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AIM EQUITY
FUNDS, INC.
Prospectus
- --------------------------------------------------------------------------------
INSTITUTIONAL
CLASSES AIM CHARTER FUND, AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND (collectively, the "Funds")
are three investment portfolios comprising series of
AIM Equity Funds, Inc. (the "Company"), an open-end,
series, management investment company. Each Fund offers
different classes of shares. The Company also offers
AIM CHARTER shares of another investment portfolio, AIM Aggressive
FUND Growth Fund ("Aggressive Growth"). Shares of
Aggressive Growth and other classes of the
Funds are sold pursuant to separate prospectuses.
This Prospectus relates solely to the Institutional
Classes of the Funds.
AIM CHARTER FUND is a diversified portfolio which seeks
to provide growth of capital, with current income as a
secondary objective. To accomplish its objectives, the
Fund invests primarily in dividend-paying common
AIM WEINGARTEN stocks which have prospects for both growth of
FUND capital and dividend income.
AIM WEINGARTEN FUND is a diversified portfolio which
seeks to provide growth of capital through investments
primarily in common stocks of leading U.S. companies
considered by management to have strong earnings
momentum.
AIM CONSTELLATION
FUND AIM CONSTELLATION FUND is a diversified portfolio which
seeks to provide capital appreciation through
investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
Shares of the Institutional Classes of the Funds
JUNE 15, 1995 are offered exclusively to clients of banks and other
financial institutions. All shares of common stock of
the Institutional Classes of the Funds are sold and
redeemed without any purchase or redemption charges
imposed by the Funds. Banks and other financial
institutions may charge a recordkeeping, account
maintenance or other fee to their customers. Fund
Management Company is the distributor of the shares of
common stock of the Institutional Classes of the Funds.
This Prospectus sets forth concisely the
information about the Funds that prospective investors
should know before investing. It should be read and
retained for future reference. A Statement of
Additional Information, dated June 15, 1995, has been
filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of
Additional Information is available without charge upon
written request to the Company at the address shown
above.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE
FUNDS' SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
(AIM Logo)
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
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SUMMARY
THE FUNDS AND THEIR INVESTMENT OBJECTIVES
AIM Equity Funds, Inc. (the "Company") is a Maryland corporation organized as
an open-end, diversified, series, management investment company. Currently, the
Company offers four series comprising four separate investment portfolios, three
of which are offered pursuant to this Prospectus: AIM Charter Fund ("Charter"),
AIM Weingarten Fund ("Weingarten") and AIM Constellation Fund ("Constellation")
(collectively, the "Funds"), each of which pursues unique investment objectives.
The investment objectives of Charter are to seek growth of capital with current
income as a secondary objective. To accomplish its objectives, Charter invests a
substantial portion of its assets in dividend-paying common stocks. The
investment objective of Weingarten is to provide growth of capital through
investments primarily in common stocks of leading U.S. companies considered by
management to have strong earnings momentum. The investment objective of
Constellation is to seek capital appreciation primarily through investments in
common stocks with emphasis on medium-sized and smaller emerging growth
companies. There is no assurance that the investment objective of any of the
Funds will be achieved. For more complete information on each Funds' investment
policies, see "Investment Programs."
Each Fund offers different classes of shares, designed to meet the needs of
different categories of investors. The Institutional Classes are offered
exclusively to clients of banks and other institutions. This Prospectus relates
only to the Institutional Classes of the Funds. The Company offers the other
Classes of the Funds pursuant to separate prospectuses. The other classes of
shares of the Funds and the Classes of shares of Aggressive Growth have
different sales charges and expenses which affect performance. For more
information about the other classes of the Funds or about the Aggressive Growth
portfolio, call (800) 347-4246. The Company also offers shares of its Aggressive
Growth portfolio pursuant to a separate prospectus. See "General Information."
The assets of each Fund are invested in a separate portfolio. The classes of
shares of each Fund share a common investment objective and portfolio of
investments. The income from the investment portfolio of a Fund is allocated to
each class of the Fund based on the net assets of such class as of the close of
business on the previous business day, as adjusted for current day's shareholder
activity. Each class bears proportionately those expenses, such as the advisory
fee, that are allocated to the Fund as a whole and bears separately certain
expenses, such as those associated with the distribution of their shares.
Consequently, the amounts available for payment of dividends and the net asset
value per share of each class will vary. See "General Information."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as each Fund's investment advisor pursuant
to a Master Investment Advisory Agreement (the "Master Advisory Agreement"). AIM
acts as manager or advisor to 37 investment company portfolios. As of June 1,
1995, the total assets of the investment company portfolios advised or managed
by AIM or its affiliates were approximately $31.3 billion. Under the Master
Advisory Agreement dated as of October 18, 1993, AIM receives a fee for its
services based on each Fund's average daily net assets. Under the Master
Administrative Services Agreement (the "Master Administrative Services
Agreement") dated as of October 18, 1993, between the Company and AIM, AIM may
receive reimbursement of its costs to perform certain accounting, shareholder
servicing and other administrative services to the Funds. Under another
administrative services agreement (the "Sub-Contract") dated September 16, 1994
between AIM and A I M Institutional Fund Services, Inc. ("AIFS"), AIFS is
entitled to receive from AIM reimbursement of its costs associated with
providing certain shareholder services for the Funds. It is anticipated that
effective July 1, 1995, the Sub-Contract will terminate concurrent with AIFS
assuming transfer agency functions. Under the Master Sub-Advisory Agreement (the
"Master Sub-Advisory Agreement") dated as of October 18, 1993, between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM Capital, a wholly-owned
subsidiary of AIM, serves as sub-advisor to the Funds and receives compensation
equal to 50% of the amount paid by the Funds to AIM. The total advisory fees
paid by the Funds are higher than those paid by many other investment companies
of all sizes and investment objectives. However, the effective fee paid by the
Funds at their respective current size is lower than the fees paid by many other
funds with similar investment objectives. See "Management."
INVESTORS IN THE FUNDS
The Institutional Classes of the Funds are designed to be convenient and
economical vehicles in which institutions, particularly banks, acting for
themselves or in a fiduciary or other similar capacity, can invest in a
portfolio of equity securities. See "Suitability for Investors."
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SHARE PURCHASE
Shares of the Institutional Class of each Fund are offered by this Prospectus
at their respective net asset value without a sales charge. The minimum initial
investment in any of the Funds is $100,000. There is no minimum amount for
subsequent investments. See "Purchase of Shares."
SHARE REDEMPTION
Redemptions may be made at any time without charge at net asset value.
Redemption orders received prior to 4:15 p.m. Eastern time will be confirmed at
the price next determined as of that day. See "Redemption of Shares."
DISTRIBUTIONS
The Funds currently declare and pay dividends from net investment income, if
any, on a quarterly basis with respect to Charter and on an annual basis with
respect to Weingarten and Constellation. Each Fund makes distributions of
realized capital gains, if any, on an annual basis. See "Dividends and
Distributions."
DISTRIBUTOR
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Institutional Classes of the Funds. FMC does not receive any fee
from the Funds. See "Management."
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TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Institutional Class
of any of the Funds understand the various costs that an investor will bear,
both directly and indirectly. The fees and expenses of the Funds set forth in
the table are based on the actual average net assets of each Fund for its 1994
fiscal year.
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
---- ---- ----
<S> <C> <C> <C>
Shareholder Transaction Expenses (Institutional
Class)
Maximum sales load imposed on purchase of shares
(as a percentage of offering price)............ None None None
Maximum sales load imposed on reinvested dividends
and distributions.............................. None None None
Deferred sales load............................... None None None
Redemption fees................................... None None None
Exchange fee...................................... None None None
Annual Fund Operating Expenses (Institutional Class)
(as a percentage of average net assets)
Management fee (after fee waiver)................. .64% .61% .62%
Distribution fees................................. None None None
Other expenses.................................... .09% .04% .07%
---- ---- ----
Total fund operating expenses..................... .73% .65% .69%
===== ===== =====
</TABLE>
Weingarten's and Constellation's investment advisor is currently waiving a
portion of its fees. Had there been no fee waivers during the year, management
fees would have been 0.64% and 0.63% of average net assets. There can be no
assurance that any future waivers of fees (if any) will not vary from the
figures reflected in the fee table. Beneficial owners of shares of the Funds
should also consider the effect of any charges imposed by the institution
maintaining their accounts.
EXAMPLE
An investor in each of the Funds would pay the following expenses on a $1,000
investment, assuming (a) a 5% annual return and (b) redemption at the end of
each time period:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
--- --- ---
<S> <C> <C> <C>
1 year........................................... $ 7 $ 7 $ 7
3 years.......................................... $23 $21 $22
5 years.......................................... $41 $36 $38
10 years.......................................... $91 $81 $86
</TABLE>
THE EXAMPLES SHOWN IN THE ABOVE TABLE SHOULD NOT BE CONSIDERED TO BE A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, A FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
THAT IS GREATER OR LESS THAN 5%. THE EXAMPLES ASSUME REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS AND THAT THE PERCENTAGE AMOUNTS FOR TOTAL FUND
OPERATING EXPENSES REMAIN THE SAME FOR EACH YEAR.
