net assets and financial
highlights for each of the years in the two-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, 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
Charter Fund as of October 31, 1995, the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights for
each of the years in the two-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
23
C H A R T E R
<PAGE>
<TABLE>
<S> <C> <C>
Directors & Officers
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
11 Greenway Plaza
Charles T. Bauer Charles T. Bauer Suite 1919
Chairman and Chief Executive Officer Chairman Houston, TX 77046
A I M Management Group Inc.
Robert H. Graham INVESTMENT ADVISOR
Bruce L. Crockett President A I M Advisors, Inc.
Director, President, and Chief 11 Greenway Plaza
Executive Officer John J. Arthur Suite 1919
COMSAT Corporation Senior Vice President and Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Institutional Fund
Cortland Trust Inc. Services, Inc.
Jonathan C. Schoolar 11 Greenway Plaza
Carl Frischling Senior Vice President Suite 1919
Partner Houston, TX 77046
Kramer, Levin, Naftalis, Nessen, Carol F. Relihan
Kamin & Frankel Vice President and Secretary CUSTODIAN
State Street Bank and Trust
Robert H. Graham Melville B. Cox Company
President and Chief Operating Officer Vice President 225 Franklin Street
A I M Management Group Inc. Boston, MA 02110
Dana R. Sutton
John F. Kroeger Vice President and Assistant Treasurer COUNSEL TO THE FUND
Formerly, Consultant Ballard Spahr
Wendell & Stockel Associates, Inc. P. Michelle Grace Andrews & Ingersoll
Assistant Secretary 1735 Market Street
Lewis F. Pennock Philadelphia, PA 19103
Attorney Nancy L. Martin
Assistant Secretary COUNSEL TO THE DIRECTORS
Ian W. Robinson Kramer, Levin, Naftalis,
Consultant; Former Executive Ofelia M. Mayo Nessen, Kamin & Frankel
Vice President and Assistant Secretary 919 Third Avenue
Chief Financial Officer New York, NY 10022
Bell Atlantic Management Kathleen J. Pflueger
Services, Inc. Assistant Secretary DISTRIBUTOR
Fund Management Company
Louis S. Sklar Samuel D. Sirko P.O. Box 4333
Executive Vice President Assistant Secretary Houston, TX 77210-4333
Hines Interests
Limited Partnership Stephen I. Winer AUDITORS
Assistant Secretary KPMG Peat Marwick LLP
700 Louisiana
Mary J. Benson NationsBank Bldg.
Assistant Treasurer Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Charter Fund Institutional Class paid ordinary dividends in the amount of
$0.24 per share to shareholders during its tax year ended October 31, 1995. Of
this amount, 33% is eligible for the dividends received deduction for
corporations. The Institutional Class also distributed long-term capital gains
of $0.325 per share during its tax year ended October 31, 1995.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
24
C H A R T E R
<PAGE>
Important Fund
Disclosures
AIM CONSTELLATION FUND
For shareholders who seek capital appreciation through investments in
common stocks, with emphasis on medium-size and smaller emerging
growth companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
* AIM Constellation Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
* The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
* The Fund's portfolio composition may change and there is no assurance the
Fund will continue to hold these same securities.
* Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
* Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Mid-Cap Fund Index represents an average of
the performance of the 30 largest mid-cap mutual funds.
* Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Standard
& Poor's 400 Mid-Cap Index (S&P 400) is an unmanaged index comprising common
stocks of approximately 400 mid-capitalization companies. The Dow Jones
Industrial Average (DJIA) is an unmanaged composite of the performance of 30
large-company stocks. The NASDAQ (National Association of Securities Dealers
Automated Quotation System) Composite Index is a group of more than 4,500
unmanaged over-the-counter securities widely regarded by investors to be
representative of the small- and medium-size company stock universe.
* An investment cannot be made in any indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
- ------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
For periods ended October 31, 1995
1 Year 34.09%
3 Years 23.17
Inception (4/8/92) 21.79
- ------------------------------------------------
AIM Constellation Fund S&P 400 NASDAQ Composite
Date (Institutional Class) Mid-Cap Index Index
- ------ -------------------- ------------- ----------------
4/8/92 10,000 10,000 10,000
10/92 10,797 10,291 10,023
10/93 13,938 12,499 12,907
10/94 15,045 12,798 12,877
10/95 20,173 15,509 17,160
Past performance is no guarantee of comparable future results.
25
C O N S T E L L A T I O N
<PAGE>
Management's
Discussion & Analysis
TECHNOLOGY STOCKS PROPEL MARKETS TO
RECORD LEVELS
-------------------------------
The much-noted aging of the
American population,
combined with an ongoing
search for ways to contain
costs, has created significant
opportunities within health care.
-------------------------------
The cover of Money magazine's November 1994 Forecast Issue read, "Make 12% or
more in 1995." After the dismal stock market returns in 1994, 12% may have
sounded like euphoria to some. Little did we know.
Healthy corporate profits exceeded analysts' expectations and propelled stocks
through record highs in 1995. The strength was broad-based, resuscitating large-
capitalization stocks, which had been out of favor for three years. The popular
DJIA sailed past 4000 on February 23, 1995, and then topped 5000 on November 21,
1995.
Spearheaded by the powerful technology stock advance, the broader NASDAQ
overtook its large-cap cousins in June of 1995 to finish the reporting period
well ahead of the pack.
The stars of the technology group were inarguably the semiconductor stocks. As
of June 30, 1995, semiconductor stocks were up an astonishing 94% in just six
months, according to Barron's. Other technology sectors were also strong, such
as aerospace and defense, software, and industrial technology companies. Also
strong were beneficiaries of stable interest rates such as banks and thrifts,
and consumer cyclical stocks in airlines, leisure and recreation companies, and
restaurants.
In September and October, the market took a well-deserved respite as concern
surfaced that third-quarter 1995 earnings reports, particularly in the
technology group, would fall below expectations. Some earnings disappointment in
certain big names such as Intel, Microsoft, Nokia, and IBM initiated profit-
taking, which temporarily suspended the market's advance. Of the companies
reporting earnings in the third quarter of 1995, I/B/E/S International Inc.
reported in The Wall Street Journal that 55% were higher than analysts'
expectations, with 14% on target, and 31% below expectations. These results
compared favorably with second-quarter reports, of which 57% exceeded
expectations and 30% were below target.
With investor confidence renewed, at least for the near term, the market
gathered strength for its next advance. Focus turned from corporate earnings to
the growing gridlock in Congress over the proposals to balance the burgeoning
budget. The Federal Reserve Board declined to implement its much-anticipated
interest rate cut pending some positive resolution to the budget debate.
YOUR INVESTMENT PORTFOLIO
Holdings in the following three sectors provided a major portion of your Fund's
strong performance during the fiscal year covered by this report.
. TECHNOLOGY. Once again, the Fund's most extensive holdings were in the
technology sector. The Fund's portfolio included both Microsoft, which
introduced its much-publicized Windows 95 operating system, and Intel,
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS TOP 10 INDUSTRIES
(as of 10/31/95) (as of 10/31/95)
1. DELL COMPUTER CORP. 1. SEMICONDUCTORS
2. CISCO SYSTEMS, INC. 2. COMPUTER SOFTWARE/SERVICES
3. APPLIED MATERIALS, INC. 3. MEDICAL (PATIENT SERVICES)
4. COMPUTER ASSOCIATES 4. RETAIL (STORES)
INTERNATIONAL, INC. 5. COMPUTER NETWORKING
5. MICRON TECHNOLOGY, INC. 6. COMPUTER PERIPHERALS
6. LSI LOGIC CORP. 7. TELECOMMUNICATIONS
7. 3COM CORP. 8. FINANCE (CONSUMER CREDIT)
8. TERADYNE, INC. 9. MEDICAL (INSTRUMENTS/
9. ALTERA CORP. PRODUCTS)
10. ORACLE SYSTEMS CORP. 10. COMPUTER MINI/PCS
- --------------------------------------------------------------------------------
See important Fund disclosure on page 25.
26
C O N S T E L L A T I O N
<PAGE>
- -------------------------------------------------------------
ONE-YEAR PERFORMANCE COMPARISON
Total Return as of 10/31/95
AIM Constellation Fund Institutional Class 34.09%
S&P 400 21.18%
NASDAQ Index 33.26%
S&P 500 26.36%
- -------------------------------------------------------------
which brought out the Pentium chip. The Fund also held a position in Ascend
Communications, Inc., a provider of access to the Internet. Another holding,
Fiserv, Inc., a manager of financial information, is expected to be an important
participant in the anticipated trend toward home banking.
In addition, the Fund's holdings shifted from makers of generic computer chips
to companies that produce more sophisticated capital equipment, companies such
as Ultratech Stepper, Inc. A stepper is a machine that imprints circuits on
silicon wafers, and Ultratech's stepper is about half as expensive as rival
machines.
. HEALTH CARE. The much-noted aging of the American population, combined
with an ongoing search for ways to contain costs, has created significant
opportunities within health care. The portfolio includes health maintenance
organizations with increasing enrollments such as Healthsource, Inc. It also
includes such firms as Invacare Corp., a provider of home health care, an
important strategy for reducing health care costs.
Health care is a sector where technological advances can save both lives and
costs. For example, AIM Constellation's portfolio includes Boston Scientific
Corp., a manufacturer of medical devices, including stents that are inserted
into cardiac blood vessels during balloon angioplasty, increasing the
effectiveness of this procedure.
. CYCLICAL CONSUMER INDUSTRIES. A new focus in the Fund during the
reporting period was specialty retailers. The Fund was attracted to two
interesting trends: independent "superstores" which have attracted significant
business from community malls, and the emerging niche retailers who target mail
order customers by offering attractive pricing, better selection, superior
distribution systems, and the convenience of catalogue shopping.
The Fund added such mail order retailers as Micro Warehouse Inc. and Corporate
Express, Inc., which deliver computers, software, and office supplies. Other
portfolio holdings included medical supply mail order vendors Cardinal Health
Inc. and Omnicare Inc.
In addition to the aforementioned trends, the Fund profited from the recent
surge in mergers and acquisitions. The Fund held a position in Cordis Corp. at
the time of the company's takeover by Johnson & Johnson late in 1995. Of course,
the Fund's portfolio composition is subject to change, and there is no guarantee
the Fund will continue to hold the same securities.
OUTLOOK FOR THE FUTURE
At this writing, the market has surpassed the Dow 5000 level. Yet many analysts
maintain that this aging bull market--the Dow has gone a record 61 months
without experiencing a 10% correction--may have plenty of steam left. Barron's
recently reported analysts' estimates that projected the Dow well past 5500
during the coming year.
Of course, a significant complement of market strategists also believe a
correction is due.
Rather than make any projections of future market performance, AIM remains
committed to its disciplined investment strategy, which helps us determine, on a
company-by-company basis, which stocks to own and which to sell--without the
guesswork of market timing.
See important Fund disclosure on page 25.
27
C O N S T E L L A T I O N
<PAGE>
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
DOMESTIC COMMON STOCKS-87.10%
ADVERTISING/BROADCASTING-0.35%
228,200 Belo (A.H.) Corp. $ 7,901,425
- --------------------------------------------------------------------
525,000 Infinity Broadcasting Corp.-Class A(a) 17,062,500
- --------------------------------------------------------------------
24,963,925
- --------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES-0.37%
400,000 Echlin Inc. 14,300,000
- --------------------------------------------------------------------
625,000 Mark IV Industries, Inc. 12,187,500
- --------------------------------------------------------------------
26,487,500
- --------------------------------------------------------------------
BEVERAGES-0.50%
750,000 Canandaigua Wine Co., Inc.-Class A(a) 36,000,000
- --------------------------------------------------------------------
BIOTECHNOLOGY-0.13%
102,400 Chiron Corp.(a) 9,318,400
- --------------------------------------------------------------------
BUILDING MATERIALS-0.11%
241,500 Black & Decker Corp. 8,180,812
- --------------------------------------------------------------------
BUSINESS SERVICES-1.73%
194,800 Equifax, Inc. 7,597,200
- --------------------------------------------------------------------
806,500 Healthcare COMPARE Corp.(a) 29,840,500
- --------------------------------------------------------------------
100,000 Interim Services Inc.(a) 2,975,000
- --------------------------------------------------------------------
1,300,000 Manpower Inc. 35,262,500
- --------------------------------------------------------------------
700,000 Olsten Corp. 26,950,000
- --------------------------------------------------------------------
900,691 Value Health, Inc.(a) 20,603,307
- --------------------------------------------------------------------
123,228,507
- --------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.35%
928,700 Airgas Inc.(a) 24,726,637
- --------------------------------------------------------------------
COMPUTER MINI/PCS-2.95%
1,050,000 COMPAQ Computer Corp.(a) 58,537,500
- --------------------------------------------------------------------
2,000,000 Dell Computer Corp.(a) 93,250,000
- --------------------------------------------------------------------
750,000 Sun Microsystems, Inc.(a) 58,500,000
- --------------------------------------------------------------------
210,287,500
- --------------------------------------------------------------------
COMPUTER NETWORKING-5.77%
500,000 ALANTEC Corp.(a) 17,875,000
- --------------------------------------------------------------------
200,000 Ascend Communications, Inc.(a) 13,000,000
- --------------------------------------------------------------------
</TABLE>
28
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
Computer Networking-(continued)
1,000,000 Bay Networks, Inc.(a) $ 66,250,000
- ---------------------------------------------------------------------
550,000 Cabletron Systems, Inc.(a) 43,243,750
- ---------------------------------------------------------------------
900,000 Cheyenne Software, Inc.(a) 18,787,500
- ---------------------------------------------------------------------
500,000 CIDCO, Inc.(a) 14,812,500
- ---------------------------------------------------------------------
1,200,000 Cisco Systems, Inc.(a) 93,000,000
- ---------------------------------------------------------------------
812,800 FORE Systems, Inc.(a) 43,078,400
- ---------------------------------------------------------------------
500,000 Network Equipment Technologies, Inc.(a) 16,312,500
- ---------------------------------------------------------------------
336,800 Optical Data Systems, Inc.(a) 10,061,900
- ---------------------------------------------------------------------
1,600,000 3Com Corp.(a) 75,200,000
- ---------------------------------------------------------------------
411,621,550
- ---------------------------------------------------------------------
COMPUTER PERIPHERALS-4.77%
800,000 Adaptec Inc.(a) 35,600,000
- ---------------------------------------------------------------------
1,125,000 Alliance Semiconductor Corp.(a) 34,593,750
- ---------------------------------------------------------------------
615,500 Cerner, Inc.(a) 16,310,750
- ---------------------------------------------------------------------
600,000 Digi International, Inc.(a) 16,050,000
- ---------------------------------------------------------------------
200,000 Filenet Corp.(a) 9,075,000
- ---------------------------------------------------------------------
257,200 Komag, Inc.(a) 14,660,400
- ---------------------------------------------------------------------
800,000 Microchip Technology, Inc.(a) 31,750,000
- ---------------------------------------------------------------------
400,000 Oak Technology, Inc.(a) 21,900,000
- ---------------------------------------------------------------------
1,604,600 Oracle Systems Corp.(a) 70,000,675
- ---------------------------------------------------------------------
500,000 Read-Rite Corp.(a) 17,437,500
- ---------------------------------------------------------------------
600,000 Seagate Technology Inc.(a) 26,850,000
- ---------------------------------------------------------------------
500,000 U.S. Robotics Corp.(a) 46,250,000
- ---------------------------------------------------------------------
340,478,075
- ---------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-10.80%
1,025,000 Acclaim Entertainment, Inc.(a) 24,215,625
- ---------------------------------------------------------------------
505,900 Adobe Systems, Inc. 28,836,300
- ---------------------------------------------------------------------
1,000,000 BMC Software, Inc.(a) 35,625,000
- ---------------------------------------------------------------------
500,000 Broderbund Software, Inc.(a) 34,687,500
- ---------------------------------------------------------------------
1,125,000 Cadence Design Systems, Inc.(a) 36,281,250
- ---------------------------------------------------------------------
879,300 Ceridian Corp.(a) 38,249,550
- ---------------------------------------------------------------------
1,500,000 Computer Associates International, Inc. 82,500,000
- ---------------------------------------------------------------------
2,000,000 Computervision Corp.(a) 23,500,000
- ---------------------------------------------------------------------
550,000 Electronic Arts, Inc.(a) 20,143,750
- ---------------------------------------------------------------------
418,000 Fiserv, Inc.(a) 10,763,500
- ---------------------------------------------------------------------
741,200 FTP Software, Inc.(a) 20,012,400
- ---------------------------------------------------------------------
</TABLE>
29
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
Computer Software/Services-(continued)
600,000 HBO & Co. $ 42,450,000
- -----------------------------------------------------------------------
200,000 Hyperion Software Corp.(a) 9,850,000
- -----------------------------------------------------------------------
1,200,000 Informix Corp.(a) 34,950,000
- -----------------------------------------------------------------------
300,000 Microsoft Corp.(a) 30,000,000
- -----------------------------------------------------------------------
642,900 Network General Corp.(a) 26,680,350
- -----------------------------------------------------------------------
700,000 PairGain Technologies, Inc.(a) 29,925,000
- -----------------------------------------------------------------------
800,000 Parametric Technology Corp.(a) 53,500,000
- -----------------------------------------------------------------------
300,000 Platinum Technology, Inc.(a) 5,475,000
- -----------------------------------------------------------------------
600,000 Policy Management Systems Corp.(a) 28,275,000
- -----------------------------------------------------------------------
500,000 Rational Software Corp.(a) 7,812,500
- -----------------------------------------------------------------------
737,300 SoftKey International Inc.(a) 23,224,950
- -----------------------------------------------------------------------
500,000 Sterling Software, Inc.(a) 23,062,500
- -----------------------------------------------------------------------
600,000 Sybase, Inc.(a) 23,550,000
- -----------------------------------------------------------------------
1,000,000 Symantec Corp.(a) 24,312,500
- -----------------------------------------------------------------------
1,415,700 Synopsys, Inc.(a) 53,088,750
- -----------------------------------------------------------------------
770,971,425
- -----------------------------------------------------------------------
CONGLOMERATES-0.18%
205,991 Tyco International Ltd. 12,513,953
- -----------------------------------------------------------------------
CONSUMER NON-DURABLES-0.16%
252,000 Department 56, Inc.(a) 11,434,500
- -----------------------------------------------------------------------
COSMETICS & TOILETRIES-0.47%
1,360,000 General Nutrition, Inc.(a) 33,830,000
- -----------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.46%
200,000 Ametek, Inc. 3,525,000
- -----------------------------------------------------------------------
600,000 Amphenol Corp.(a) 12,975,000
- -----------------------------------------------------------------------
146,200 AVX Corp. 4,550,475
- -----------------------------------------------------------------------
300,000 Methode Electronics, Inc. 6,900,000
- -----------------------------------------------------------------------
156,250 Molex, Inc. 5,156,250
- -----------------------------------------------------------------------
234,375 Molex, Inc.-Class A 7,207,031
- -----------------------------------------------------------------------
187,500 Parker-Hannifin Corp. 6,328,125
- -----------------------------------------------------------------------
300,000 Recoton Corp.(a) 6,675,000
- -----------------------------------------------------------------------
750,000 Symbol Technologies, Inc.(a) 26,156,250
- -----------------------------------------------------------------------
400,000 Tektronix, Inc. 23,700,000
- -----------------------------------------------------------------------
2,177,800 Teradyne, Inc.(a) 72,684,075
- -----------------------------------------------------------------------
175,857,206
- -----------------------------------------------------------------------
</TABLE>
30
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
ELECTRONIC/PC DISTRIBUTORS-0.89%
650,000 Arrow Electronics, Inc.(a) $ 32,987,500
- --------------------------------------------------------------------
600,000 Avnet, Inc. 30,225,000
- --------------------------------------------------------------------
63,212,500
- --------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.83%
500,000 ADVANTA Corp.-Class A 19,375,000
- --------------------------------------------------------------------
500,000 ADVANTA Corp.-Class B 17,875,000
- --------------------------------------------------------------------
1,100,000 Credit Acceptance Corp.(a) 25,850,000
- --------------------------------------------------------------------
650,000 First USA, Inc. 29,900,000
- --------------------------------------------------------------------
1,300,000 Green Tree Financial Corp. 34,612,500
- --------------------------------------------------------------------
1,600,000 MBNA Corp. 59,000,000
- --------------------------------------------------------------------
1,220,800 Medaphis Corp.(a) 38,760,400
- --------------------------------------------------------------------
2,500,000 Mercury Finance Co. 48,125,000
- --------------------------------------------------------------------
273,497,900
- --------------------------------------------------------------------
FUNERAL SERVICES-1.46%
814,100 Loewen Group, Inc. 32,602,181
- --------------------------------------------------------------------
1,366,400 Service Corp. International 54,826,800
- --------------------------------------------------------------------
500,000 Stewart Enterprises, Inc.-Class A 16,875,000
- --------------------------------------------------------------------
104,303,981
- --------------------------------------------------------------------
GAMING-0.69%
1,000,000 Mirage Resorts, Inc.(a) 32,750,000
- --------------------------------------------------------------------
750,000 Players International, Inc.(a) 8,062,500
- --------------------------------------------------------------------
476,200 Trump Hotels & Casino Resorts, Inc.(a) 8,095,400
- --------------------------------------------------------------------
48,907,900
- --------------------------------------------------------------------
HOME BUILDING-0.34%
750,000 Clayton Homes, Inc. 19,687,500
- --------------------------------------------------------------------
125,000 Oakwood Homes Corp. 4,687,500
- --------------------------------------------------------------------
24,375,000
- --------------------------------------------------------------------
HOTELS/MOTELS-0.88%
145,900 Doubletree Corp.(a) 3,209,800
- --------------------------------------------------------------------
600,000 Hospitality Franchise Systems, Inc.(a) 36,750,000
- --------------------------------------------------------------------
750,000 La Quinta Inns, Inc. 19,312,500
- --------------------------------------------------------------------
162,500 Promus Companies Inc.(a) 3,575,000
- --------------------------------------------------------------------
62,847,300
- --------------------------------------------------------------------
</TABLE>
31
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
INSURANCE (LIFE & HEALTH)-0.07%
150,000 Equitable of Iowa Companies $ 5,250,000
- ------------------------------------------------------------------
LEISURE & RECREATION-0.46%
429,300 Avid Technology, Inc.(a) 18,781,875
- ------------------------------------------------------------------
500,000 Mattel, Inc. 14,375,000
- ------------------------------------------------------------------
33,156,875
- ------------------------------------------------------------------
MACHINE TOOLS-0.17%
400,000 Kennametal Inc. 12,450,000
- ------------------------------------------------------------------
MACHINERY (HEAVY)-0.08%
131,000 AGCO Corp. 5,862,250
- ------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.39%
600,000 Thermo Electron Corp.(a) 27,600,000
- ------------------------------------------------------------------
MEDICAL (DRUGS)-1.28%
1,000,000 Cardinal Health, Inc. 51,375,000
- ------------------------------------------------------------------
125,800 Forest Laboratories, Inc.(a) 5,204,975
- ------------------------------------------------------------------
1,000,000 Mylan Laboratories, Inc. 19,000,000
- ------------------------------------------------------------------
350,000 Watson Pharmaceuticals, Inc.(a) 15,662,500
- ------------------------------------------------------------------
91,242,475
- ------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-3.00%
1,000,000 Biomet, Inc.(a) 16,625,000
- ------------------------------------------------------------------
910,400 Boston Scientific Corp.(a) 38,350,600
- ------------------------------------------------------------------
300,000 Cordis Corp.(a) 33,150,000
- ------------------------------------------------------------------
154,300 Heart Technology, Inc.(a) 4,397,550
- ------------------------------------------------------------------
500,800 Idexx Laboratories, Inc.(a) 20,407,600
- ------------------------------------------------------------------
689,000 Invacare Corp. 17,397,250
- ------------------------------------------------------------------
400,000 Medtronic Inc. 23,100,000
- ------------------------------------------------------------------
500,000 Nellcor, Inc.(a) 28,750,000
- ------------------------------------------------------------------
515,800 St. Jude Medical Inc.(a) 27,466,350
- ------------------------------------------------------------------
100,000 Stryker Corp. 4,512,500
- ------------------------------------------------------------------
214,156,850
- ------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-10.04%
400,000 American Medical Response, Inc.(a) 11,550,000
- ------------------------------------------------------------------
1,750,000 Apria Healthcare Group, Inc.(a) 37,843,750
- ------------------------------------------------------------------
1,128,000 Columbia/HCA Healthcare Corp. 55,413,000
- ------------------------------------------------------------------
900,000 Community Health Systems, Inc.(a) 28,575,000
- ------------------------------------------------------------------
</TABLE>
32
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
Medical (Patient Services)-(continued)
500,000 Foundation Health Corp.(a) $ 21,187,500
- ---------------------------------------------------------------------------
700,000 Genesis Health Ventures, Inc.(a) 20,212,500
- ---------------------------------------------------------------------------