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FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the fiscal years ended October 31, 1994, 1993, 1992
and the period July 30, 1991 (date operations commenced) through October 31,
1991, for the Institutional Class of Charter, for the fiscal years ended October
31, 1994, 1993, 1992 and the period October 8, 1991 (date operations commenced)
through October 31, 1991, for the Institutional Class of Weingarten and for the
fiscal years ended October 31, 1994 and 1993 and the period April 8, 1992 (date
operations commenced) through October 31, 1992, for the Institutional Class of
Constellation. The data with respect to the Institutional Class of Charter for
the fiscal year ended October 31, 1994 has been audited by KPMG Peat Marwick
LLP, independent auditors, whose unqualified report thereon appears in the
Statement of Additional Information and is available upon request. The data with
respect to the Institutional Class of Charter for the periods prior to the
October 31, 1994 fiscal year has been audited by Tait, Weller & Baker,
independent auditors, whose unqualified report thereon appears in the Statement
of Additional Information and is available upon request. The data with respect
to the Institutional Classes of Weingarten and Constellation have been derived
from financial statements audited by KPMG Peat Marwick LLP, independent
auditors, whose unqualified report thereon appears in the Statement of
Additional Information and is available upon request.
AIM CHARTER FUND
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
JULY 30, 1991
YEAR ENDED OCTOBER 31, THROUGH
------------------------------------ OCTOBER 31,
1994 1993 1992 1991
------- ------- ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 9.48 $ 8.38 $ 8.42 $ 7.92
Income from investment operations:
Net investment income............................ 0.25 0.19 0.20 0.05
Net gains (losses) on securities (both realized
and unrealized)............................... (0.44) 1.23 0.16 0.45
------- ------- ------ ------
Total from investment operations................. (0.19) 1.42 0.36 0.50
------- ------- ------ ------
Less distributions:
Dividends from net investment income............. (0.20) (0.32) (0.17) --
Distributions from capital gains................. (0.16) -- (0.23) --
------- ------- ------ ------
Total distributions.............................. (0.36) (0.32) (0.40) --
------- ------- ------ ------
Net asset value, end of period..................... $ 8.93 $ 9.48 $ 8.38 $ 8.42
======== ======== ======= =======
Total return(a).................................... (2.02)% 17.39% 4.53% 6.31%
======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)......... $21,840 $24,196 $7,800 $ 775
======== ======== ======= =======
Ratio of expenses to average net assets.......... 0.73%(b) 0.79% 0.87% 1.00%(c)
======== ======== ======= =======
Ratio of net investment income to average net
assets....................................... 2.76%(b) 2.26% 2.44% 2.43%(c)
======== ======== ======= =======
Portfolio turnover rate......................... 126% 144% 95% 144%
======== ======== ======= =======
</TABLE>
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(a) For periods less than one year, total returns are not annualized.
(b) Ratios are based on average net assets of $22,184,298.
(c) Annualized.
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AIM WEINGARTEN FUND
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
OCTOBER 8, 1991
YEAR ENDED OCTOBER 31, THROUGH
----------------------------------- OCTOBER 31,
1994 1993 1992 1991
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 17.69 $ 16.73 $ 15.77 $15.15
Income from investment operations:
Net investment income.............................. 0.17 0.16 0.14 0.01
Net gains (losses) on securities (both realized
and unrealized)................................. 0.58 0.93 0.99 0.61
------- ------- ------- ------
Total from investment operations................... 0.75 1.09 1.13 0.62
------- ------- ------- ------
Less distributions:
Dividends from net investment income............... (0.17) (0.13) (0.08) --
Distributions from net realized capital gains...... (0.33) -- (0.09) --
------- ------- ------- ------
Total distributions................................ (0.50) (0.13) (0.17) --
------- ------- ------- ------
Net asset value, end of period....................... $ 17.94 $ 17.69 $ 16.73 $15.77
======== ======== ======== =======
Total return(a)...................................... 4.37% 6.53% 7.16% 4.09%
======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)........... $40,486 $39,821 $16,519 $3,926
======== ======== ======== =======
Ratio of expenses to average net assets............ 0.65%(b) 0.78% 0.82% 0.90%(c)
======== ======== ======== =======
Ratio of net investment income to average net assets 1.00%(b) 0.97% 0.91% 1.00%(c)
======== ======== ======== =======
Portfolio turnover rate............................ 136% 109% 37% 46%
======== ======== ======== =======
</TABLE>
- ---------------
(a) For periods less than one year, total returns are 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 0.98%
respectively. Ratios are based on average net assets of $38,809,535.
(c) Annualized.
6
<PAGE> 7
AIM CONSTELLATION FUND
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 8, 1992
OCTOBER 31, THROUGH
--------------------- OCTOBER 31,
1994 1993 1992
------- ------- ------
<S> <C> <C> <C>
Net asset value, beginning of period................................ $ 17.13 $ 13.27 $12.29
Income from investment operations:
Net investment income (loss)...................................... 0.03 -- (0.01)
Net gains (losses) on securities (both realized and unrealized)... 1.33 3.86 0.99
------- ------- ------
Total from investment operations.................................. 1.36 3.86 0.98
------- ------- ------
Less distributions:
Dividends from net investment income.............................. -- -- --
Distributions from capital gains.................................. -- -- --
------- ------- ------
Total distributions............................................... -- -- --
------- ------- ------
Net asset value, end of period...................................... $ 18.49 $ 17.13 $13.27
======== ======== =======
Total return(a)..................................................... 7.94% 29.09% 7.97%
======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).......................... $39,847 $12,338 $3,087
======== ======== =======
Ratio of expenses to average net assets........................... 0.69%(b) 0.87% 0.91%(c)
======== ======== =======
Ratio of net investment income (loss) to average net assets....... 0.36%(b) 0.04% (0.12)%(c)
======== ======== =======
Portfolio turnover rate........................................... 79% 70% 62%
======== ======== =======
</TABLE>
- ---------------
(a) For periods less than one year, total returns are not annualized.
(b) Ratios are based on average net assets of $19,421,949.
(c) After expense reimbursements. Annualized.
SUITABILITY FOR INVESTORS
The Institutional Classes of the Funds are intended for use by institutions,
particularly banks, acting for themselves or in a fiduciary or similar capacity.
Shares of the Institutional Classes of the Funds are available for collective
and common trust funds of banks, banks investing for their own account and banks
investing for the account of a public entity (e.g., Taft-Hartley funds, states,
cities, or government agencies) which does not pay commissions or distribution
fees. Prospective investors should determine if an investment in the Funds is
consistent with the objectives of an account and with applicable state and
federal laws and regulations. FMC will review each application for purchase of
the Institutional Classes and reserves the right to reject any order to purchase
based upon a review of the suitability of the investor.
The Institutional Classes of the Funds are designed to be convenient and
economical vehicles in which institutions can invest in a portfolio of equity
securities. An investment in the Funds may relieve the institution of many of
the investment and administrative burdens encountered when investing in equity
securities directly. These include: selection and diversification of portfolio
investments; surveying the market for the best price at which to buy and sell;
valuation of portfolio securities; receipt, delivery and safekeeping of
securities; and portfolio recordkeeping. It is anticipated that most investors
will perform their own sub-accounting.
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<PAGE> 8
INVESTMENT PROGRAMS
Each of the Funds has its own investment objectives and investment program.
There can, of course, be no assurance that any Fund will in fact achieve its
objectives since all investments are inherently subject to market risks. The
Board of Directors of the Company reserves the right to change any of the
investment policies, strategies or practices of any of the Funds, as described
in this Prospectus and the Statement of Additional Information, without
shareholder approval, except in those instances where shareholder approval is
expressly required.
Each of the Funds may invest, for temporary or defensive purposes, in
investment grade (high quality) corporate bonds, commercial paper, or U.S.
Government obligations. In addition, a portion of each Fund's assets may be
held, from time to time, in cash, repurchase agreements, or other debt
securities, when such positions are deemed advisable in light of economic or
market conditions.
AIM CHARTER FUND
The primary investment objective of Charter is to seek growth of capital, with
current income as a secondary objective. Although the amount of Charter's
current income will vary from time to time, it is anticipated that the current
income realized by Charter will generally be greater than that realized by
mutual funds whose sole objective is growth of capital. Charter seeks to achieve
its objective by investing primarily in common stocks of companies believed by
management to have the potential for above average growth in revenues and
earnings. The Fund may satisfy the foregoing requirement in part through the
ownership of securities which are convertible into, or exchangeable for, common
stocks. Generally, at least 80% of Charter's investments will be in interest,
income or dividend paying stocks.
AIM WEINGARTEN FUND
The investment objective of Weingarten is to seek growth of capital
principally through investment in common stocks of seasoned and better
capitalized companies. Current income will not be an important criterion of
investment selection, and any such income should be considered incidental. It is
anticipated that common stocks will be the principal form of investment by the
Fund. Weingarten's portfolio is primarily comprised of securities of two basic
categories of companies: (a) "core" companies, which Fund management considers
to have experienced above-average and consistent long-term growth in earnings
and to have excellent prospects for outstanding future growth, and (b) "earnings
acceleration" companies which Fund management believes are currently enjoying a
dramatic increase in profits. See "Investment Program and Restrictions" in the
Statement of Additional Information.
AIM CONSTELLATION FUND
The investment objective of Constellation is to seek capital appreciation.
Constellation aggressively seeks to increase shareholders' capital by investing
principally in common stocks, with emphasis on medium-sized and smaller emerging
growth companies. Management of the Fund will be particularly interested in
companies that are likely to benefit from new or innovative products, services
or processes that should enhance such companies' prospects for future growth in
earnings. As a result of this policy, the market prices of many of the
securities purchased and held by the Fund may fluctuate widely. Any income
received from securities held by the Fund will be incidental, and an investor
should not consider a purchase of shares of the Fund as equivalent to a complete
investment program. Constellation's portfolio is primarily comprised of
securities of two basic categories of companies: (a) "core" companies, which
Fund management considers to have experienced above-average and consistent
long-term growth in earnings and to have excellent prospects for outstanding
future growth, and (b) "earnings acceleration" companies which Fund management
believes are currently enjoying a dramatic increase in profits. See "Certain
Investment Strategies and Policies" and "Investment Restrictions" below and
"Investment Program and Restrictions" in the Statement of Additional
Information.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
In pursuit of its objectives and policies, each of the Funds may employ one or
more of the following strategies in order to enhance investment results:
REPURCHASE AGREEMENTS. Each of the Funds may enter into repurchase agreements.
A repurchase agreement is an instrument under which the Fund acquires ownership
of a debt security and the seller agrees, at the time of the sale, to repurchase
the obligation at a mutually agreed upon time and price, thereby determining the
yield during the Fund's holding period. With regard to repurchase transactions,
in the event of a bankruptcy or other default of a seller of a repurchase
agreement, a Fund could experience both delays in liquidating the underlying
securities and losses, including: (a) a possible decline in the value of
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<PAGE> 9
the underlying security during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing its rights.
STOCK INDEX FUTURES CONTRACTS. Each of the Funds may purchase and sell stock
index futures contracts as a hedge against changes in market conditions. A stock
index futures contract is an agreement pursuant to which two parties agree to
take delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
Charter, Constellation and Weingarten will only enter into domestic stock index
futures. No physical delivery of the underlying stocks in the index is made.
Each of the Funds will only enter into futures contracts as a hedge against
changes resulting from market conditions in the values of the securities held or
which the Fund intends to purchase. Generally, a Fund may elect to close a
position in a futures contract by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. See the Statement of
Additional Information for a description of the Funds' investments in futures
contracts, including certain related risks. The Funds may each purchase or sell
futures contracts if, immediately thereafter, the sum of the amount of margin
deposits and premiums on open positions with respect to futures contracts would
not exceed 5% of the market value of a Fund's total assets.
WRITING COVERED CALL OPTION CONTRACTS. Each of Weingarten and Constellation
may write (sell) covered call options. The purpose of such transactions is to
hedge against changes in the market value of a Fund's portfolio securities
caused by fluctuating interest rates, fluctuating currency exchange rates and
changing market conditions, and to close out or offset existing positions in
such options or futures contracts as described below. None of the Funds will
engage in such transactions for speculative purposes.
Constellation and Weingarten may each write (sell) call options, but only if
such options are covered and remain covered as long as the Fund is obligated as
a writer of the option (seller). A call option is "covered" if a Fund owns the
underlying security covered by the call. If a "covered" call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option is exercised, the writer realizes either a gain or
loss from the sale or purchase of the underlying security with the proceeds to
the writer being increased by the amount of the premium. Prior to its
expiration, a call option may be closed out by means of a purchase of an
identical option. Any gain or loss from such transaction will depend on whether
the amount paid is more or less than the premium received for the option plus
related transaction costs.
Options are subject to certain risks, including the risk of imperfect
correlation between the option and a Fund's other investments and the risk that
there might not be a liquid secondary market for the option when the Fund seeks
to hedge against adverse market movements. In general, options whose strike
prices are close to their underlying securities' current values will have the
highest trading value, while options whose strike prices are further away may be
less liquid. The liquidity of options may also be affected if options exchanges
impose trading halts, particularly when markets are volatile.
The investment policies of each of Weingarten and Constellation permit the
writing of call options on securities comprising no more than 25% of the value
of each Fund's net assets. Each Fund's policies with respect to the writing of
call options may be changed by the Company's Board of Directors, without
shareholder approval.
ILLIQUID SECURITIES. None of the Funds will invest more than 15% of their net
assets in illiquid securities, including repurchase agreements with maturities
in excess of seven days.
RULE 144A SECURITIES. Each of the Funds may invest in securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). These securities are sometimes
referred to as private placements. Although securities which may be resold only
to "qualified institutional buyers" in accordance with the provisions of Rule
144A under the 1933 Act are unregistered securities, the Funds may each purchase
Rule 144A securities without regard to the limitation on investments in illiquid
securities described above under "Illiquid Securities," provided that a
determination is made that such securities have a readily available trading
market. AIM will determine the liquidity of Rule 144A securities under the
supervision of the Company's Board of Directors. The liquidity of Rule 144A
securities will be monitored by AIM and, if as a result of changed conditions,
it is determined that a Rule 144A security is no longer liquid, a Fund's
holdings of illiquid securities will be reviewed to determine what, if any,
action is required to assure that the Fund does not exceed its applicable
percentage limitation for investments in illiquid securities.
FOREIGN SECURITIES. To the extent consistent with their respective investment
objectives, each of the Funds may invest in foreign securities. It is not
anticipated that such foreign securities, which may be payable in foreign
currencies and traded abroad, will constitute more than 20% of the value of the
Funds' total assets. For purposes of calculating such limitation, American
Depository Receipts, European Depository Receipts and other securities
representing underlying securities of foreign issuers are treated as foreign
securities. To the extent a Fund invests in securities denominated in foreign
currencies, each Fund bears the risk of changes in the exchange rates between
U.S. currency and the foreign currency, as well as the availability and status
of foreign securities markets. These securities will be marketable equity
securities (including common and preferred
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<PAGE> 10
stock, depositary receipts for stock and fixed income or equity securities
exchangeable for or convertible into stock) of foreign companies which, with
their predecessors, have been in continuous operation for three years or more
and which generally are listed on a recognized foreign securities exchanges or
traded in a foreign over-the-counter market. Each of the Funds may also invest
in foreign securities listed on recognized U.S. securities exchanges or traded
in the U.S. over-the-counter market. Such foreign securities may be issued by
foreign companies located in developing countries in various regions of the
world. A "developing country" is a country in the initial stages of its
industrial cycle. As compared to investment in the securities markets of
developed countries, investment in the securities markets of developing
countries involves exposure to markets that may have substantially less trading
volume and greater price volatility, economic structures that are less diverse
and mature, and political systems that may be less stable. For a discussion of
the risks pertaining to investments in foreign obligations, see "Risk Factors"
below.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by a Fund in foreign
securities, including Eurodollar, Yankee dollar and other foreign obligations,
may entail all of the risks set forth below. Investments by a Fund in ADRs may
entail certain political and economic risks and regulatory risks as set forth
below.
Currency Risk. The value of each Fund's foreign investments will be affected
by changes in currency exchange rates. The U.S. dollar value of a foreign
security decreases when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and increases when the value of
the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which
the Funds may invest are not as developed as the United States economy and may
be subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation, and limitations on the removal of funds
or other assets could also adversely affect the value of each Fund's
investments.
Regulatory Risk. Foreign companies are not registered with the Securities and
Exchange Commission and are generally not subject to the regulatory controls
imposed on United States issuers and, as a consequence, there is generally less
publicly available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the Funds may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
PORTFOLIO TURNOVER. Any particular security will be sold, and the proceeds
reinvested, whenever such action is deemed prudent from the viewpoint of a
Fund's investment objectives, regardless of the holding period of that security.
Each Fund's historical portfolio turnover rates are included in the Financial
Highlights tables above. A higher rate of portfolio turnover may result in
higher transaction costs, including brokerage commissions. Also, to the extent
that higher portfolio turnover results in a higher rate of net realized capital
gains to a Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
The investment objectives and policies stated above are not fundamental
policies of the Funds and may be changed by the Board of Directors of the
Company without shareholder approval. Shareholders will be notified before any
material change in the investment policies stated above become effective.
INVESTMENT RESTRICTIONS
Each of the Funds has adopted a number of investment restrictions, including
the following:
BORROWING. Each of the Funds may borrow money to a limited extent from banks
(including the Funds' custodian bank) for temporary or emergency purposes.