1,500,000 Health Care and Retirement Corp.(a) 44,062,500
- ---------------------------------------------------------------------------
1,792,125 Health Management Associates, Inc.-Class A(a) 38,530,688
- ---------------------------------------------------------------------------
732,600 Healthsource, Inc.(a) 38,827,800
- ---------------------------------------------------------------------------
2,500,000 Healthsouth Corp.(a) 65,312,500
- ---------------------------------------------------------------------------
1,250,000 Horizon Healthcare Corp.(a) 25,312,500
- ---------------------------------------------------------------------------
1,000,000 Integrated Health Services, Inc.(a) 22,875,000
- ---------------------------------------------------------------------------
1,300,000 Lincare Holdings Inc.(a) 32,337,500
- ---------------------------------------------------------------------------
600,000 Living Centers of America, Inc.(a) 15,525,000
- ---------------------------------------------------------------------------
1,250,000 Manor Care, Inc. 40,937,500
- ---------------------------------------------------------------------------
600,000 Omnicare Inc. 21,750,000
- ---------------------------------------------------------------------------
1,250,000 OrNda HealthCorp(a) 22,031,250
- ---------------------------------------------------------------------------
600,000 Oxford Health Plans, Inc.(a) 46,950,000
- ---------------------------------------------------------------------------
150,000 Pacificare Health Systems, Inc.-Class A(a) 10,575,000
- ---------------------------------------------------------------------------
150,000 Pacificare Health Systems, Inc.-Class B(a) 10,912,500
- ---------------------------------------------------------------------------
350,000 PhyCor, Inc.(a) 12,862,500
- ---------------------------------------------------------------------------
600,000 Quorum Health Group Inc.(a) 12,862,500
- ---------------------------------------------------------------------------
900,000 Sybron International Corp. 38,250,000
- ---------------------------------------------------------------------------
434,000 Theratx Inc.(a) 4,882,500
- ---------------------------------------------------------------------------
1,350,000 Vencor, Inc.(a) 37,462,500
- ---------------------------------------------------------------------------
717,041,488
- ---------------------------------------------------------------------------
OFFICE PRODUCTS-0.45%
300,000 Avery Dennison Corp. 13,425,000
- ---------------------------------------------------------------------------
517,100 Reynolds & Reynolds Co.-Class A 18,421,688
- ---------------------------------------------------------------------------
31,846,688
- ---------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.09%
400,000 Smith International, Inc.(a) 6,400,000
- ---------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.19%
250,000 Champion International Corp. 13,375,000
- ---------------------------------------------------------------------------
POLLUTION CONTROL-0.33%
225,000 Asyst Technologies, Inc.(a) 9,450,000
- ---------------------------------------------------------------------------
658,000 USA Waste Services, Inc.(a) 13,818,000
- ---------------------------------------------------------------------------
23,268,000
- ---------------------------------------------------------------------------
PUBLISHING-0.10%
187,900 Harcourt General, Inc. 7,445,538
- ---------------------------------------------------------------------------
</TABLE>
33
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
RESTAURANTS-0.74%
312,100 Applebee's International, Inc. $ 8,777,813
- ---------------------------------------------------------------------
850,000 Cracker Barrel Old Country Store, Inc. 14,450,000
- ---------------------------------------------------------------------
400,000 Morrison Restaurants Inc. 6,250,000
- ---------------------------------------------------------------------
750,000 Outback Steakhouse, Inc.(a) 23,531,250
- ---------------------------------------------------------------------
53,009,063
- ---------------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.46%
300,000 Casey's General Stores, Inc. 6,900,000
- ---------------------------------------------------------------------
652,500 Eckerd Corp.(a) 25,855,313
- ---------------------------------------------------------------------
1,000,000 Kroger Co.(a) 33,375,000
- ---------------------------------------------------------------------
800,000 Safeway, Inc.(a) 37,800,000
- ---------------------------------------------------------------------
103,930,313
- ---------------------------------------------------------------------
RETAIL (STORES)-7.35%
696,500 AutoZone, Inc.(a) 17,238,375
- ---------------------------------------------------------------------
410,100 Baby Superstore, Inc.(a) 19,377,225
- ---------------------------------------------------------------------
1,000,000 Bed Bath & Beyond, Inc.(a) 31,250,000
- ---------------------------------------------------------------------
18,900 CDW Computer Centers, Inc.(a) 916,650
- ---------------------------------------------------------------------
625,000 Circuit City Stores, Inc. 20,859,375
- ---------------------------------------------------------------------
1,000,000 Consolidated Stores Corp.(a) 23,125,000
- ---------------------------------------------------------------------
572,200 Corporate Express, Inc.(a) 14,948,725
- ---------------------------------------------------------------------
1,399,975 Dollar General Corp. 34,299,387
- ---------------------------------------------------------------------
500,000 Gap, Inc. 19,687,500
- ---------------------------------------------------------------------
900,000 Gymboree Corp.(a) 20,362,500
- ---------------------------------------------------------------------
800,200 Heilig-Meyers Co. 14,703,675
- ---------------------------------------------------------------------
558,000 Kohl's Corp.(a) 25,319,250
- ---------------------------------------------------------------------
400,000 MacFrugals Bargains Close-Outs, Inc.(a) 4,750,000
- ---------------------------------------------------------------------
600,100 Men's Wearhouse, Inc. (The)(a) 23,403,900
- ---------------------------------------------------------------------
837,900 Micro Warehouse Inc.(a) 37,286,550
- ---------------------------------------------------------------------
1,006,450 Office Depot, Inc.(a) 28,809,630
- ---------------------------------------------------------------------
150,000 Petco Animal Supplies, Inc.(a) 4,200,000
- ---------------------------------------------------------------------
153,900 PetSmart, Inc.(a) 5,155,650
- ---------------------------------------------------------------------
1,000,000 Sports Authority, Inc. (The)(a) 21,750,000
- ---------------------------------------------------------------------
1,850,000 Staples Inc.(a) 49,256,250
- ---------------------------------------------------------------------
750,000 Sunglass Hut International, Inc.(a) 20,437,500
- ---------------------------------------------------------------------
800,000 Talbots, Inc. 19,400,000
- ---------------------------------------------------------------------
255,700 Tandy Corp. 12,625,188
- ---------------------------------------------------------------------
1,246,300 Viking Office Products, Inc.(a) 55,460,350
- ---------------------------------------------------------------------
524,622,680
- ---------------------------------------------------------------------
</TABLE>
34
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
SCIENTIFIC INSTRUMENTS-0.82%
780,000 Millipore Corp. $ 27,592,500
- ----------------------------------------------------------------
600,000 Varian Associates, Inc. 30,825,000
- ----------------------------------------------------------------
58,417,500
- ----------------------------------------------------------------
SEMICONDUCTORS-16.86%
1,200,000 Altera Corp.(a) 72,600,000
- ----------------------------------------------------------------
1,325,000 Analog Devices, Inc.(a) 47,865,625
- ----------------------------------------------------------------
1,800,000 Applied Materials, Inc.(a) 90,225,000
- ----------------------------------------------------------------
2,200,000 Atmel Corp.(a) 68,750,000
- ----------------------------------------------------------------
800,000 Cirrus Logic Corp.(a) 33,700,000
- ----------------------------------------------------------------
501,450 Credence Systems Corp.(a) 18,741,694
- ----------------------------------------------------------------
1,000,000 Cypress Semiconductor Corp.(a) 35,250,000
- ----------------------------------------------------------------
300,000 Electroglas, Inc.(a) 21,075,000
- ----------------------------------------------------------------
150,000 Gasonics International Corp.(a) 4,950,000
- ----------------------------------------------------------------
2,500,000 Integrated Device Technology, Inc. 47,500,000
- ----------------------------------------------------------------
400,000 Intel Corp. 27,950,000
- ----------------------------------------------------------------
967,000 International Rectifier Corp.(a) 43,635,875
- ----------------------------------------------------------------
800,000 KLA Instruments Corp.(a) 34,200,000
- ----------------------------------------------------------------
850,000 LAM Research Corp.(a) 51,743,750
- ----------------------------------------------------------------
580,700 Lattice Semiconductor Corp.(a) 22,792,475
- ----------------------------------------------------------------
1,000,000 Linear Technology Corp. 43,750,000
- ----------------------------------------------------------------
1,700,000 LSI Logic Corp.(a) 80,112,500
- ----------------------------------------------------------------
313,800 Maxim Integrated Products, Inc.(a) 23,456,550
- ----------------------------------------------------------------
1,000,000 MEMC Electronic Materials, Inc.(a) 32,000,000
- ----------------------------------------------------------------
1,150,000 Micron Technology, Inc. 81,218,750
- ----------------------------------------------------------------
558,900 Novellus Systems, Inc.(a) 38,494,238
- ----------------------------------------------------------------
409,000 SCI Systems, Inc.(a) 14,366,125
- ----------------------------------------------------------------
600,000 Sierra Semiconductor Corp.(a) 10,725,000
- ----------------------------------------------------------------
400,000 Silicon Valley Group, Inc.(a) 12,950,000
- ----------------------------------------------------------------
1,000,000 Solectron Corp.(a) 40,250,000
- ----------------------------------------------------------------
333,400 Tencor Instruments(a) 14,211,175
- ----------------------------------------------------------------
770,000 Texas Instruments Inc. 52,552,500
- ----------------------------------------------------------------
32,200 Ultratech Stepper, Inc.(a) 1,288,000
- ----------------------------------------------------------------
430,000 Vishay Intertechnology, Inc.(a) 15,157,500
- ----------------------------------------------------------------
1,500,000 VLSI Technology, Inc.(a) 35,250,000
- ----------------------------------------------------------------
1,500,000 Xilinx, Inc.(a) 69,000,000
- ----------------------------------------------------------------
500,000 Zilog, Inc.(a) 17,750,000
- ----------------------------------------------------------------
1,203,511,757
- ----------------------------------------------------------------
</TABLE>
35
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
SHOES & RELATED APPAREL-0.44%
500,000 Nine West Group, Inc.(a) $ 22,250,000
- -----------------------------------------------------------------
300,000 Wolverine World Wide, Inc. 9,000,000
- -----------------------------------------------------------------
31,250,000
- -----------------------------------------------------------------
TELECOMMUNICATIONS-3.00%
400,000 ADC Telecommunications, Inc.(a) 16,000,000
- -----------------------------------------------------------------
450,000 Allen Group Inc. 11,025,000
- -----------------------------------------------------------------
500,000 Andrew Corp.(a) 21,125,000
- -----------------------------------------------------------------
700,000 Aspect Telecommunications Corp.(a) 24,062,500
- -----------------------------------------------------------------
425,000 DSC Communications Corp.(a) 15,725,000
- -----------------------------------------------------------------
250,000 Glenayre Technologies, Inc.(a) 16,062,500
- -----------------------------------------------------------------
512,600 Octel Communications Corp.(a) 17,492,475
- -----------------------------------------------------------------
600,000 Scientific-Atlanta, Inc. 7,425,000
- -----------------------------------------------------------------
350,000 StrataCom, Inc.(a) 21,525,000
- -----------------------------------------------------------------
249,100 Tekelec(a) 3,611,950
- -----------------------------------------------------------------
750,000 Tellabs, Inc.(a) 25,500,000
- -----------------------------------------------------------------
112,500 TransPro, Inc. 1,237,500
- -----------------------------------------------------------------
400,000 U.S. Long Distance Corp.(a) 5,150,000
- -----------------------------------------------------------------
875,000 WorldCom, Inc.(a) 28,546,875
- -----------------------------------------------------------------
214,488,800
- -----------------------------------------------------------------
TELEPHONE-0.02%
55,700 Century Telephone Enterprises, Inc. 1,615,300
- -----------------------------------------------------------------
TEXTILES-0.47%
600,000 Nautica Enterprises, Inc.(a) 20,550,000
- -----------------------------------------------------------------
348,700 Tommy Hilfiger Corp.(a) 13,294,188
- -----------------------------------------------------------------
33,844,188
- -----------------------------------------------------------------
TRUCKING-0.10%
391,800 TNT Freightways Corp. 7,052,400
- -----------------------------------------------------------------
Total Domestic Common Stocks 6,217,881,736
- -----------------------------------------------------------------
</TABLE>
36
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.14%
AUSTRALIA-0.09%
480,832 Broken Hill Proprietary Co. Ltd. (Conglomerates) $ 6,512,182
- -------------------------------------------------------------------------------
CANADA-0.22%
900,000 Corel Corp. (Computer Software/Services)(a) 15,412,500
- -------------------------------------------------------------------------------
FINLAND-0.25%
23,170 Nokia Corp. (Telecommunications) 1,325,527
- -------------------------------------------------------------------------------
300,000 Nokia Corp.-ADR (Telecommunications) 16,725,000
- -------------------------------------------------------------------------------
18,050,527
- -------------------------------------------------------------------------------
FRANCE-0.23%
20,000 LVMH Moet Hennessy Louis Vuitton (Beverages-
Alcoholic) 3,979,469
- -------------------------------------------------------------------------------
50,580 Roussel-Uclaf (Medical-Drugs) 8,295,364
- -------------------------------------------------------------------------------
12,650 Sidel S.A. (Machinery-Miscellaneous) 4,392,487
- -------------------------------------------------------------------------------
16,667,320
- -------------------------------------------------------------------------------
GERMANY-0.06%
13,000 Mannesmann A.G. (Machinery-Miscellaneous) 4,278,834
- -------------------------------------------------------------------------------
HONG KONG-0.15%
1,000,000 Hutchison Whampoa Ltd. (Conglomerates) 5,509,655
- -------------------------------------------------------------------------------
628,000 Sun Hung Kai Properties Ltd. (Real Estate) 5,015,585
- -------------------------------------------------------------------------------
10,525,240
- -------------------------------------------------------------------------------
INDONESIA-0.06%
1,250,000 PT Bank International Indonesia (Banking) 4,375,826
- -------------------------------------------------------------------------------
IRELAND-0.13%
221,100 Elan Corp. PLC-ADR (Medical-Drugs)(a) 8,871,638
- -------------------------------------------------------------------------------
ISRAEL-0.22%
250,000 Lannet Data Communications Ltd. (Computer
Networking)(a) 7,187,500
- -------------------------------------------------------------------------------
225,000 Teva Pharmaceutical Industries Ltd.-ADR (Medical-
Drugs) 8,831,250
- -------------------------------------------------------------------------------
16,018,750
- -------------------------------------------------------------------------------
ITALY-0.05%
1,074,000 Telecom Italia Mobile S.p.A.
(Telecommunications)(a) 1,806,395
- -------------------------------------------------------------------------------
1,074,000 Telecom Italia S.p.A. (Telecommunications) 1,645,363
- -------------------------------------------------------------------------------
3,451,758
- -------------------------------------------------------------------------------
JAPAN-0.07%
120,000 Tokyo Electron Ltd. (Electronic
Components/Miscellaneous) 5,208,466
- -------------------------------------------------------------------------------
MALAYSIA-0.11%
938,000 Malayan Banking Berhad (Banking) 7,567,493
- -------------------------------------------------------------------------------
</TABLE>
37
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
NETHERLANDS-0.72%
400,000 ASM Lithography Holding N.V. (Semiconductors)(a) $ 19,850,000
- ------------------------------------------------------------------------------
400,000 Madge, N.V. (Computer Networking)(a) 16,750,000
- ------------------------------------------------------------------------------
270,500 Philips Electronics N.V.-New York Shares-ADR
(Electronic Components/Miscellaneous) 10,448,063
- ------------------------------------------------------------------------------
32,850 Ver Ned Uitgever Bezit (Publishing) 4,605,392
- ------------------------------------------------------------------------------
51,653,455
- ------------------------------------------------------------------------------
SPAIN-0.01%
8,100 Acerinox, S.A. (Metals-Miscellaneous) 852,771
- ------------------------------------------------------------------------------
SWEDEN-0.96%
140,000 Astra AB (Medical-Drugs) 5,059,784
- ------------------------------------------------------------------------------
60,500 Autoliv AB (Automobile/Trucks Parts & Tires) 3,471,147
- ------------------------------------------------------------------------------
2,811,600 Telefonaktiebolaget L.M. Ericsson-ADR
(Telecommunications) 60,054,089
- ------------------------------------------------------------------------------
68,585,020
- ------------------------------------------------------------------------------
SWITZERLAND-0.12%
3,500 BBC Brown Boveri Ltd. (Engineering &
Construction) 4,060,160
- ------------------------------------------------------------------------------
5,000 Ciba-Geigy Ltd. (Chemicals) 4,329,252
- ------------------------------------------------------------------------------
8,389,412
- ------------------------------------------------------------------------------
UNITED KINGDOM-0.69%
2,700,000 Burton Group PLC (Retail-Stores) 4,300,790
- ------------------------------------------------------------------------------
1,075,000 Danka Business Systems PLC-ADR (Office
Automation) 36,012,500
- ------------------------------------------------------------------------------
390,000 Granada Group PLC (Leisure & Recreation) 4,165,138
- ------------------------------------------------------------------------------
210,000 Thorn EMI PLC (Leisure & Recreation) 4,890,593
- ------------------------------------------------------------------------------
49,369,021
- ------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 295,790,213
- ------------------------------------------------------------------------------
</TABLE>
38
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<C> <S> <C>
PRINCIPAL
AMOUNT MARKET VALUE
MASTER NOTE AGREEMENT-1.07%
$76,500,000 Citicorp Securities, Inc., 6.125%,
03/11/96(b) $ 76,500,000
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-4.27%(c)
43,781,167 Daiwa Securities America, Inc., 5.90%,
11/01/95(d) 43,781,167
- -------------------------------------------------------------------------------
261,000,000 Goldman, Sachs & Co. Inc., 5.90%, 11/01/95(e) 261,000,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements 304,781,167
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-3.77%
U.S. TREASURY BILLS-3.06%(f)
195,000,000(g) 5.48%, 11/16/95 194,561,135
- -------------------------------------------------------------------------------
25,000,000 5.22%, 06/27/96 24,132,000
- -------------------------------------------------------------------------------
218,693,135
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES-0.71%
15,000,000 5.50%, 04/30/96 15,000,900
- -------------------------------------------------------------------------------
35,000,000 7.625%, 04/30/96 35,357,000
- -------------------------------------------------------------------------------
50,357,900
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 269,051,035
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.35% 7,164,004,151
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.35)% (24,736,094)
- -------------------------------------------------------------------------------
NET ASSETS-100.00% $7,139,268,057
===============================================================================
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon notice to the issuer. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
October 31, 1995.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(d) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,641. Collateralized by $353,853,000 U.S. Treasury obligations,
8.375% due 08/15/08.
(e) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$360,681,783. Collateralized by $341,411,000 U.S. Treasury obligations,
5.625% to 12.00% due 11/15/95 to 02/15/25.
(f) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(g) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 7.
See Notes to Financial Statements.
39
C O N S T E L L A T I O N
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $5,084,052,318) $7,164,004,151
- ------------------------------------------------------------------------
Foreign currencies, at market value (cost $13,642,266) 13,495,706
- ------------------------------------------------------------------------
Receivables for:
Investments sold 28,101,604
- ------------------------------------------------------------------------
Capital stock sold 50,215,325
- ------------------------------------------------------------------------
Dividends and interest 1,095,114
- ------------------------------------------------------------------------
Investment for deferred compensation plan 35,624
- ------------------------------------------------------------------------
Other assets 100,373
- ------------------------------------------------------------------------
Total assets 7,257,047,897
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 57,630,332
- ------------------------------------------------------------------------
Capital stock reacquired 50,907,595
- ------------------------------------------------------------------------
Variation margin 1,239,750
- ------------------------------------------------------------------------
Deferred compensation 35,624
- ------------------------------------------------------------------------
Accrued advisory fees 3,602,549
- ------------------------------------------------------------------------
Accrued administrative services fees 14,663
- ------------------------------------------------------------------------
Accrued directors' fees 3,850
- ------------------------------------------------------------------------
Accrued distribution fees 2,624,668
- ------------------------------------------------------------------------
Accrued transfer agent fees 439,464
- ------------------------------------------------------------------------
Accrued operating expenses 1,281,345
- ------------------------------------------------------------------------
Total liabilities 117,779,840
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $7,139,268,057
========================================================================
NET ASSETS:
Class A $7,000,350,013
========================================================================
Institutional Class $ 138,918,044
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------------------
Outstanding 295,483,948
========================================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------------------
Outstanding 5,775,803
========================================================================
CLASS A:
Net asset value and redemption price per share $23.69
========================================================================
Offering price per share:
(Net asset value of $23.69 divided by 94.50%) $25.07
========================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $24.05
========================================================================
</TABLE>
See Notes to Financial Statements.
40
C O N S T E L L A T I O N
<PAGE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $322,914 foreign withholding tax) $ 14,062,451
- --------------------------------------------------------------------------
Interest 27,896,762
- --------------------------------------------------------------------------
Total investment income 41,959,213
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 31,803,884
- --------------------------------------------------------------------------
Administrative services fees 173,257
- --------------------------------------------------------------------------
Custodian fees 568,906
- --------------------------------------------------------------------------
Directors' fees 44,198
- --------------------------------------------------------------------------
Distribution fees-Class A 14,905,705
- --------------------------------------------------------------------------
Transfer agent fees-Class A 9,158,530
- --------------------------------------------------------------------------
Transfer agent fees-Institutional Class 5,273
- --------------------------------------------------------------------------
Other 2,078,095
- --------------------------------------------------------------------------
Total expenses 58,737,848
- --------------------------------------------------------------------------
Less fees waived by advisor (761,655)
- --------------------------------------------------------------------------
Net expenses 57,976,193
- --------------------------------------------------------------------------
Net investment income (loss) (16,016,980)
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain on sales of:
Investment securities 198,443,948
- --------------------------------------------------------------------------
Foreign currencies 225,354
- --------------------------------------------------------------------------
Futures contracts 38,758,395
- --------------------------------------------------------------------------
237,427,697
- --------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 1,310,161,937
- --------------------------------------------------------------------------
Foreign currencies (529,855)
- --------------------------------------------------------------------------
Futures contracts (2,597,985)
- --------------------------------------------------------------------------
1,307,034,097
- --------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 1,544,461,794
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,528,444,814
==========================================================================
</TABLE>
See Notes to Financial Statements.
41
C O N S T E L L A T I O N
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (16,016,980) $ (4,773,452)
- -----------------------------------------------------------------------------
Net realized gain on sales of investment
securities,
foreign currencies and futures contracts 237,427,697 113,271,698
- -----------------------------------------------------------------------------
Unrealized appreciation of investment
securities,
foreign currencies and futures contracts 1,307,034,097 137,121,005
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,528,444,814 245,619,251
- -----------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investment securities:
Class A (107,823,749) --
- -----------------------------------------------------------------------------
Institutional Class (1,218,145) --
- -----------------------------------------------------------------------------
Share transactions - net:
Class A 1,878,176,040 726,623,024
- -----------------------------------------------------------------------------
Institutional Class 75,813,810 24,797,834
- -----------------------------------------------------------------------------
Net increase in net assets 3,373,392,770 997,040,109
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,765,875,287 2,768,835,178
- -----------------------------------------------------------------------------
End of period $7,139,268,057 $3,765,875,287
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,828,771,443 $2,890,417,744
- -----------------------------------------------------------------------------
Undistributed net investment income (loss) (54,010) --
- -----------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies
and futures contracts 231,637,155 103,578,171
- -----------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 2,078,913,469 771,879,372
- -----------------------------------------------------------------------------
$7,139,268,057 $3,765,875,287
=============================================================================
</TABLE>
See Notes to Financial Statements.
42
C O N S T E L L A T I O N
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity 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 four diversified portfolios:
AIM Constellation Fund, AIM Weingarten Fund, AIM Charter Fund and AIM
Aggressive Growth Fund. The Fund currently offers two different classes of
shares: the Class A shares (formerly "Retail Class") and the Institutional
Class. 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
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange is valued
at its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date, or absent a last sales price, at the mean
of the closing bid and asked prices. Debt obligations that are issued or
guaranteed by the U.S. Treasury 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 quotations are not readily
available are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors of the Company. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1995,
$326,819 was reclassified from undistributed net realized gains to
undistributed net investment income (loss) as a result of differing book/tax
treatments of foreign currency transactions. In addition, $15,636,151 was
reclassified from net investment income (loss) to paid-in capital as a
result of a net operating tax loss. Net assets of the Fund were unaffected
by the reclassifications discussed above.
C. 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.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
G. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by
43
C O N S T E L L A T I O N
<PAGE>
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - Continued
"marking to market" on a daily basis to reflect the market value of the
contracts at the end of each day's trading. Variation margin payments are made
or received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the contracts
may not correlate with changes in the value of the securities being hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees
paid by the Fund to AIM to the extent necessary to reduce the fees paid by the
Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of the Fund's average daily net assets
in excess of $150 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion. During the year ended October
31, 1995, AIM waived fees of $761,655. The waiver is entirely voluntary and the
Board of Directors would be advised of any decision by AIM to discontinue the
waiver. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM. These agreements require AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations
thereunder of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1995, AIM
was reimbursed $173,257 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Class A shares. During the year ended October 31, 1995, AFS was
paid $4,943,213 for such services. During the year ended October 31, 1995, the
Fund paid A I M Institutional Fund Services, Inc. ("AIFS") with respect to the
Institutional Class $2,790 for shareholder and transfer agency services.
Effective July 1, 1995, AIFS became the exclusive transfer agent for the
Institutional Class of the Fund.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Company
has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), with
respect to the Class A shares, whereby the Fund pays AIM Distributors an annual
rate of 0.30% of the Class A shares average daily net assets as compensation
for services related to the sales and distribution of the Class A shares. The
Plan provides that payments to dealers and financial institutions that provide
continuing personal shareholder services to their customers who purchase and
own shares of the Class A shares, in amounts of up to 0.25% of the average net
assets of the Class A shares attributable to the customers of such dealers or
financial institutions, may be characterized as a service fee. The Plan also
provides that payments in excess of service fees are characterized as an asset-
based sales charge under the Plan. The Plan also imposes a cap on the total
amount of sales charges, including asset-based sales charges, that may be paid
by the Company with respect to the Fund's Class A shares. During the year ended
October 31, 1995, the Class A shares paid AIM Distributors $14,905,705 as
compensation under the Plan.
AIM Distributors received commissions of $13,146,761 from Class A capital
stock transactions during the year ended October 31, 1995. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Capital, AIM Distributors, AFS,
AIFS and FMC.
During the year ended October 31, 1995 the Fund paid legal fees of $14,394 for
services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3 - DIRECTORS' FEES
Director's fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
44
C O N S T E L L A T I O N
<PAGE>
NOTE 4 - BANK BORROWINGS
The Fund has a $83,100,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. During the period July 20, 1995 (effective date of Credit
Agreement) through October 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 5 - AFFILIATED COMPANY TRANSACTIONS
Affiliated issuers, as defined in the 1940 Act, are issuers in which the Fund
held 5% or more of the outstanding voting securities. A summary of transactions
for each issuer who is or was an affiliate at or during the year ended October
31, 1995, is as follows:
<TABLE>
<CAPTION>
SHARE SHARE MARKET
BALANCE BALANCE VALUE
OCTOBER 31, PURCHASES REALIZED DIVIDEND OCTOBER 31, OCTOBER 31,
NAME OF ISSUER: 1994 COST SALES COST GAIN INCOME 1995 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Roosevelt Financial
Group, Inc. 315,000 $0 $4,779,251 $392,937 $30,943 $0 $0
===============================================================================================
</TABLE>
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended October 31,
1995 was $4,071,335,941 and $2,213,924,196, respectively. The amount of
unrealized appreciation (depreciation) of investment securities as of October
31, 1995, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,178,971,166
- -----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (99,425,248)
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,079,545,918
=============================================================================
</TABLE>
Cost of investments for tax purposes is $5,084,458,233.
NOTE 7- FUTURES CONTRACT
On October 31, 1995, $9,668,000 U.S. Treasury bills were pledged as collateral
to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1995:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
<S> <C>
S&P 500 Index 370 contracts/Dec95/Buy $ 749,250
S&P 500 Index 500 contracts/Mar96/Buy (1,642,375)
=====================================================
</TABLE>
NOTE 8 - CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 5,036,915 $ 105,368,663 1,908,947 $ 33,070,778
- -----------------------------------------------------------------------------------
Class A 214,014,863 4,411,919,689 100,598,652 1,751,901,830
- -----------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 60,580 1,019,563 -- --
- -----------------------------------------------------------------------------------
Class A 6,006,043 99,940,399 -- --
- -----------------------------------------------------------------------------------
Reacquired:
Institutional Class (1,476,157) (30,574,416) (474,909) (8,272,944)
- -----------------------------------------------------------------------------------
Class A (128,002,913) (2,633,684,048) (58,902,798) (1,025,278,806)
- -----------------------------------------------------------------------------------
95,639,331 $ 1,953,989,850 43,129,892 $ 751,420,858
===================================================================================
</TABLE>
45
C O N S T E L L A T I O N
<PAGE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Institutional Class during the three-year period ended October 31, 1995 and
the period April 8, 1992 (date operations commenced) through October 31, 1992.