Charter and Weingarten may each borrow amounts of up to 10% of their respective
total assets and may each pledge amounts of up to 20% of their respective total
assets to secure such borrowings. Currently, Weingarten and Constellation each
have a committed credit facility with Morgan Guaranty Trust Company of New York.
Constellation may borrow amounts to purchase or carry securities only if,
immediately after such borrowing, the value of its assets, including the amount
borrowed, less its liabilities, is equal to at least 300% of the amount
borrowed, plus all outstanding borrowings.
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In addition to the ability to borrow money for temporary or emergency
purposes, Constellation may, but has no current intention to, borrow money from
banks to purchase or carry securities. The amount of such borrowings is limited
by provisions of the Investment Company Act of 1940 (the "1940 Act"). Any
investment gains made by Constellation with the borrowed monies in excess of
interest paid by the Fund will cause the net asset value of the Fund's shares to
rise faster than would otherwise be the case. On the other hand, if the
investment performance of the additional securities purchased with the proceeds
of such borrowings fails to cover the interest paid on the money borrowed by the
Fund, the net asset value of the Fund will decrease faster than would otherwise
be the case. This speculative factor is known as "leveraging."
LENDING OF FUND SECURITIES. Each of the Funds may also lend its portfolio
securities in amounts up to 33 1/3% of the total assets of the respective Funds.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
The foregoing investment restrictions are matters of fundamental policy and
may not be changed without shareholder approval. For additional investment
restrictions applicable to the Funds, see the Statement of Additional
Information.
PURCHASE OF SHARES
Shares of the Institutional Classes of the Funds are sold on a continuing
basis at their respective net asset values. Although no sales charge is imposed
in connection with the purchase of shares, banks or other financial institutions
may charge a recordkeeping, account maintenance or other fee to their customers,
and beneficial holders of shares of the Funds should consult with such
institutions to obtain a schedule of such fees. In order to maximize its income,
each Fund attempts to remain as fully invested as practicable. Accordingly, in
order to be accepted for execution, purchase orders must be submitted in proper
form and received by FMC prior to 4:15 p.m. Eastern time on a business day of
the Funds, and such orders will be confirmed at the net asset value determined
as of the close of that day ("trade date"). A "business day of the Funds" means
any day on which the New York Stock Exchange is open for trading. It is expected
that the New York Stock Exchange will be closed during the next twelve months on
Saturdays and Sundays and on the days on which New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the New York Stock Exchange.
In accordance with the current rules and regulations of the SEC, the net asset
value of a Fund share is determined once daily as of 4:15 p.m. Eastern Time on
each day on which the New York Stock Exchange is open for trading by dividing
the value of the Fund's securities, cash and other assets (including accrued
expenses but excluding capital and surplus), by the number of shares
outstanding. In the event the New York Stock Exchange closes early (i.e., before
4:00 p.m. Eastern Time) on a particular day, the net asset value of a Fund share
is determined 15 minutes following the close of the New York Stock Exchange on
such day. Determination of the Fund's net asset value per share is made in
accordance with generally accepted accounting principles.
Payments for shares purchased must be in the form of federal funds or other
funds immediately available to the Funds and must be made on the "settlement
date," which shall be the next business day of the Funds following the trade
date. Federal Reserve wires should be sent as early as possible on the
settlement date in order to facilitate crediting to the shareholder's account.
Any funds received in respect of an order which is not accepted by a Fund and
any funds received for which an order has not been received will be returned to
the sending institution. An order to purchase shares must specify which Fund is
being purchased, otherwise any funds received will be returned to the sending
institution.
The minimum initial investment in any of the Funds is $100,000. Institutions
may be requested to maintain separate Master Accounts in each Fund for shares
held by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary, and
(b) for accounts for which the institution acts in some other capacity. An
institution's Master Account(s) and sub-accounts with a Fund may be aggregated
for the purpose of the minimum investment requirement. No minimum amount is
required for subsequent investments in a Fund nor are minimum balances required.
Prior to the initial purchase of shares, an Account Information and
Authorization Form must be completed and sent to FMC at 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Account Information and Authorization Forms may
be obtained from FMC.
In the interest of economy and convenience, certificates representing shares
of the Funds will not be issued except upon written request to the applicable
Fund. Certificates (in full shares only) will be issued without charge and may
be redeposited at any time.
The Company, FMC and their agents reserve the right at any time (a) to
withdraw all or any part of the offering made by this Prospectus; (b) to reject
any purchase or exchange order or to cancel any purchase due to nonpayment of
the purchase price;
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(c) to increase, waive or lower the minimum investment requirements; or (d) to
modify any of the terms or conditions of purchases of shares of a Fund.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares at the net asset value next
determined after receipt of the redemption request in proper form by the
applicable Fund. See "Determination of Net Asset Value." Redemption requests
with respect to shares for which certificates have not been issued are normally
made by calling FMC.
Payment for redeemed shares is normally made by Federal Reserve wire to the
commercial bank account designated in the shareholder's Account Information and
Authorization Form, but may be remitted by check upon request by a shareholder.
If a redemption request is received by the applicable Fund prior to 4:15 p.m.
Eastern time on a business day of such Fund, the redemption will be effected at
the net asset value determined as of the close of that day (the "redemption
date"). The proceeds of a redemption request will be wired on the next business
day following the redemption date.
Payment for shares redeemed by mail and payment for telephone redemptions in
amounts under $1,000 may, at the option of a Fund, be made by check mailed
within seven days after receipt of the redemption request in proper form. A Fund
may make payment for telephone redemptions in excess of $1,000 by check when it
is considered to be in the Fund's best interest to do so.
A Fund's shares are not redeemable at the option of the Fund unless the Board
of Directors of the Fund determines in its sole discretion that failure to so
redeem may have materially adverse consequences to the shareholder of such Fund.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's current policy is to pay dividends from net investment income, if
any, on a quarterly basis with respect to Charter and on an annual basis with
respect to Weingarten and Constellation. In addition, each Fund's current policy
is to make distributions of any realized capital gains before the end of each
calendar year. In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. All dividends and
distributions of a Fund are automatically reinvested on the payment date in full
and fractional shares of such Fund, calculated at their net asset value on the
ex-dividend date for the dividend or distribution, unless the shareholder has
elected, by written notice to FMC, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of an Institutional Class of one of the other Funds offered pursuant
to this Prospectus. If a shareholder has redeemed or exchanged all of the shares
in his account between the record date and the payment date for a dividend or
distribution, such dividend or distribution is paid in cash regardless of
whether the shareholder has previously elected to reinvest such dividends or
distributions.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by written notice to FMC and are effective as to any
subsequent payment if such notice is received by FMC prior to the record date of
such payment. Any dividend and distribution election remains in effect until FMC
receives a revised written election by the shareholder.
Any dividend or distribution paid by a Fund has the effect of reducing the net
asset value per share on the ex-dividend date by the amount of the dividend or
distribution. Therefore, a dividend or distribution declared shortly after a
purchase of shares by an investor would represent, in substance, a return of
capital to the shareholder with respect to such shares even though it would be
subject to income taxes, as discussed below.
FEDERAL TAXES
Each Fund has qualified and intends to continue to qualify for treatment as a
regulated investment company under Sub-chapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As long as each Fund qualifies for this tax
treatment, it is not subject to federal income taxes on amounts distributed to
shareholders. Each Fund, for purposes of determining taxable income,
distribution requirements and other requirements of Subchapter M, is treated as
a separate corporation. Therefore, no Fund may offset its gains against another
Fund's losses and each Fund must individually comply with all of the provisions
of the Code which are applicable to its operations.
Because the Company intends to distribute substantially all of the net
investment income and net realized capital gains of each Fund to its respective
shareholders, it is not expected that the Funds will be required to pay any
federal income tax. Each Fund also intends to meet the distribution requirements
of the Code to avoid the imposition of a 4% excise tax. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a Fund whether in the form of cash or additional shares of a Fund.
Shareholders are notified annually of the federal tax status of dividends and
capital gains distributions. Dividends paid by a Fund (other than
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<PAGE> 13
long-term capital gain distributions) generally will qualify for the federal 70%
dividends received deduction for corporate shareholders to the extent of the
qualifying dividends received by the Fund from domestic corporations.
For each sale of a Funds' shares by a shareholder who is not an exempt payee,
the Fund or the securities dealer effecting the transaction is required to file
an information return with the IRS.
Distributions may be subject to treatment under foreign, state or local tax
laws which differs from the federal income tax consequences discussed herein.