<TABLE>
<CAPTION>
1995 1994 1993 1992
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $18.49 $17.13 $13.27 $12.29
- ---------------------------------- -------- ------- ------- ------
Income from investment operations:
Net investment income (loss) 0.02 0.03 -- (0.01)
- ---------------------------------- -------- ------- ------- ------
Net gains on securities (both
realized and unrealized) 6.06 1.33 3.86 0.99
- ---------------------------------- -------- ------- ------- ------
Total from investment operations 6.08 1.36 3.86 0.98
- ---------------------------------- -------- ------- ------- ------
Less distributions:
Distributions from capital gains (0.52) -- -- --
- ---------------------------------- -------- ------- ------- ------
Net asset value, end of period $24.05 $18.49 $17.13 $13.27
================================== ======== ======= ======= ======
Total return(a) 34.09% 7.94% 29.09% 7.97%
================================== ======== ======= ======= ======
Net assets, end of period (000s
omitted) $138,918 $39,847 $12,338 $3,087
================================== ======== ======= ======= ======
Ratio of expenses to average net
assets 0.66%(b) 0.69% 0.87% 0.91%(c)
================================== ======== ======= ======= ======
Ratio of net investment income
(loss) to average net assets 0.18%(b) 0.36% 0.04% (0.12)%(c)
================================== ======== ======= ======= ======
Portfolio turnover rate 45% 79% 70% 62%
================================== ======== ======= ======= ======
</TABLE>
(a) For periods less than one year, total return is not annualized.
(b) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees were 0.68% and
0.16%, respectively. Ratios are based on average net assets of $78,053,151.
(c) After expense reimbursements. Annualized.
46
C O N S T E L L A T I O N
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Constellation Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Constellation Fund (a portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the seven-year period then ended, the ten
months ended October 31, 1988, and the year ended December 31, 1987. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, 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
Constellation Fund as of October 31, 1995, and the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the seven-year period then ended, the ten months ended October 31,
1988, and the year ended December 31, 1987, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
47
C O N S T E L L A T I O N
<PAGE>
<TABLE>
<S> <C> <C>
Directors & Officers
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
11 Greenway Plaza
Charles T. Bauer Charles T. Bauer Suite 1919
Chairman and Chief Executive Officer Chairman Houston, TX 77046
A I M Management Group Inc.
Robert H. Graham INVESTMENT ADVISOR
Bruce L. Crockett President A I M Advisors, Inc.
Director, President, and Chief 11 Greenway Plaza
Executive Officer John J. Arthur Suite 1919
COMSAT Corporation Senior Vice President and Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Institutional Fund
Cortland Trust Inc. Services, Inc.
Jonathan C. Schoolar 11 Greenway Plaza
Carl Frischling Senior Vice President Suite 1919 .
Partner Houston, TX 77046
Kramer, Levin, Naftalis, Nessen, Carol F. Relihan
Kamin & Frankel Vice President and Secretary CUSTODIAN
State Street Bank and Trust
Robert H. Graham Melville B. Cox Company
President and Chief Operating Officer Vice President 225 Franklin Street
A I M Management Group Inc. Boston, MA 02110
Dana R. Sutton
John F. Kroeger Vice President and Assistant Treasurer COUNSEL TO THE FUND
Formerly, Consultant Ballard Spahr
Wendell & Stockel Associates, Inc. P. Michelle Grace Andrews & Ingersoll
Assistant Secretary 1735 Market Street
Lewis F. Pennock Philadelphia, PA 19103
Attorney Nancy L. Martin
Assistant Secretary COUNSEL TO THE DIRECTORS
Ian W. Robinson Kramer, Levin, Naftalis,
Consultant; Former Executive Ofelia M. Mayo Nessen, Kamin & Frankel
Vice President and Assistant Secretary 919 Third Avenue
Chief Financial Officer New York, NY 10022
Bell Atlantic Management Kathleen J. Pflueger
Services, Inc. Assistant Secretary DISTRIBUTOR
Fund Management Company
Louis S. Sklar Samuel D. Sirko P.O. Box 4333
Executive Vice President Assistant Secretary Houston, TX 77210-4333
Hines Interests
Limited Partnership Stephen I. Winer AUDITORS
Assistant Secretary KPMG Peat Marwick LLP
700 Louisiana
Mary J. Benson NationsBank Bldg.
Assistant Treasurer Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Constellation Fund distributed long-term capital gains of $0.52 per share
during its tax year ended October 31, 1995.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
48
C O N S T E L L A T I O N
<PAGE>
Important
Fund Disclosures
AIM WEINGARTEN FUND
For shareholders who seek long-term growth of capital through investments
primarily in common stocks of leading U.S. companies considered by management to
have strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
* AIM Weingarten Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
* One-year results include reinvested distributions of $1.905 per share.
* The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
* The Fund's portfolio composition may change and there is no assurance the
Fund will continue to hold these same securities.
* Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
* Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Growth Fund Index represents an average of the
performance of the 30 largest growth mutual funds.
* Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Dow Jones
Industrial Average (DJIA) is an unmanaged composite of the performance of 30
large-company stocks. The NASDAQ (National Association of Securities Dealers
Automated Quotation System) Composite Index is a group of more than 4,500
unmanaged over-the-counter securities widely regarded by investors to be
representative of the small- and medium-sized company stock universe.
* An investment cannot be made in any indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
- ---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended 10/31/95
1 Year 28.69%
3 Years 12.69
Inception (10/8/91) 12.10
- ---------------------------------------------------
AIM Weingarten Fund S&P 500 Lipper Growth
Date (Institutional Class) Stock Index Fund Index
- ------ -------------------- ----------- -------------
10/8/91 10,000 10,000 10,000
10/91 10,368 10,310 10,165
10/92 11,110 11,333 10,959
10/93 11,836 13,020 13,039
10/94 12,354 13,524 13,306
10/95 15,898 17,089 16,496
Past performance is no guarantee of comparable future results.
49
W E I N G A R T E N
<PAGE>
Management's
Discussion & Analysis
TECHNOLOGY STOCKS PROPEL MARKETS
TO RECORD LEVELS
---------------------------
The much-noted aging of the
American population,
combined with an ongoing
search for ways to contain
the rising cost of health
care, has created
significant opportunities.
---------------------------
Healthy corporate profits exceeded analysts' expectations and propelled stocks
through record highs in 1995. The strength was broad-based, resuscitating large-
capitalization stocks, which had been out of favor for three years. The popular
Dow Jones Industrial Average sailed past 4000 on February 23, 1995, and then
topped 5000 on November 21, 1995.
Spearheaded by the powerful technology stock advance, the broader NASDAQ
overtook its large-cap cousins in June of 1995 to finish the reporting period
well ahead of the pack.
The stars of the technology group were inarguably the semiconductor stocks. As
of June 30, 1995, semiconductor stocks were up an astonishing 94% in just six
months, according to Barron's. Other technology sectors were also strong, such
as aerospace and defense, software, and industrial technology companies. Also
strong were beneficiaries of stable interest rates such as banks and thrifts,
and consumer cyclical stocks in airlines, leisure and recreation companies, and
restaurants.
In September and October, the market took a well-deserved respite as concern
surfaced that third-quarter 1995 earnings reports, particularly in the
technology group, would fall below expectations. Some earnings disappointment in
certain big names such as Intel, Microsoft, Nokia, and IBM initiated profit-
taking, which temporarily suspended the market's advance. Of the companies
reporting earnings in the third quarter of 1995, I/B/E/S International Inc.
reported in The Wall Street Journal that 55% were higher than analysts'
expectations, with 14% on target, and 31% below expectations. These results
compared favorably with second-quarter reports, of which 57% exceeded
expectations and 30% were below target.
With investor confidence renewed, at least for the near term, the market
gathered strength for its next advance. Focus turned from corporate earnings to
the growing gridlock in Congress over the proposals to balance the burgeoning
budget. The Federal Reserve Board declined to implement its much-anticipated
interest rate cut pending some positive resolution to the budget debate.
YOUR INVESTMENT PORTFOLIO
AIM Weingarten Fund's earnings-driven investment strategy led it into three main
sectors during the reporting period, and these sectors provided a major portion
of your Fund's 28.69% total annual return during the fiscal year covered by this
report.
. TECHNOLOGY. Once again, the Fund's most extensive holdings were in the
technology sector as many of these stocks continued to report robust earnings.
As the fiscal year drew to a close, however, the Fund's weighting in the
technology sector had dropped from 45% to 35% as a result of lower-than-expected
earnings reports from several companies. The Fund reduced or eliminated holdings
in Motorola and Silicon Graphics, among others, when earnings momentum in those
companies fell short of
- -------------------------------------------------------------------------------
TOP 10 EQUITIES TOP 10 INDUSTRIES
(as of 10/31/95) (as of 10/31/95)
1. APPLIED MATERIALS, INC. 1. SEMICONDUCTORS
2. PHILIP MORRIS COMPANIES, INC. 2. MEDICAL (DRUGS)
3. MICRON TECHNOLOGY INC. 3. FINANCE (CONSUMER CREDIT)
4. TEXAS INSTRUMENTS INC. 4. COMPUTER SOFTWARE/SERVICES
5. CISCO SYSTEMS, INC. 5. RETAIL (STORES)
6. COMPUTER ASSOCIATES 6. COMPUTER MINI/PCS
INTERNATIONAL, INC. 7. COMPUTER NETWORKING
7. LAM RESEARCH CORP. 8. MEDICAL (PATIENT SERVICES)
8. SCHERING-PLOUGH CORP. 9. TELECOMMUNICATIONS
9. TERADYNE INC. 10. MEDICAL (INSTRUMENTS/
10. VARIAN ASSOCIATES, INC. PRODUCTS
- -------------------------------------------------------------------------------
See important Fund disclosure on page 49.
50
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<PAGE>
- -------------------------------------------------------
ONE-YEAR PERFORMANCE COMPARISON
TOTAL RETURN FOR FISCAL YEAR ENDED 10/31/95
Weingarten Fund Institutional Class 28.69%
Lipper Growth Fund Index 23.98%
S&P 500 26.36%
- -------------------------------------------------------
AIM's investment philosophy criteria.
In addition, the Fund's holdings shifted from makers of generic computer chips
to companies that produce more sophisticated capital equipment. Thus, holdings
of semiconductor makers were down from approximately 18% of the portfolio to
roughly 14%.
. FINANCIAL STOCKS. This sector has been enjoying the declining interest
rate environment that has existed since the Federal Reserve Board completed its
year-long run-up of short-term rates early in 1995. Nonbank financial companies
have been especially attractive, including such brokerage/financial services
firms as American Express and Dean Witter. The Fund also benefited from the
Chase-Chemical Bank merger announced shortly before the close of the fiscal
year.
. HEALTH CARE. The much-noted aging of the American population, combined
with an ongoing search for ways to contain the rising cost of health care, has
created significant opportunities. Health-care firms that enhance productivity
have produced especially attractive returns.
For example, pharmaceutical advances and improved devices can lower the
intrusiveness of medical procedures, thereby shortening the length of hospital
stays. The Fund holds several significant domestic pharmaceutical firms,
including Merck & Co. and Pfizer Inc. The portfolio also includes such foreign
firms as Sweden's Pharmacia, which is becoming an increasingly important global
player in this industry.
As of October 31, 1995, the Fund's portfolio comprised 203 holdings. Of
course, the Fund's holdings are subject to change, and there is no guarantee it
will continue to hold any particular security.
OUTLOOK FOR THE FUTURE
At this writing, the market has surpassed the Dow 5000 level. Yet many analysts
maintain that this aging bull market--the Dow has gone a record 61 months
without experiencing a 10% correction--may have plenty of steam left. Barron's
recently reported analysts' estimates that projected the Dow well past 5500
during the coming year.
Of course, a significant complement of market strategists also believe a
correction is due.
Rather than make any projections of future market performance, AIM remains
committed to its disciplined investment strategy, which helps us determine, on a
company-by-company basis, which stocks to own and which to sell--without the
guesswork of market timing.
See important Fund disclosure on page 49.