Shareholders are advised to consult with their own tax advisers concerning the
application of state, local, or foreign taxes. Additional information about
taxes is set forth in the Statement of Additional Information.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of the shares of the
Institutional Class of each of the Funds is determined as of 4:15 p.m. Eastern
time on each business day of the Funds. A "business day" is any day on which the
New York Stock Exchange is open for business. It is expected that the New York
Stock Exchange will be closed during the next twelve months on Saturdays and
Sundays and on the days on which New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the New York Stock Exchange. In the event the New York Stock
Exchange closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day,
the net asset value will be determined 15 minutes following the close of the New
York Stock Exchange on such day. The net asset values per share of the
Institutional Class and the Retail Class of a Fund will differ because of
different expenses attributable to each class. The income or loss and the
expenses common to both classes of a Fund are allocated to each class on the
basis of the net assets of each such class calculated as of the close of
business on the previous business day of the Fund, as adjusted for current day's
shareholder activity of each class. In addition to certain common expenses which
are allocated to both classes of a Fund, certain expenses, such as those related
to the distribution of shares of a class, are allocated only to the class to
which such expenses relate. The net asset value per share of a class is
determined by subtracting the liabilities (e.g., the expenses) allocated to the
class from the assets allocated to the class and dividing the results by the
total number of shares outstanding of such class. The determination of net asset
value per share of each class is made in accordance with generally accepted
accounting principles. Among other items, a Fund's liabilities include accrued
expenses and dividends payable, and its total assets include portfolio
securities valued at their market value as well as income accrued but not yet
received. 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 and in accordance with methods which are specifically
authorized by the Board of Directors of the Company. Short-term obligations with
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
PERFORMANCE
The performance of the Institutional Class of each Fund may be quoted in
advertising in terms of yield or total return. Performance information can be
obtained by calling the Company at (800) 659-1005. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Funds. Further information regarding each Fund's
performance is contained in that Fund's annual report to shareholders which is
available upon request and without charge.
The total return shows the overall change in value of a Fund's Institutional
Class, including changes in share price assuming all dividends and capital gain
distributions attributable to such Fund's Institutional Class are reinvested. A
cumulative total return reflects the performance of a Fund's Institutional Class
over a stated period of time. An average annual total return reflects the
hypothetical annually compounded return that would have produced the same
cumulative total return if the performance of a Fund's Institutional Class had
been constant over the entire period. Investors should recognize that average
annual returns are not the same as actual year-by-year results because they tend
to even out variations in the total returns. To illustrate the components of
overall performance, the Institutional Class of a Fund may separate its
cumulative and average annual returns into income results and capital gain or
loss.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of any Fund. Such a practice will
have the effect of increasing the Fund's yield and total return.
The performance of the Institutional Class of each Fund will vary from time to
time and past results are not necessarily indicative of future results. The
performance of the Institutional Class of a Fund is a function of its portfolio
management in selecting the type and quality of portfolio securities and is
affected by operating expenses of the Institutional Class and market conditions.
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REPORTS TO SHAREHOLDERS
The Company furnishes shareholders with semi-annual reports containing
information about the Company and its operations, including a list of the
investments held in the Funds and financial statements. The annual financial
statements of each Fund are audited by the Fund's independent auditors. A copy
of the current list of the investments of each Fund will be sent to shareholders
upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth, for
each sub-account, the share balance, income earned for the month, income earned
for the year to date and the total current value of the account.
MANAGEMENT
The overall management of the business and affairs of the Funds is vested with
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company and persons or companies furnishing
services to a Fund, including the Master Advisory Agreement with AIM, the Master
Sub-Advisory Agreement between AIM and AIM Capital, the Master Administrative
Services Agreement with AIM, the Sub-Contract between AIM and AIFS, the Funds'
agreement with FMC as the distributor of the shares of its Institutional Class,
and the Funds' agreement with State Street Bank and Trust Company serving as
custodian and as transfer agent to the Funds. The day-to-day operations of each
Fund are delegated to its officers and to AIM, subject always to the objectives
and policies of the Fund and to the general supervision of the Company's Board
of Directors. Certain directors and officers of the Company are affiliated with
AIM and A I M Management Group Inc. ("AIM Management"), the parent of AIM. AIM
Management is a holding company engaged in the financial services business.
Information concerning the Board of Directors may be found in the Statement of
Additional Information.
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, serves as the
investment advisor to each Fund pursuant to the Master Advisory Agreement. AIM
was organized in 1976 and advises or manages 37 investment company portfolios
(including the Funds). As of June 1, 1995, the total assets of the mutual funds
managed or advised by AIM and its affiliates were approximately $31.3 billion.
AIM is a wholly owned subsidiary of AIM Management.
Under the terms of the Master Advisory Agreement, AIM supervises all aspects
of the Funds' operations and provides investment advisory services to the Funds.
The Master Advisory Agreement also provides that, upon the request of the
Company's Board of Directors, AIM may perform certain accounting, shareholder
servicing and other administrative services for each Fund which are not required
to be performed by AIM under the Master Advisory Agreement. For such services
AIM, pursuant to the Master Administrative Services Agreement between the
Company and AIM, is entitled to receive from each Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Company's Board
of Directors. Currently, AIM is reimbursed for the services of each Fund's
principal financial officer and his staff, and any expenses related to such
services. Under the Sub-Contract between AIM and AIFS, AIFS is entitled to
receive from AIM reimbursement of its costs associated with providing certain
shareholder services for the Funds. AIM obtains and evaluates economic,
statistical and financial information to formulate and implement investment
programs for the Funds. AIM will not be liable to the Funds or their
shareholders except in the case of AIM's willful misfeasance, bad faith, gross
negligence or reckless disregard of duty; provided, however that AIM may be
liable for certain breaches of duty under the 1940 Act.
SUB-ADVISOR
AIM Capital, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, serves
as sub-advisor to each Fund pursuant to the Master Sub-Advisory Agreement
between AIM and AIM Capital. Under the terms of the Master Sub-Advisory
Agreement, AIM has appointed AIM Capital to provide certain investment advisory
services for each Fund, subject to overall supervision by AIM and the Company's
Board of Directors. Prior sub-advisory agreements between AIM and AIM Capital
for each of the Funds, with substantially identical terms to the Master
Sub-Advisory Agreement, were in effect prior to October 18, 1993. AIM Capital is
a wholly-owned subsidiary of AIM. Certain of the directors and officers of AIM
Capital are also executive officers of the Company.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of any Fund but
will retain its ability to be reimbursed prior to the end of the fiscal year.
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ADVISORY FEES
As compensation for its services AIM is paid an investment advisory fee, which
is calculated separately for each Fund. AIM received total advisory fees from
Charter, Weingarten and Constellation for the fiscal year ended October 31,
1994, which represented 0.64%, 0.61% and 0.62%, respectively, of each of such
Fund's average daily net assets. AIM received reimbursement of administrative
services costs from Charter, Weingarten and Constellation for the fiscal year
ended October 31, 1994, which represented 0.06%, 0.07% and 0.07%, respectively,
of each of such Fund's average daily net assets. Total expenses of the
Institutional Class of Charter, Weingarten and Constellation for the fiscal year
ended October 31, 1994, stated as a percentage of average net assets were 0.73%,
0.65% and 0.69%, respectively. As compensation for its services, AIM Capital
receives a fee equal to 50% of the fees received by AIM under the Master
Advisory Agreement on behalf of the Funds.
DISTRIBUTOR
The Company has entered into a Master Distribution Agreement dated as of
October 18, 1993, on behalf of the Institutional Class of each of the Funds (the
"Master Distribution Agreement") with FMC, a registered broker-dealer and a
wholly-owned subsidiary of AIM, to act as the distributor of the shares of the
Funds. The address of FMC is 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Certain directors and officers of the Funds are affiliated with FMC.
The Master Distribution Agreement provides that FMC has the exclusive right to
distribute Institutional Shares of the Funds either directly or through other
broker-dealers. FMC receives no fee for its services as distributor.
Distribution agreements between the Company and FMC with respect to each of the
Funds, with substantially identical terms to the Master Distribution Agreement,
were in effect prior to October 18, 1993. FMC is the distributor of several of
the mutual funds administered or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other consideration
or incentive to dealers or banks who sell a minimum dollar amount of the shares
of the Funds during a specific period of time. In some instances, these
incentives may be offered only to certain dealers or institutions who have sold
or may sell significant amounts of shares. The total amount of such additional
bonus payments or other consideration shall not exceed 0.10% of the net asset
value of the shares of the Funds sold. Any such bonus or incentive programs will
not change the price paid by investors for the purchase of shares of the Funds
or the amount received as proceeds from such sales. Dealers or institutions may
not use sales of the shares of the Funds to qualify for any incentives to the
extent that such incentives may be prohibited by the laws of any jurisdiction.
PORTFOLIO MANAGERS
AIM uses a team approach and a disciplined investment process in providing
investment advisory services to all of its accounts, including the Funds. AIM's
investment staff consists of 81 individuals. While individual members of AIM's
investment staff are assigned primary responsibility for the day-to-day
management of each of AIM's accounts, all accounts are reviewed on a regular
basis by AIM's Investment Policy Committee to ensure that they are being
invested in accordance with the account's and AIM's investment policies. The
individuals who are primarily responsible for the day-to-day management of the
Funds and their titles, if any, with AIM or its affiliates and the Fund, the
length of time they have been responsible for the management, and their years of
investment experience and prior experience (if they have been with AIM for less
than five years) are shown below.
Lanny H. Sachnowitz and Joel P. Dobberpuhl are primarily responsible for
day-to-day management of Charter. Mr. Sachnowitz is Vice President of AIM
Capital, and Vice President of the Company and has been responsible for the Fund
since 1988. Mr. Sachnowitz has been associated with AIM and/or its affiliates
since 1987 and has seven years of experience as an investment professional. Mr.
Dobberpuhl is Vice President of AIM Capital and has been responsible for the
Fund since 1995. Mr. Dobberpuhl has been associated with AIM since 1990 and has
a total of six years of experience as an investment professional. Prior to 1990,
he served as an equity trader and portfolio analyst for NationsBank of Texas,
N.A.
Jonathan C. Schoolar and David P. Barnard are primarily responsible for the
day-to-day management of Weingarten. Mr. Schoolar, a chartered financial
analyst, is Senior Vice President and Director of AIM Capital, Vice President of
AIM and Senior Vice President of the Company and has been responsible for the
Fund since 1987. He has been associated with AIM and/or its affiliates since
1986 and has eleven years of experience as an investment professional. Mr.
Barnard is Vice President of AIM Capital and Vice President of the Company and
has been responsible for the Fund since 1986. Mr. Barnard has been associated
with AIM and/or its affiliates since 1982 and has 21 years of experience as an
investment professional.
Robert M. Kippes, David P. Barnard and Jonathan C. Schoolar are primarily
responsible for the day-to-day management of Constellation. Mr. Kippes is Vice
President of AIM Capital. He currently serves as manager for Constellation and
has been responsible for the Fund since 1993. Mr. Kippes has been associated
with AIM and/or its affiliates since 1989 and has six years of experience as an
investment professional. Mr. Barnard's background is discussed above with
respect to the management of Weingarten; he has also been responsible for the
management of Constellation since 1990. Mr. Schoolar, whose background is
discussed above with respect to the management of Weingarten, has also been
responsible for the management of Constellation since 1987.
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GENERAL INFORMATION
ORGANIZATION OF THE COMPANY
The Company was organized in 1988 as a Maryland corporation, and is registered
with the Securities and Exchange Commission as a diversified, open-end, series,
management investment company. The Company currently consists of four separate
portfolios: Charter and Weingarten, each of which has a Retail Class of shares
consisting of Class A and Class B shares and an Institutional Class;
Constellation, which has a Retail Class of Class A shares and an Institutional
Class, and Aggressive Growth, which has a Retail Class of Class A shares.
The authorized capital stock of the Company consists of 5,500,000,000 shares
of common stock with a par value of $.001 per share, of which 750,000,000 shares
are classified Class A shares of each investment portfolio, 750,000,000 shares
are classified Class B shares of each of Charter and Weingarten, 200,000,000
shares are classified Institutional Shares of each of the Funds, and the balance
of which are unclassified.
Each class of shares of the same Fund represent interests in that Fund's
assets and have identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that each class of shares bears differing
class-
specific expenses, is subject to differing sales loads, conversion features and
exchange privileges, and has exclusive voting rights on matters pertaining to
that class' distribution plan.
Except as specifically noted above, shareholders of each Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the different classes of shares,
where applicable, of a Fund. However, on matters affecting one portfolio of the
Company or one class of shares, a separate vote of shareholders of that
portfolio or class is required. Shareholders of a portfolio or class are not
entitled to vote on any matter which does not affect that portfolio or class but
which requires a separate vote of another portfolio or class. An example of a
matter which would be voted on separately by shareholders of a portfolio is the
approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect directors,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors of the Company, and the holders of less than 50% of
the shares voting for the election of directors will not be able to elect any
directors.
The holders of shares of the Institutional Class of each Fund are entitled to
such dividends payable out of the net assets allocable to such class as may be
declared by the Board of Directors of the Company. In the event of liquidation
or dissolution of the Company, the holders of shares of the Institutional Class
of a Fund will be entitled to receive pro rata, subject to the rights of
creditors, the net assets of the Fund allocable to the Institutional Class.
Fractional shares of each Fund have the same rights as full shares to the extent
of their proportionate interest.
Under Maryland law and the Company's By-Laws, the Company need not hold an
annual meeting of shareholders unless a meeting is required under the 1940 Act
to elect directors. Shareholders may remove directors from office, and a meeting
of shareholders may be called at the request of the holders of 10% or more of
the Company's outstanding shares.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, serves as the transfer agent and dividend paying agent with
respect to the Funds' Institutional Classes. It is anticipated that effective
July 1, 1995, AIFS, a wholly-owned subsidiary of AIM and a registered transfer
agent, will become the transfer agent and dividend paying agent for the Funds'
Institutional Classes.
State Street Bank and Trust Company also serves as custodian for the Funds'
portfolio securities and cash.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania,
serves as counsel to the Company and has passed upon the legality of the shares
offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning their account should be directed to FMC at 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may be made by calling
(800) 659-1005.
16
<PAGE> 17
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Funds prior to investing. A Statement of Additional Information has been
filed with the Securities and Exchange Commission and is available upon request
and without charge by writing or calling FMC. This Prospectus omits certain
information contained in the registration statement filed with the Securities
and Exchange Commission. Copies of the registration statement, including items
omitted from this Prospectus, may be obtained from the Securities and Exchange
Commission by paying the charges prescribed under its rules and regulations.
17
<PAGE> 18
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<PAGE> 19
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<PAGE> 20
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 21
- ------------------------------------------------------
- ------------------------------------------------------
AIM EQUITY FUNDS, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
INVESTMENT ADVISOR
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(713) 626-1919
INVESTMENT SUB-ADVISOR
A I M CAPITAL MANAGEMENT, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(713) 626-1919
DISTRIBUTOR
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 340-4246
AUDITORS
KPMG PEAT MARWICK LLP
700 Louisiana
NationsBank Building
Houston, Texas 77002
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02110
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION TO ANY PERSON TO WHOM SUCH OFFERING MAY NOT LAWFULLY BE MADE.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTUS
June 15, 1995
AIM EQUITY FUNDS, INC
(INSTITUTIONAL CLASSES)
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
TABLE OF CONTENTS
PAGE
------
Summary........................................... 2
Table of Fees and Expenses........................ 4
Financial Highlights.............................. 5
Suitability For Investors......................... 7
Investment Programs............................... 8
Purchase of Shares................................ 11
Redemption of Shares.............................. 12
Dividends and Distributions....................... 12
Federal Taxes..................................... 12
Determination of Net Asset Value.................. 13
Performance....................................... 13
Reports to Shareholders........................... 14
Management........................................ 14
General Information............................... 16
------------------------------------------------------
------------------------------------------------------
<PAGE> 22
STATEMENT OF
ADDITIONAL INFORMATION
INSTITUTIONAL CLASSES OF
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS, INC.)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE
FROM AUTHORIZED DEALERS OR BY WRITING
FUND MANAGEMENT COMPANY,
11 GREENWAY PLAZA, SUITE 1919,
HOUSTON, TEXAS 77046-1173
OR BY CALLING (800) 659-1105
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 15, 1995
RELATING TO PROSPECTUS DATED JUNE 15, 1995
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Advisor, Sub-Advisor and Administrator . . . . . . . . . . . . . . . . . . . . . 7
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PURCHASES AND REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Net Asset Value Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Total Return Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Yield Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Suspension of Redemption Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
INVESTMENT PROGRAM AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Special Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Writing Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Risks as to Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Additional Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Reinvestment of Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . 28
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Qualification as a Regulated Investment Company . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
i
<PAGE> 24
<TABLE>
<S> <C>
Excise Tax on Regulated Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . 30
Fund Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Sale or Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Effect of Future Legislation; Local Tax Considerations . . . . . . . . . . . . . . . . . . . 33
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Description of Commercial Paper Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Description of Corporate Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 25
INTRODUCTION
AIM Equity Funds, Inc. (the "Company") is a series mutual fund. The
rules and regulations of the United States Securities and Exchange Commission
(the "SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information is included in a Prospectus dated June 15, 1995
(the "Prospectus"), which relates to the Institutional Classes of the following
portfolios of the Company: AIM Charter Fund ("Charter"), AIM Weingarten Fund
("Weingarten") and AIM Constellation ("Constellation") (individually, a "Fund"
and collectively, the "Funds"). Additional copies of the Prospectus and this
Statement of Additional Information may be obtained without charge by writing
the principal distributor of the Funds' shares, Fund Management Company ("FMC"),
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 or by calling (800)
659-1005. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus; and, in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omits certain information contained in
a Registration Statement filed with the SEC. Copies of the Registration
Statement, including items omitted from the Prospectus and this Statement of
Additional Information, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE COMPANY AND ITS SHARES
The Company was organized in 1988 as a Maryland series corporation, and
is registered with the SEC as a diversified open-end series management
investment company. The Company currently consists of four separate portfolios:
Charter and Weingarten, each of which has a Retail Class of shares consisting of
Class A and Class B shares and an Institutional Class; Constellation, which has
a Retail Class of Class A Shares and an Institutional Class; and AIM Aggressive
Growth Fund ("Aggressive Growth"), which has a Retail Class of Class A shares.