51
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<PAGE>
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
DOMESTIC COMMON STOCKS - 82.38%
AEROSPACE/DEFENSE - 0.89%
350,000 Boeing Co. $ 22,968,750
- --------------------------------------------------------------------
116,600 Raytheon Co. 5,086,675
- --------------------------------------------------------------------
150,000 United Technologies Corp. 13,312,500
- --------------------------------------------------------------------
41,367,925
- --------------------------------------------------------------------
APPLIANCES - 0.87%
1,000,000 Newell Co. 24,125,000
- --------------------------------------------------------------------
350,000 Premark International Inc. 16,187,500
- --------------------------------------------------------------------
40,312,500
- --------------------------------------------------------------------
AUTOMOBILE(MANUFACTURERS) - 0.25%
225,000 Chrysler Corp. 11,615,625
- --------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.61%
800,000 Echlin Inc. 28,600,000
- --------------------------------------------------------------------
BANKING - 2.38%
455,000 Chase Manhattan Corp. 25,935,000
- --------------------------------------------------------------------
1,250,000 CoreStates Financial Corp. 45,468,750
- --------------------------------------------------------------------
463,600 Norwest Bank Corp. 13,676,200
- --------------------------------------------------------------------
1,000,000 Southern National Corp. 25,750,000
- --------------------------------------------------------------------
110,829,950
- --------------------------------------------------------------------
BEVERAGES - 1.02%
900,000 PepsiCo Inc. 47,475,000
- --------------------------------------------------------------------
BUILDING MATERIALS - 0.89%
548,900 Black & Decker Corp. 18,593,988
- --------------------------------------------------------------------
275,000 Georgia-Pacific Corp. 22,687,500
- --------------------------------------------------------------------
41,281,488
- --------------------------------------------------------------------
BUSINESS SERVICES - 2.21%
330,000 Equifax, Inc. 12,870,000
- --------------------------------------------------------------------
684,800 Healthcare COMPARE Corp.(a) 25,337,600
- --------------------------------------------------------------------
1,000,000 Manpower Inc. 27,125,000
- --------------------------------------------------------------------
712,000 Olsten Corp. 27,412,000
- --------------------------------------------------------------------
368,900 ServiceMaster L.P. 10,467,538
- --------------------------------------------------------------------
103,212,138
- --------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.45%
375,000 W.R. Grace & Co. 20,906,250
- --------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
COMPUTER MAINFRAMES - 0.73%
350,000 International Business Machines Corp. $ 34,037,500
- --------------------------------------------------------------------
COMPUTER MINI/PCS - 3.61%
900,000 COMPAQ Computer Corp.(a) 50,175,000
- --------------------------------------------------------------------
1,000,000 Dell Computer Corp. 46,625,000
- --------------------------------------------------------------------
250,000 Digital Equipment Corp.(a) 13,531,250
- --------------------------------------------------------------------
456,600 Hewlett-Packard Co. 42,292,575
- --------------------------------------------------------------------
200,000 Sun Microsystems Inc.(a) 15,600,000
- --------------------------------------------------------------------
168,223,825
- --------------------------------------------------------------------
COMPUTER NETWORKING - 3.51%
725,000 Bay Networks Inc.(a) 48,031,250
- --------------------------------------------------------------------
250,000 Cabletron Systems, Inc.(a) 19,656,250
- --------------------------------------------------------------------
750,000 Cisco Systems, Inc.(a) 58,125,000
- --------------------------------------------------------------------
800,000 3Com Corp.(a) 37,600,000
- --------------------------------------------------------------------
163,412,500
- --------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.92%
500,000 Adaptec Inc.(a) 22,250,000
- --------------------------------------------------------------------
464,600 Seagate Technology Inc.(a) 20,790,850
- --------------------------------------------------------------------
43,040,850
- --------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 4.98%
347,700 Adobe Systems, Inc. 19,818,900
- --------------------------------------------------------------------
1,000,000 BMC Software, Inc.(a) 35,625,000
- --------------------------------------------------------------------
1,050,000 Cadence Design Systems, Inc.(a) 33,862,500
- --------------------------------------------------------------------
1,000,000 Computer Associates International, Inc. 55,000,000
- --------------------------------------------------------------------
489,300 FTP Software, Inc.(a) 13,211,100
- --------------------------------------------------------------------
675,000 Mentor Graphics Corp.(a) 14,175,000
- --------------------------------------------------------------------
115,000 Microsoft Corp.(a) 11,500,000
- --------------------------------------------------------------------
433,000 Policy Management Systems Corp.(a) 20,405,125
- --------------------------------------------------------------------
417,500 SoftKey International Inc.(a) 13,151,250
- --------------------------------------------------------------------
332,900 Sterling Software, Inc.(a) 15,355,013
- --------------------------------------------------------------------
232,103,888
- --------------------------------------------------------------------
CONGLOMERATES - 1.26%
50,200 Dial Corp. (The) 1,223,625
- --------------------------------------------------------------------
200,000 Du Pont De Nemours 12,475,000
- --------------------------------------------------------------------
160,700 Federal Signal Corp. 3,595,663
- --------------------------------------------------------------------
180,000 Loews Corp. 26,392,500
- --------------------------------------------------------------------
250,100 Tyco International Ltd. 15,193,575
- --------------------------------------------------------------------
58,880,363
- --------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
CONTAINERS - 0.58%
523,100 Ball Corp. $ 14,450,638
- ------------------------------------------------------------------------
275,000 First Brands Corp. 12,581,250
- ------------------------------------------------------------------------
27,031,888
- ------------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.51%
256,600 Alberto-Culver Co. 6,928,200
- ------------------------------------------------------------------------
100,000 Gillette Co. (The) 4,837,500
- ------------------------------------------------------------------------
150,000 Procter & Gamble Co. 12,150,000
- ------------------------------------------------------------------------
23,915,700
- ------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 2.01%
622,800 Anixter International Inc.(a) 11,911,050
- ------------------------------------------------------------------------
49,900 AVX Corp. 1,553,138
- ------------------------------------------------------------------------
449,700 Tektronix, Inc. 26,644,725
- ------------------------------------------------------------------------
1,600,000 Teradyne, Inc.(a) 53,400,000
- ------------------------------------------------------------------------
93,508,913
- ------------------------------------------------------------------------
ELECTRONIC/DEFENSE - 0.26%
200,000 Sundstrand Corp. 12,250,000
- ------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS - 2.01%
850,000 Arrow Electronics, Inc.(a) 43,137,500
- ------------------------------------------------------------------------
1,000,000 Avnet, Inc. 50,375,000
- ------------------------------------------------------------------------
93,512,500
- ------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 1.03%
668,600 Finova Group, Inc. 30,254,150
- ------------------------------------------------------------------------
815,600 PaineWebber Group, Inc. 17,943,200
- ------------------------------------------------------------------------
48,197,350
- ------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 5.91%
300,000 American Express Co. 12,187,500
- ------------------------------------------------------------------------
1,196,800 Countrywide Credit Industries, Inc. 26,479,200
- ------------------------------------------------------------------------
450,000 Dean Witter Discover & Co. 22,387,500
- ------------------------------------------------------------------------
500,000 Federal Home Loan Mortgage Corp. 34,625,000
- ------------------------------------------------------------------------
33,700 Federal National Mortgage Association 3,534,288
- ------------------------------------------------------------------------
800,000 First USA, Inc. 36,800,000
- ------------------------------------------------------------------------
1,608,200 Green Tree Acceptance, Inc. 42,818,325
- ------------------------------------------------------------------------
1,088,200 MBNA Corp. 40,127,375
- ------------------------------------------------------------------------
650,000 Mercury Finance Co. 12,512,500
- ------------------------------------------------------------------------
252,300 PMI Group, Inc. (The) 12,110,400
- ------------------------------------------------------------------------
250,000 Student Loan Marketing Association 14,718,750
- ------------------------------------------------------------------------
51,400 SunAmerica, Inc. 3,199,650
- ------------------------------------------------------------------------
500,000 United Companies Financial Corp. 14,125,000
- ------------------------------------------------------------------------
275,625,488
- ------------------------------------------------------------------------
</TABLE>
54
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
FINANCE (SAVINGS & LOAN) - 0.45%
783,800 Greenpoint Financial Corp. $ 21,162,600
- --------------------------------------------------------------------
FOOD PROCESSING - 0.73%
300,000 ConAgra, Inc. 11,587,500
- --------------------------------------------------------------------
651,600 Hudson Foods, Inc. 9,203,850
- --------------------------------------------------------------------
394,233 Lancaster Colony Corp. 13,108,247
- --------------------------------------------------------------------
33,899,597
- --------------------------------------------------------------------
FUNERAL SERVICES - 0.78%
61,200 Loewen Group, Inc. 2,450,870
- --------------------------------------------------------------------
840,200 Service Corp. International 33,713,025
- --------------------------------------------------------------------
36,163,895
- --------------------------------------------------------------------
HOTELS/MOTELS - 0.33%
600,000 La Quinta Motor Inns, Inc. 15,450,000
- --------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 1.59%
750,000 ACE, Ltd. 25,500,000
- --------------------------------------------------------------------
250,000 CIGNA Corp. 24,781,250
- --------------------------------------------------------------------
76,900 General Re Corp. 11,140,888
- --------------------------------------------------------------------
218,300 Mid Ocean Ltd. 7,722,363
- --------------------------------------------------------------------
236,600 Prudential Reinsurance Holdings(a) 4,820,725
- --------------------------------------------------------------------
73,965,226
- --------------------------------------------------------------------
LEISURE & RECREATION - 0.75%
1,003,900 Carnival Cruise Lines, Inc. 23,340,675
- --------------------------------------------------------------------
400,000 Mattel, Inc. 11,500,000
- --------------------------------------------------------------------
34,840,675
- --------------------------------------------------------------------
MACHINERY (HEAVY) - 0.25%
300,000 Case Corp. 11,437,500
- --------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 1.52%
1,600,000 American Standard Companies(a) 42,800,000
- --------------------------------------------------------------------
610,350 Thermo Electron Corp.(a) 28,076,100
- --------------------------------------------------------------------
70,876,100
- --------------------------------------------------------------------
MEDICAL (DRUGS) - 5.55%
600,000 Abbott Laboratories 23,850,000
- --------------------------------------------------------------------
425,000 American Home Products Corp. 37,665,625
- --------------------------------------------------------------------
590,000 AmeriSource Health Corp.(a) 16,077,500
- --------------------------------------------------------------------
357,700 Cardinal Health, Inc. 18,376,838
- --------------------------------------------------------------------
781,400 Mallinckrodt Group, Inc. 27,153,650
- --------------------------------------------------------------------
225,000 Merck & Co., Inc. 12,937,500
- --------------------------------------------------------------------
1,432,100 Mylan Laboratories, Inc. 27,209,900
- --------------------------------------------------------------------
</TABLE>
55
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
Medical (Drugs) - continued
470,000 Pfizer, Inc. $ 26,966,250
- -------------------------------------------------------------------
7,500 Rhone-Poulenc Rorer Inc. 353,438
- -------------------------------------------------------------------
1,000,000 Schering-Plough Corp. 53,625,000
- -------------------------------------------------------------------
325,000 Watson Pharmaceuticals, Inc.(a) 14,543,750
- -------------------------------------------------------------------
258,759,451
- -------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 2.90%
325,000 Baxter International Inc. 12,553,125
- -------------------------------------------------------------------
200,000 Becton, Dickinson & Co. 13,000,000
- -------------------------------------------------------------------
744,600 Biomet, Inc.(a) 12,378,975
- -------------------------------------------------------------------
216,600 Boston Scientific Corp.(a) 9,124,275
- -------------------------------------------------------------------
100,000 Cordis Corp. (a) 11,050,000
- -------------------------------------------------------------------
601,300 Heart Technology Inc.(a) 17,137,050
- -------------------------------------------------------------------
406,400 Medtronic, Inc. 23,469,600
- -------------------------------------------------------------------
200,000 St. Jude Medical, Inc. 10,650,000
- -------------------------------------------------------------------
75,000 Stryker Corp. 3,384,375
- -------------------------------------------------------------------
525,000 Sybron International Corp.(a) 22,312,500
- -------------------------------------------------------------------
135,059,900
- -------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 3.49%
822,500 Apria Healthcare Group, Inc.(a) 17,786,563
- -------------------------------------------------------------------
500,000 Columbia/HCA Healthcare Corp. 24,562,500
- -------------------------------------------------------------------
510,000 Health Management Associates, Inc.(a) 10,965,000
- -------------------------------------------------------------------
500,000 Healthsource, Inc.(a) 26,500,000
- -------------------------------------------------------------------
1,800,000 Healthsouth Corp.(a) 47,025,000
- -------------------------------------------------------------------
600,000 Lincare Holdings, Inc.(a) 14,925,000
- -------------------------------------------------------------------
750,000 Vencor, Inc.(a) 20,812,500
- -------------------------------------------------------------------
162,576,563
- -------------------------------------------------------------------
OFFICE AUTOMATION - 0.96%
350,000 Xerox Corp. 45,412,500
- -------------------------------------------------------------------
OFFICE PRODUCTS - 0.65%
400,000 Avery Dennison Corp. 17,900,000
- -------------------------------------------------------------------
350,000 Reynolds & Reynolds Co. 12,468,750
- -------------------------------------------------------------------
30,368,750
- -------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 0.13%
148,300 Halliburton Co. 6,154,450
- -------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.60%
225,000 Champion International Corp. 12,037,500
- -------------------------------------------------------------------
279,800 Mead Corp. (The) 16,123,475
- -------------------------------------------------------------------
28,160,975
- -------------------------------------------------------------------
</TABLE>
56
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
PUBLISHING - 0.20%
235,500 Harcourt General, Inc. $ 9,331,688
- ------------------------------------------------------------------
RESTAURANTS - 0.27%
400,000 Outback Steakhouse Inc.(a) 12,550,000
- ------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 2.05%
1,000,000 Hannaford Bros. Co. 26,125,000
- ------------------------------------------------------------------
805,700 Kroger Co.(a) 26,890,238
- ------------------------------------------------------------------
900,000 Safeway Inc.(a) 42,525,000
- ------------------------------------------------------------------
95,540,238
- ------------------------------------------------------------------
RETAIL (STORES) - 3.99%
637,300 AutoZone, Inc.(a) 15,773,175
- ------------------------------------------------------------------
1,000,000 Circuit City Stores, Inc. 33,375,000
- ------------------------------------------------------------------
1,500,000 Consolidated Stores Corp.(a) 34,687,500
- ------------------------------------------------------------------
625,000 Gap Inc. 24,609,375
- ------------------------------------------------------------------
1,500,000 Intimate Brands, Inc.(a) 25,125,000
- ------------------------------------------------------------------
393,750 Staples, Inc.(a) 10,483,594
- ------------------------------------------------------------------
261,200 Tandy Corp. 12,896,750
- ------------------------------------------------------------------
648,800 Viking Office Products Inc.(a) 28,871,600
- ------------------------------------------------------------------
185,821,994
- ------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 1.10%
1,000,000 Varian Associates, Inc. 51,375,000
- ------------------------------------------------------------------
SEMICONDUCTORS - 12.94%
1,000,000 Analog Devices, Inc.(a) 36,125,000
- ------------------------------------------------------------------
2,000,000 Applied Materials, Inc.(a) 100,250,000
- ------------------------------------------------------------------
508,700 Atmel Corp.(a) 15,896,875
- ------------------------------------------------------------------
250,000 Cirrus Logic, Inc.(a) 10,531,250
- ------------------------------------------------------------------
600,000 Cypress Semiconductor Corp.(a) 21,150,000
- ------------------------------------------------------------------
1,000,000 Integrated Device Technology, Inc.(a) 19,000,000
- ------------------------------------------------------------------
150,000 Intel Corp. 10,481,250
- ------------------------------------------------------------------
651,000 KLA Instruments Corp.(a) 27,830,250
- ------------------------------------------------------------------
900,000 LAM Research Corp.(a) 54,787,500
- ------------------------------------------------------------------
450,000 Linear Technology Corp. 19,687,500
- ------------------------------------------------------------------
300,000 LSI Logic Corp.(a) 14,137,500
- ------------------------------------------------------------------
1,200,000 Micron Technology Inc. 84,750,000
- ------------------------------------------------------------------
175,000 Motorola, Inc. 11,484,375
- ------------------------------------------------------------------
400,000 National Semiconductor Corp.(a) 9,750,000
- ------------------------------------------------------------------
250,000 Novellus Systems, Inc.(a) 17,218,750
- ------------------------------------------------------------------
</TABLE>
57
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
Semiconductors - (continued)
718,300 Solectron Corp.(a) $ 28,911,575
- -----------------------------------------------------------------------------
1,000,000 Texas Instruments Inc. 68,250,000
- -----------------------------------------------------------------------------
700,000 Vishay Intertechnology, Inc.(a) 24,675,000
- -----------------------------------------------------------------------------
500,000 VLSI Technology Inc.(a) 11,750,000
- -----------------------------------------------------------------------------
350,000 Xilinx, Inc.(a) 16,100,000
- -----------------------------------------------------------------------------
602,766,825
- -----------------------------------------------------------------------------
SHOES & RELATED APPAREL - 0.61%
500,000 NIKE, Inc. - Class B 28,375,000
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.41%
800,000 AT&T Corp. 51,200,000
- -----------------------------------------------------------------------------
429,000 Tellabs, Inc.(a) 14,586,000
- -----------------------------------------------------------------------------
65,786,000
- -----------------------------------------------------------------------------
TOBACCO - 1.99%
1,100,000 Philip Morris Companies, Inc. 92,950,000
- -----------------------------------------------------------------------------
TRANSPORTATION - MISCELLANEOUS - 0.25%
390,200 Stolt Nielsen S.A. 11,706,000
- -----------------------------------------------------------------------------
Total Domestic Common Stocks 3,839,832,568
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 1.65%
COMPUTER SOFTWARE/SERVICES - 0.18%
$ 9,580,000 SoftKey International Inc., Conv. Sr. Notes,
5.50%, 11/01/00(b)
(acquired 10/17/95; cost $9,580,000) 8,095,100
- -----------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.44%
15,215,000 Altera Corp., Conv. Sub. Notes, 5.75%,
06/15/02(b)
(acquired 7/27/95-10/17/95; cost
$20,134,139) 20,502,213
- -----------------------------------------------------------------------------
OFFICE AUTOMATION - 0.55%
19,500,000 Danka Business Systems PLC, Conv. Yankee Sub.
Notes, 6.75%, 04/01/02(b)
(acquired 10/26/95; cost $24,960,000) 25,740,000
- -----------------------------------------------------------------------------
RETAIL STORES - 0.48%
34,400,000 Office Depot Inc., Liquid Yield Option Notes,
4.00%, 11/01/08(c) 22,532,000
- -----------------------------------------------------------------------------
Total Convertible Corporate Bonds 76,869,313
- -----------------------------------------------------------------------------
SHARES
CONVERTIBLE PREFERRED STOCKS - 0.22%
FINANCE (CONSUMER CREDIT) - 0.22%
165,000 SunAmerica Inc. - Series E, $3.10 Conv. Pfd. 10,230,000
- -----------------------------------------------------------------------------
Total Convertible Preferred Stocks 10,230,000
- -----------------------------------------------------------------------------
</TABLE>
58
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 10.98%
AUSTRALIA - 0.36%
1,255,832 Broken Hill Proprietary Co. Ltd. (Conglomerates) $ 17,008,450
- -----------------------------------------------------------------------------
CANADA - 0.54%
694,900 Northern Telecom Ltd. (Telecommunications) 25,016,400
- -----------------------------------------------------------------------------
DENMARK - 0.28%
290,000 Danisco A/S (Food Processing) 13,215,593
- -----------------------------------------------------------------------------
FINLAND - 0.55%
400,000 Nokia Corp. - ADR (Telecommunications) 22,300,000
- -----------------------------------------------------------------------------
55,450 Nokia Corp. (Telecommunications) 3,172,226
- -----------------------------------------------------------------------------
25,472,226
- -----------------------------------------------------------------------------
FRANCE - 0.28%
65,500 LVMH Moet Hennessy Louis Vuitton (Beverages) 13,032,760
- -----------------------------------------------------------------------------
GERMANY - 0.35%
30,400 Mannesmann A.G. (Machinery - Miscellaneous) 10,005,889
- -----------------------------------------------------------------------------
158,000 Veba A.G. (Electric Services) 6,486,800
- -----------------------------------------------------------------------------
16,492,689
- -----------------------------------------------------------------------------
HONG KONG - 1.05%
820,000 HSBC Holdings PLC (Banking) 11,931,399
- -----------------------------------------------------------------------------
3,077,000 Hutchison Whampoa Ltd. (Conglomerates) 16,953,208
- -----------------------------------------------------------------------------
2,505,000 Sun Hung Kai Properties Ltd. (Real Estate) 20,006,434
- -----------------------------------------------------------------------------
48,891,041
- -----------------------------------------------------------------------------
ISRAEL - 0.53%
625,000 Teva Pharmaceutical Industries Ltd. - ADR
(Medical - Drugs) 24,531,250
- -----------------------------------------------------------------------------
ITALY - 0.35%
167,000 Fila Holding S.p.A. - ADR (Retail Stores) 7,201,875
- -----------------------------------------------------------------------------
2,919,000 Telecom Italia Mobile S.p.A.(a)
(Telecommunications) 4,909,560
- -----------------------------------------------------------------------------
2,919,000 Telecom Italia S.p.A. (Telecommunications) 4,471,893
- -----------------------------------------------------------------------------
16,583,328
- -----------------------------------------------------------------------------
MALAYSIA - 0.58%
2,149,000 Malayan Banking Berhad (Banking) 17,337,465
- -----------------------------------------------------------------------------
1,600,000 United Engineers (Building Materials) 9,948,839
- -----------------------------------------------------------------------------
27,286,304
- -----------------------------------------------------------------------------
NETHERLANDS - 0.79%
550,000 Elsag Bailey Process Automation N.V. - ADR(a)
(Electronic Components/Miscellaneous) 14,987,500
- -----------------------------------------------------------------------------
276,100 Philips Electronics N.V. - New York Shares - ADR
(Electronics) 10,664,363
- -----------------------------------------------------------------------------
120,000 Wolters Kluwer N.V. (Publishing) 10,921,536
- -----------------------------------------------------------------------------
36,573,399
- -----------------------------------------------------------------------------
</TABLE>
59
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<PAGE>
<TABLE>
<C> <S> <C>
SHARES MARKET VALUE
NEW ZEALAND - 0.22%
2,500,000 Telecom Corp. of New Zealand (Telecommunications) $ 10,380,222
- -------------------------------------------------------------------------------
SINGAPORE - 0.20%
1,513,000 City Developments Ltd. (Real Estate) 9,369,249
- -------------------------------------------------------------------------------
SWEDEN - 3.62%
250,000 ASEA AB-B Shares (Conglomerates) 24,658,916
- -------------------------------------------------------------------------------
712,200 ASTRA AB-A Shares (Medical - Drugs) 26,168,840
- -------------------------------------------------------------------------------
625,000 ASTRA AB-B Shares (Medical - Drugs) 22,588,320
- -------------------------------------------------------------------------------
958,900 Pharmacia AB-A Shares (Medical - Drugs) 33,356,308
- -------------------------------------------------------------------------------
719,100 Pharmacia Aktiebolaget SP - ADR (Medical - Drugs) 25,168,500
- -------------------------------------------------------------------------------
490,000 Skandia Forsakrings (Insurance - Multi-Line
Property) 12,433,364
- -------------------------------------------------------------------------------
1,141,976 Telefonaktiebolaget L.M.Ericsson - ADR
(Telecommunications) 24,391,922
- -------------------------------------------------------------------------------
168,766,170
- -------------------------------------------------------------------------------
SWITZERLAND - 0.71%
6,500 BBC Brown Boveri Ltd. (Conglomerates) 7,540,298
- -------------------------------------------------------------------------------
29,200 Ciba-Geigy Ltd. (Medical - Drugs) 25,282,833
- -------------------------------------------------------------------------------
32,823,131
- -------------------------------------------------------------------------------
UNITED KINGDOM - 0.57%
190,300 Danka Business Systems PLC - ADR (Office
Automation) 6,375,050
- -------------------------------------------------------------------------------
1,000,000 Granada Group PLC (Leisure & Recreation) 10,679,841
- -------------------------------------------------------------------------------
410,000 Thorn EMI PLC (Leisure & Recreation) 9,548,300
- -------------------------------------------------------------------------------
26,603,191
- -------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 512,045,403
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 0.03%(d)
$ 1,274,793 Daiwa Securities America Inc., 5.90%, 11/01/95(e) 1,274,793
- -------------------------------------------------------------------------------
Total Repurchase Agreement 1,274,793
- -------------------------------------------------------------------------------
TIME DEPOSIT - 4.40%
205,000,000 Cayman Time Deposit, 5.75%, 11/01/95 205,000,000
- -------------------------------------------------------------------------------
Total Time Deposit 205,000,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.66% 4,645,252,077
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.34% 16,046,672
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $4,661,298,749
===============================================================================
</TABLE>
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<PAGE>
Abbreviations:
ADR - American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) 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 the securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31, 1995 was
$54,337,313 which represented 1.17% of the net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of original
issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the Investment advisor.
(e) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,641. Collateralized by $353,853,000 U.S. Treasury Notes, 8.375%
due 08/15/08.
See Notes to Financial Statements.
61
W E I N G A R T E N
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $3,692,990,886) $4,645,252,077
- -------------------------------------------------------------------------
Foreign currencies, at market value (cost $19,248,298) 18,855,785
- -------------------------------------------------------------------------
Receivables for:
Investments sold 81,804,922
- -------------------------------------------------------------------------
Capital stock sold 7,671,955
- -------------------------------------------------------------------------
Dividends and interest 2,040,054
- -------------------------------------------------------------------------
Investment for deferred compensation plan 59,337
- -------------------------------------------------------------------------
Other assets 111,757
- -------------------------------------------------------------------------
Total assets 4,755,795,887
- -------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 79,969,614
- -------------------------------------------------------------------------
Capital stock reacquired 8,329,522
- -------------------------------------------------------------------------
Deferred compensation 59,337
- -------------------------------------------------------------------------
Options repurchased 467,407
- -------------------------------------------------------------------------
Accrued advisory fees 2,411,107
- -------------------------------------------------------------------------
Accrued administrative service fees 33,042
- -------------------------------------------------------------------------
Accrued distribution fees 1,766,732
- -------------------------------------------------------------------------
Accrued transfer agent fees 474,454
- -------------------------------------------------------------------------
Accrued operating expenses 985,923
- -------------------------------------------------------------------------
Total liabilities 94,497,138
- -------------------------------------------------------------------------
Net assets applicable to shares outstanding $4,661,298,749
=========================================================================
NET ASSETS:
Class A $4,564,729,631
=========================================================================
Class B $ 42,237,610
=========================================================================
Institutional Class $ 54,331,508
=========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- -------------------------------------------------------------------------
Outstanding 224,564,125
=========================================================================
Class B:
Authorized 750,000,000
- -------------------------------------------------------------------------
Outstanding 2,082,509
=========================================================================
Institutional Class:
Authorized 200,000,000
- -------------------------------------------------------------------------
Outstanding 2,652,632
=========================================================================
CLASS A:
Net asset value and redemption price per share $20.33
=========================================================================
Offering price per share:
(Net asset value of $20.33 divided by 94.50%) $21.51
=========================================================================
CLASS B:
Net asset value and offering price per share $20.28
=========================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $20.48
=========================================================================
</TABLE>
See Notes to Financial Statements.
62
W E I N G A R T E N
<PAGE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $693,812 foreign withholding tax) $ 38,215,389
- ------------------------------------------------------------------------
Interest 8,498,626
- ------------------------------------------------------------------------
Total investment income 46,714,015
- ------------------------------------------------------------------------
EXPENSES:
Advisory fees 26,291,625
- ------------------------------------------------------------------------
Administrative service fees 182,595
- ------------------------------------------------------------------------
Custodian fees 871,313
- ------------------------------------------------------------------------
Directors' fees 42,436
- ------------------------------------------------------------------------
Distribution fees-Class A 12,217,290
- ------------------------------------------------------------------------
Distribution fees-Class B 68,621
- ------------------------------------------------------------------------
Transfer agent fees-Class A 7,784,636
- ------------------------------------------------------------------------
Transfer agent fees-Class B 15,054
- ------------------------------------------------------------------------
Transfer agent fees-Institutional Class 2,913
- ------------------------------------------------------------------------
Other 1,340,482
- ------------------------------------------------------------------------
Total expenses 48,816,965
- ------------------------------------------------------------------------
Less fees waived by advisor (843,494)
- ------------------------------------------------------------------------
Net expenses 47,973,471
- ------------------------------------------------------------------------
Net investment income (loss) (1,259,456)
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTIONS
CONTRACTS:
Net realized gain on sales of:
Investment securities 610,490,585
- ------------------------------------------------------------------------
Foreign currencies 966,904
- ------------------------------------------------------------------------
Futures contracts 6,404,690
- ------------------------------------------------------------------------
Options contracts 2,779,330
- ------------------------------------------------------------------------
620,641,509
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 416,011,617
- ------------------------------------------------------------------------
Foreign currencies (751,970)
- ------------------------------------------------------------------------
Futures contracts (4,057,387)
- ------------------------------------------------------------------------
411,202,260
- ------------------------------------------------------------------------
Net gain on investment securities, foreign currencies,
futures and options contracts 1,031,843,769
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,030,584,313
========================================================================
</TABLE>
See Notes to Financial Statements.