Prior to October 15, 1993, Aggressive Growth was a portfolio of AIM Funds Group
("AFG"), a Massachusetts business trust. Pursuant to an Agreement and Plan of
Reorganization between the Company and AFG, Aggressive Growth was redomesticated
as a portfolio of the Company effective as of October 15, 1993.
This Statement of Additional Information relates solely to the
Institutional Classes of the Funds.
The term "majority of the outstanding shares" of the Company, of a
particular Fund or of a particular class of a Fund means, respectively, the vote
of the lessor of (a) 67% or more of the shares of the Company, such Fund or such
class present at a meeting of the Company's shareholders, if the holders of more
than 50% of the outstanding shares of the Company, such Fund or such class are
present or represented by proxy, or (b) more than 50% of the outstanding shares
of the Company, such Fund or such class.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all
portfolios of the Company voting together for election of directors may elect
all of the members of the Board of Directors of the Company. In such event, the
remaining holders cannot elect any members of the Board of Directors of the
Company.
1
<PAGE> 26
Each class of shares of each Fund has equal rights and privileges. Each
share of a particular class is entitled to one vote, to participate equally in
dividends and distributions declared by the Board of Directors with respect to
that class and, upon liquidation of the Fund, to participate proportionately in
the net assets of the Fund allocable to that class remaining after satisfaction
of outstanding liabilities of the Fund allocable to that Class. Fund shares are
fully paid, non-assessable and fully transferable when issued and have no
preemptive, conversion or exchange rights. Fractional shares have
proportionately the same rights, including voting rights, as are provided for a
full share.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during the last five years are set forth below. Unless otherwise
indicated, the address of each director and officer is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. All of the Company's executive officers hold
similar offices with some or all of the other AIM Funds.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Ventures Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT; (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (70)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director,
CF & I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
- ------------------------
* A director who is an "interested person," of the Company and A I M
Advisors, Inc. as defined in the 1940 Act.
2
<PAGE> 27
*CARL FRISCHLING, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
**ROBERT H. GRAHAM, Director and President (48)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors. Inc.; Director and Executive Vice
President, A I M Distributors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Fund Services, Inc., A I M Global Associates,
Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Senior Vice President, AIM
Global Advisors Limited.
JOHN F. KROEGER, Director (70)
Box 464
24875 Swan Road - Martingham
St. Michaels, MD 21663
Director, Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund,
Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (52)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
- ----------------------
* A director who is an "interested person" of the Company as defined in
the 1940 Act.
** A director who is an "interested person," of the Company and A I M
Advisors, Inc. as defined in the 1940 Act.
3
<PAGE> 28
LOUIS S. SKLAR, Director (55)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
JOHN J. ARTHUR, Senior Vice President and Treasurer (50)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (47)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., and AIM Global Ventures
Co.; Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
JONATHAN C. SCHOOLAR, Senior Vice President (33)
Director and Senior Vice President, A I M Capital Management, Inc.; and
Vice President, A I M Advisors, Inc.
CAROL F. RELIHAN, Vice President and Secretary (40)
Vice President, General Counsel and Secretary, A I M Management Group
Inc., A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc., and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (51)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc., A
I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
4
<PAGE> 29
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for meeting
with the Company's auditors to review audit procedures and results and to
consider any matters arising from an audit to be brought to the attention of the
directors as a whole with respect to the Company's fund accounting or its
internal accounting controls, and considering such matters as may from time to
time be set forth in a charter adopted by the Board of Directors and such
committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividends and distributions issues, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Company maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, and considering such matters as may from time to time be set forth in
a charter adopted by the Board of Directors and such committee.
All of the Company's directors also serve as directors or trustees of
some or all of the other investment companies managed or advised by A I M
Advisors, Inc. ("AIM Funds"). All of the Company's executive officers hold
similar offices with some or all of the other AIM Funds.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee attended. The directors
of the Company who do not serve as officers of the Company are compensated for
their services according to a fee schedule which recognizes the fact that they
also serve as directors or trustees of certain other investment companies
advised or managed by AIM. Each such director receives a fee, allocated among
the AIM Funds for which he serves as a director or trustee, which consists of an
annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1994 for each director of the Company:
<TABLE>
<CAPTION>
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
FROM BY ALL FROM ALL
DIRECTOR COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------
Bruce L. Crockett 10,743.11 2,814.00 45,093.75
- -------------------------------------------------------------------------------------------
Owen Daly II 10,973.92 14,375.00 45,843.75
- -------------------------------------------------------------------------------------------
Carl Frischling 10,912.82 7,542.00 45,093.75(4)
- -------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- -------------------------------------------------------------------------------------------
John F. Kroeger 10,973.92 20,517.00 45,843.75
- -------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 30
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Lewis F. Pennock 10,973.92 5,093.00 45,843.75
- -------------------------------------------------------------------------------------------
Ian W. Robinson 10,744.89 10,396.00 45,093.75
- -------------------------------------------------------------------------------------------
Louis S. Sklar 10,912.82 4,682.00 45,093.75
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) The total amount of compensation deferred by all Directors of the
Company during the fiscal year ended October 31, 1994, including
interest earned thereon, was $45,439.74.
(2) During the fiscal year ended October 31, 1994, the total amount of
expenses allocated to the Company in respect of such retirement
benefits was $19,033.01.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a
Director or Trustee of a total of 11 AIM Funds. Messrs. Crockett,
Frischling, Robinson and Sklar each serves as a Director or Trustee of
a total of 10 AIM Funds. Data reflects compensation earned for the
calendar year ended December 31, 1994.
(4) See also page seven regarding fees earned by Mr. Frischling's former
law firm.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each eligible director is entitled to receive an annual benefit from the AIM
Funds commencing on the first day of the calendar quarter coincident with or
following his date of retirement equal to 5% of such Director's compensation
paid by the AIM Funds multiplied by the number of such Director's years of
service (not in excess of 10 years of service) completed with respect to any of
the AIM Funds. Such benefit is payable to each eligible director in quarterly
installments for a period of no more than five years. If an eligible director
dies after attaining the normal retirement date but before receipt of any
benefits under the Plan commences, the director's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased director, for no more than five years beginning the first day of
the calendar quarter following the date of the director's death. Payments under
the Plan are not secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar are
7, 8, 17, 17, 13, 7, and 5 years, respectively.
6
<PAGE> 31
<TABLE>
<CAPTION>
Annual Compensation Paid By All AIM Funds
$40,000 $45,000 $50,000 $55,000
=============================================================================
<S> <C> <C> <C> <C> <C>
10 $20,000 $22,500 $25,000 $27,500
Number of -----------------------------------------------------------------------------
Years of 9 $18,000 $20,250 $22,500 $24,750
Service With -----------------------------------------------------------------------------
the AIM 8 $16,000 $18,000 $20,000 $22,000
Funds -----------------------------------------------------------------------------
7 $14,000 $15,750 $17,500 $19,250
-----------------------------------------------------------------------------
6 $12,000 $13,500 $15,000 $16,500
-----------------------------------------------------------------------------
5 $10,000 $11,250 $12,500 $13,750
=============================================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Company, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of his deferral account shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
years beginning on the date the deferring director's retirement benefits
commence under the Plan. The Company's Board of Directors, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the deferring director's termination of service as a director of the
Company. If a deferring director dies prior to the distribution of amounts in
his deferral account, the balance of the deferral account will be distributed to
his designated beneficiary in a single lump sum payment as soon as practicable
after such deferring director's death. The Agreements are not funded and, with
respect to the payments of amounts held in the deferral accounts, the deferring
directors have the status of unsecured creditors of the Company and of each
other AIM Fund from which they are deferring compensation.
The Company paid the law firm of Reid & Priest $14,165, $33,304 and
$21,356 in legal fees for services provided to Charter, Weingarten and
Constellation, respectively, during the fiscal year ended October 31, 1994. Mr.
Carl Frischling, a director of the Company, was previously a partner in such
firm.
INVESTMENT ADVISOR, SUB-ADVISOR AND ADMINISTRATOR
A I M Advisors, Inc. ("AIM") is a wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046. AIM Management is a holding company that has been engaged
in the financial services business since 1976. Certain of the directors and
officers of AIM are also executive officers of the Company and their
affiliations are shown under "Directors and Officers".
The Funds have entered into a Master Investment Advisory Agreement,
dated as of October 18, 1993, (the "Master Advisory Agreement") and a Master
Administrative Services Agreement, dated as of October 18, 1993, (the "Master
Administrative Services Agreement") with AIM, and AIM has entered into a Master
Sub-Advisory Agreement, dated as of October 18, 1993 (the "Master Sub-Advisory
Agreement"), with A I M Capital Management, Inc. ("AIM Capital") with respect to
the Funds.