63
W E I N G A R T E N
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,259,456) $ 18,228,044
- -------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies, futures
and options contracts 620,641,509 387,037,586
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities, foreign
currencies, and futures contracts 411,202,260 (259,837,784)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,030,584,313 145,427,846
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment
income:
Class A (14,842,521) (29,907,523)
- -------------------------------------------------------------------------------
Class B -- --
- -------------------------------------------------------------------------------
Institutional Class (290,923) (363,799)
- -------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investment securities:
Class A (387,332,253) (89,314,780)
- -------------------------------------------------------------------------------
Class B -- --
- -------------------------------------------------------------------------------
Institutional Class (4,072,920) (724,291)
- -------------------------------------------------------------------------------
Net equalization credits (charges):
Class A 204,025 (10,126,574)
- -------------------------------------------------------------------------------
Class B 297,921 --
- -------------------------------------------------------------------------------
Institutional Class 71,195 1,640
- -------------------------------------------------------------------------------
Share transactions-net:
Class A (17,628,236) (1,048,548,626)
- -------------------------------------------------------------------------------
Class B 41,458,876 --
- -------------------------------------------------------------------------------
Institutional Class 6,504,480 96,085
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets 654,953,957 (1,033,460,022)
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,006,344,792 5,039,804,814
- -------------------------------------------------------------------------------
End of period $4,661,298,749 $ 4,006,344,792
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,070,552,699 $ 3,040,217,579
- -------------------------------------------------------------------------------
Undistributed net investment income 25,028,873 40,848,632
- -------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies,
futures and options contracts 613,833,040 384,596,704
- -------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, and
futures contracts 951,884,137 540,681,877
- -------------------------------------------------------------------------------
$4,661,298,749 $ 4,006,344,792
===============================================================================
</TABLE>
See Notes to Financial Statements.
64
W E I N G A R T E N
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity 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 four diversified portfolios:
AIM Weingarten Fund, AIM Charter Fund, AIM Constellation Fund and AIM
Aggressive Growth Fund. The Fund currently offers three different classes of
shares: the Class A shares (formerly "Retail Shares"), Class B shares and the
Institutional Class. Matters affecting each portfolio or class will be voted on
exclusively by such shareholders. The assets, liabilities and operations of
each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements.
A. Security Valuations - A security listed or traded on an exchange is valued
at its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security traded in the over-the-
counter market (but not including securities reported on the NASDAQ National
Market System) is valued at the mean between the last bid and asked prices
based upon quotes furnished by market makers for such securities. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date, or absent a last sales price, at the mean
of the closing bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined in good
faith by or under the supervision of the Company's officers in a manner
specifically authorized by the Board of Directors of the Company. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a currency contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the
U.S. dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in the value of the
contract may not correlate with changes in the securities being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last
sale price, or in the absence of a sale, the mean between the last bid and
asked prices on that day. If a written call option expires on the stipulated
expiration date, or if the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or a loss if the closing purchase transaction
exceeds the premium received when the option was written) without regard to
any unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised,
the Fund realizes a gain or a loss from the sale of the underlying security
and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for
65
W E I N G A R T E N
<PAGE>
capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the
price of the underlying security decline. During the option period, the Fund
may be required at any time to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time at which the Fund
effects a closing purchase transaction by purchasing (at a price which may be
higher than that received when the call option was written) a call option
identical to the one originally written. The Fund will not write a covered
call option if, immediately thereafter, the aggregate value of the securities
underlying all such options, determined as of the dates such options were
written, would exceed 25% of the net assets of the Fund.
F. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
G. 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.
H. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
I. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
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"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of
1.0% of the first $30 million of the Fund's average daily net assets, plus
0.75% of the Fund's average daily net assets in excess of $30 million to and
including $350 million, plus 0.625% of the Fund's average daily net assets in
excess of $350 million. AIM is currently voluntarily waiving a portion of its
advisory fees payable by the Fund to AIM to the extent necessary to reduce the
fees paid by the Fund at net asset levels higher than those currently
incorporated in the present advisory fee schedule. AIM will receive a fee
calculated at the annual rate of 1.0% of the first $30 million of the Fund's
average daily net assets, plus 0.75% of the Fund's average daily net assets in
excess of $30 million to and including $350 million, plus 0.625% of the Fund's
average daily net assets in excess of $350 million to and including $2 billion,
plus 0.60% of the Fund's average daily net assets in excess of $2 billion to
and including $3 billion, plus 0.575% of the Fund's average daily net assets in
excess of $3 billion to and including $4 billion, plus 0.55% of the Fund's
average daily net assets in excess of $4 billion. The waiver of fees is
entirely voluntary and the Board of Directors of the Company would be advised
of any decision by AIM to discontinue the waiver. During the year ended October
31, 1995, AIM waived fees of $843,494. Under the terms of a master sub-advisory
agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM
pays AIM Capital 50% of the amount paid by the Fund to AIM. These agreements
require AIM to reduce its fees or, if necessary, make payments to the Fund to
the extent required to satisfy any expense limitations imposed by the
securities laws or regulations thereunder of any state in which the Fund's
shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1995, AIM
was reimbursed $182,595 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A shares and Class B shares. During the
year ended October 31, 1995, AFS was reimbursed $4,016,831 for such services.
During the year ended October 31, 1995, the Fund, pursuant to a transfer
agency and service agreement, paid A I M Institutional Fund Services, Inc.
("AIFS") $1,260 for shareholder and transfer agency services with respect to
the Institutional Class. Effective July 1, 1995, AIFS became the exclusive
transfer agent for the Institutional Class of the Fund.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own Class A shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and
own Class B shares of the Fund. Any amounts not paid as a service fee under
such 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. AIM Distributors may, from time to time,
assign, transfer or pledge to one or more designees, its rights to all or a
designated portion of (a) compensation received by AIM Distributors from the
Fund pursuant to the Class B Plan (but not AIM Distributors duties and
obligations pursuant to the Class B Plan) and (b) any contingent deferred sales
charges received by AIM Distributors related to the Class B shares. During the
year ended October 31, 1995 for the Class A shares and the period June 26, 1995
(date sales commenced) through October 31, 1995 for the Class B shares, the
Class A shares and the Class B shares paid AIM Distributors $12,217,290 and
$68,621, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,767,515 from sales of shares of
the Class A shares of the Fund during the year ended October 31, 1995. 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. Certain officers and
directors of the Company are officers and directors of AIM, AIM Capital, AIM
Distributors, AFS, AIFS and FMC.
During the year ended October 31, 1995, the Fund paid legal fees of $13,238
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
66
W E I N G A R T E N
<PAGE>
NOTE 3 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended October 31, 1995 was
$5,516,271,702 and $5,871,965,081, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of October 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $980,791,723
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (39,012,965)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $941,778,758
===========================================================================
</TABLE>
Cost of investments for tax purposes is $3,703,473,319.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
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 has a $68,400,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 6 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year -- --
- -----------------------------------------
Written 29,413 $ 6,668,627
- -----------------------------------------
Closed (11,309) (3,032,287)
- -----------------------------------------
Exercised (4,833) (887,684)
- -----------------------------------------
Expired (13,271) (2,748,656)
- -----------------------------------------
End of year -- $ --
=========================================
</TABLE>
NOTE 7 - CAPITAL STOCK
Changes in the capital stock outstanding during the years ended October 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 32,034,901 $ 559,325,258 22,715,102 $ 385,995,119
- -----------------------------------------------------------------------------------
Class B* 2,180,033 43,415,613 -- --
- -----------------------------------------------------------------------------------
Institutional Class 559,557 10,092,219 466,667 7,928,748
- -----------------------------------------------------------------------------------
Issued as a reinvestment
of dividends:
Class A 24,460,017 361,036,594 4,979,521 84,004,521
- -----------------------------------------------------------------------------------
Class B* -- -- -- --
- -----------------------------------------------------------------------------------
Institutional Class 199,304 2,950,819 42,665 721,040
- -----------------------------------------------------------------------------------
Reacquired:
Class A (54,445,065) (937,990,088) (88,892,319) (1,518,548,266)
- -----------------------------------------------------------------------------------
Class B* (97,524) (1,956,737) -- --
- -----------------------------------------------------------------------------------
Institutional Class (363,327) (6,538,558) (503,154) (8,553,703)
- -----------------------------------------------------------------------------------
4,527,896 $ 30,335,120 (61,191,518) $(1,048,452,541)
===================================================================================
</TABLE>
*Class B shares commenced sales on June 26, 1995.
67
W E I N G A R T E N
<PAGE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Institutional Class during each of the years in the four-year period ended
October 31, 1995 and the period October 8, 1991 (date operations commenced)
through October 31, 1991.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 17.94 $ 17.69 $ 16.73 $ 15.77 $15.15
- --------------------------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income 0.10 0.17 0.16 0.14 0.01
- --------------------------- ------- ------- ------- ------- ------
Net gains (losses) on
securities (both realized
and unrealized) 4.35 0.58 0.93 0.99 0.61
- --------------------------- ------- ------- ------- ------- ------
Total from investment
operations 4.45 0.75 1.09 1.13 0.62
- --------------------------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income (0.13) (0.17) (0.13) (0.08) --
- --------------------------- ------- ------- ------- ------- ------
Distributions from net
realized capital gains (1.78) (0.33) -- (0.09) --
- --------------------------- ------- ------- ------- ------- ------
Total distributions (1.91) (0.50) (0.13) (0.17) --
- --------------------------- ------- ------- ------- ------- ------
Net asset value, end of
period $ 20.48 $ 17.94 $ 17.69 $ 16.73 $15.77
=========================== ======= ======= ======= ======= ======
Total return(a) 28.69% 4.37% 6.53% 7.16% 4.09%
=========================== ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $54,332 $40,486 $39,821 $16,519 $3,926
=========================== ======= ======= ======= ======= ======
Ratio of expense to average
net assets 0.70%(b) 0.65% 0.78% 0.82% 0.90%(c)
=========================== ======= ======= ======= ======= ======
Ratio of net investment
income to average net
assets 0.45%(b) 1.00% 0.97% 0.91% 1.00%(c)
=========================== ======= ======= ======= ======= ======
Portfolio turnover rate 139% 136% 109% 37% 46%
=========================== ======= ======= ======= ======= ======
Borrowings for the period:
Amount of debt outstanding
at end of period (000s
omitted) -- -- -- -- --
=========================== ======= ======= ======= ======= ======
Average amount of debt
outstanding during the
period (000s omitted)(d) $ 6 -- -- -- --
=========================== ======= ======= ======= ======= ======
Average number of shares
outstanding during the
period (000s omitted)(d) 2,526 2,256 1,826 707 249
=========================== ======= ======= ======= ======= ======
Average amount of debt per
share during the period $0.0024 -- -- -- --
=========================== ======= ======= ======= ======= ======
</TABLE>
(a) For periods less than one year, total return is not annualized.
(b) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees were 0.72% and
0.43%, respectively. Ratios are based on average net assets of $45,368,533.
(c) Annualized.
(d) Averages computed on a daily basis.
68
W E I N G A R T E N
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Weingarten Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Weingarten Fund (a portfolio of AIM Equity Funds, Inc.), including the schedule
of investments, as of October 31, 1995, the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the seven year period then ended, the ten months ended October 31,
1988, and the two year period ended December 31, 1987. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, 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
Weingarten Fund as of October 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the seven year period then ended, the ten months ended October 31, 1988, and
the two year period ended December 31, 1987, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
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<TABLE>
<S> <C> <C>
Directors & Officers
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
11 Greenway Plaza
Charles T. Bauer Charles T. Bauer Suite 1919
Chairman and Chief Executive Officer Chairman Houston, TX 77046
A I M Management Group Inc.
Robert H. Graham INVESTMENT ADVISOR
Bruce L. Crockett President A I M Advisors, Inc.
Director, President, and Chief 11 Greenway Plaza
Executive Officer John J. Arthur Suite 1919
COMSAT Corporation Senior Vice President and Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Institutional Fund
Cortland Trust Inc. Services, Inc.
Jonathan C. Schoolar 11 Greenway Plaza
Carl Frischling Senior Vice President Suite 1919 .
Partner Houston, TX 77046
Kramer, Levin, Naftalis, Nessen, Carol F. Relihan
Kamin & Frankel Vice President and Secretary CUSTODIAN
State Street Bank and Trust
Robert H. Graham Melville B. Cox Company
President Vice President 225 Franklin Street
A I M Management Group Inc. Boston, MA 02110
Dana R. Sutton
John F. Kroeger Vice President and Assistant Treasurer COUNSEL TO THE FUND
Formerly, Consultant Ballard Spahr
Wendell & Stockel Associates, Inc. P. Michelle Grace Andrews & Ingersoll
Assistant Secretary 1735 Market Street
Lewis F. Pennock Philadelphia, PA 19103
Attorney Nancy L. Martin
Assistant Secretary COUNSEL TO THE DIRECTORS
Ian W. Robinson Kramer, Levin, Naftalis,
Consultant; Former Executive Ofelia M. Mayo Nessen, Kamin & Frankel
Vice President and Assistant Secretary 919 Third Avenue
Chief Financial Officer New York, NY 10022
Bell Atlantic Management Kathleen J. Pflueger
Services, Inc. Assistant Secretary DISTRIBUTOR
Fund Management Company
Louis S. Sklar Samuel D. Sirko P.O. Box 4333
Executive Vice President Assistant Secretary Houston, TX 77210-4333
Hines Interests
Limited Partnership Stephen I. Winer AUDITORS
Assistant Secretary KPMG Peat Marwick LLP
700 Louisiana
Mary J. Benson NationsBank Bldg.
Assistant Treasurer Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Weingarten Fund Institutional Class paid ordinary dividends in the amount of
$0.127 per share during its tax year ended October 31, 1995. Of this amount 99%
is eligible for the dividends received deduction for corporations. The Fund also
distributed long-term capital gains of $1.778 per share during its tax year
ended October 31, 1995.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
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[LOGO APPEARS HERE] BULK RATE
U.S. POSTAGE
Fund Management Company PAID
11 Greenway Plaza, Suite 1919 Houston, TX
Houston, Texas 77046-1188 Permit No. 1919
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