7
<PAGE> 32
AIM Capital, a wholly owned subsidiary of AIM, is engaged in the
business of providing investment advisory services to investment companies,
corporations, institutions and other accounts.
AIM was organized in 1976 and manages or advises 37 investment company
portfolios. As of June 1, 1995, the total assets advised or managed by AIM or
its affiliates were approximately $31.3 billion.
AIM and the Company have adopted a Code of Ethics (the "Code") which
requires investment personnel (a) to pre-clear all personal securities
transactions, (b) to file reports regarding such transactions, and (c) to
refrain from personally engaging in (i) short-term trading of a security, (ii)
transactions involving a security within seven days of an AIM Fund transaction
involving the same security, and (iii) transactions involving securities being
considered for investment by an AIM Fund. The Code also prohibits investment
personnel from purchasing securities in an initial public offering. Personal
trading reports are reviewed periodically by AIM, and the Board of Directors
reviews annually such reports (including information on any substantial
violations of the Code). Violations of the Code may result in censure, monetary
penalties, suspension or termination of employment.
Both the Master Advisory Agreement and the Master Sub-Advisory
Agreement provide that each Fund will pay or cause to be paid all expenses of
such Fund not assumed by AIM or AIM Capital, including, without limitation:
brokerage commissions, taxes, legal, auditing or governmental fees, the cost of
preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to directors and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Company on behalf
of the Funds in connection with membership in investment company organizations,
the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders, and all other charges and
costs of the Funds' operations unless otherwise explicitly provided.
The Master Advisory Agreement and the Master Sub-Advisory Agreement
each provide that if, for any fiscal year, the total of all ordinary business
expenses of any Fund, including all investment advisory fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses, such
as litigation, exceed the applicable expense limitations imposed by state
securities regulations in any state in which such Fund's shares are qualified
for sale, as such limitations may be raised or lowered from time to time, the
aggregate of all such investment advisory fees with respect to such Fund shall
be reduced by the amount of such excess. The amount of any such reduction to be
borne by AIM shall be deducted from the monthly investment advisory fees
otherwise payable to AIM with respect to such Fund during such fiscal year. If
required pursuant to such state securities regulations, AIM will reimburse the
Funds, no later than the last day of the first month of the next succeeding
fiscal year, for any such annual operating expenses (after reduction of all
investment advisory fees in excess of such limitation).
The Master Advisory Agreement and the Master Sub-Advisory Agreement
became effective on October 18, 1993 and will continue in effect until June 30,
1995 and from year to year thereafter only if such continuance is specifically
approved at least annually by (i) the Company's Board of Directors or the vote
of a "majority of the outstanding voting securities" of the Funds (as defined in
the 1940 Act) and (ii) the affirmative vote of a majority of the directors who
are not parties to the agreements or "interested persons" of any such party (the
"Non-Interested Directors") by votes cast in person at a meeting called for such
purpose. The Master Advisory Agreement and the Master Sub-Advisory Agreement
provide that the Funds, AIM (in the case of the Master Advisory Agreement) or
AIM Capital (in the case of the Master Sub-Advisory Agreement) may terminate
such agreements on sixty (60) days' written notice without penalty. Each
agreement terminates automatically in the event of its assignment.
With respect to each of Charter and Constellation, AIM receives a fee
calculated at an annual rate of 1.0% of the first $30 million of such Fund's
average daily net assets, plus 0.75% of such Fund's average daily net assets in
excess of $30 million to and including $150 million, plus 0.625% of such Fund's
average
8
<PAGE> 33
daily net assets in excess of $150 million. With respect to Weingarten, AIM's
fee is calculated 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 up to and including $350 million, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. As compensation
for its services, AIM Capital receives a fee from AIM equal to 50% of the fee
received by AIM from Charter, Weingarten and Constellation pursuant to the
Master Advisory Agreement.
For the fiscal year ended October 31, 1994, AIM received advisory fees
from Charter, Weingarten and Constellation, of $10,447,924, $26,472,250 and
$19,926,116, respectively. For the fiscal year ended October 31, 1994, AIM in
turn paid $5,223,962, $13,236,125 and $9,963,058, respectively, of such amounts,
with respect to Charter, Weingarten and Constellation, to AIM Capital as
sub-advisor. For the fiscal year ended October 31, 1993, AIM received advisory
fees from Charter, Weingarten and Constellation of $9,635,490, $32,301,167 and
$12,398,962, respectively. For the fiscal year ended October 31, 1993, AIM in
turn paid $4,817,745, $16,150,583 and $6,199,481, respectively, of such amounts
with respect to Charter, Weingarten and Constellation, to AIM Capital, as
sub-advisor. For the fiscal year ended October 31, 1992, AIM received advisory
fees from Charter, Weingarten and Constellation of $5,829,820, $25,014,801 and
$4,660,486, respectively. For the fiscal year ended October 31, 1992, AIM in
turn paid $2,914,910, $12,507,401 and $2,330,243, respectively, of such amounts,
to AIM Capital as sub-advisor.
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting and other
administrative services to each Fund which are not required to be performed by
AlM under the Master Advisory Agreement. For such services, AIM would be
entitled to receive from each Fund reimbursement of its costs or such reasonable
compensation as may be approved by the Company's Board of Directors. The Master
Administrative Services Agreement became effective on October 18, 1993 and will
continue in effect until June 30, 1995 and from year to year thereafter only if
such continuance is specifically approved at least annually by (i) the Company's
Board of Directors or the vote of a "majority of the outstanding voting
securities" of the Funds (as defined in the 1940 Act) and (ii) the affirmative
vote of a majority of the Non-Interested Directors by votes cast in person at a
meeting called for such purpose.
For the fiscal year ended October 31, 1994, AIM received administrative
services fees from Charter, Weingarten and Constellation of $980,837, $3,161,130
and $2,196,752, respectively. For the fiscal year ended October 31, 1993, AIM
received administrative services fees from Charter, Weingarten and Constellation
of $806,712, $3,168,957 and $1,119,692, respectively. For the fiscal year ended
October 31, 1992, AIM received administrative services fees from Charter,
Weingarten and Constellation of $343,181, $1,495,140 and $291,634, respectively.
In addition, a sub-contract dated September 16, 1994 between AIM and
A I M Institutional Fund Services, Inc. ("AIFS"), a registered transfer agent
and wholly owned subsidiary of AIM, provides that AIFS may perform certain
shareholder services for the Funds which are not required to be performed by AIM
under the Master Advisory Agreement. Currently, AIFS provides certain
shareholder services for the Funds. For such services, AIFS is entitled to
receive from AIM such reimbursement of its costs associated with providing these
services as may be approved by the Board of Directors. For the period September
16, 1994 through October 31, 1994, AIFS received fees with respect to Charter,
Weingarten and Constellation in the amount of $65, $106 and $119, respectively.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. State Street also acts as transfer and
dividend disbursing agent for the Institutional Classes of the Funds. These
services do not include any supervisory function over
9
<PAGE> 34
management or provide any protection against any possible depreciation of
assets. The Funds pay the custodian and the transfer agent such compensation as
may be agreed upon from time to time.
AUDIT REPORTS
The Board of Directors will issue semi-annual reports of the
transactions of the Funds to the shareholders. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG Peat Marwick LLP
has served as the auditors for the Funds for the fiscal year ended October 31,
1994.
LEGAL MATTERS
Legal matters for the Company have been passed upon by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania.
10
<PAGE> 35
PRINCIPAL HOLDERS OF SECURITIES
CHARTER
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding shares of the Retail Class of
Charter as of April 3, 1995, and the Institutional Class of Charter as of
April 3, 1995, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- ---------------- ------------
<S> <C>
RETAIL CLASS
Merrill Lynch Pierce Fenner & Smith 15.8%
AIDS/Street Account
Mutual Fund Operations
ATTN: Private Client Group
P.O. Box 45286
Jacksonville, FL 32232-5286
Great West Life & Annuity 7.6%
Insurance Co.
Financial Control
401(K) 6T1
8505 E. Orchard
Englewood, CO 80111
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- ---------------- ------------
<S> <C>
INSTITUTIONAL CLASS
Commonwealth of Mass. 81.59%**
One Ashburton Place
12th Floor
Boston, MA 12108
Bank of A. Levy 12.33%
P.O. Box 2575
Trust Department
Ventura, CA 93002
</TABLE>
- ------------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
11
<PAGE> 36
WEINGARTEN
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding shares of the Retail Class of
Weingarten as of April 3, 1995, and of the Institutional Class of Weingarten as
of April 3, 1995, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- ----------------- ------------
<S> <C>
RETAIL CLASS
Merrill Lynch Pierce Fenner & Smith 21.3%
AIDS/Street Account
Mutual Fund Operations
ATTN: Private Client Group
P.O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- ---------------- ------------
<S> <C>
INSTITUTIONAL CLASS
Commonwealth of Mass. 59.90%**
One Ashburton Place
12th Floor
Boston, MA 02108
Union Planters National Bank 16.58%
P.O. Box 387
Memphis, TN 38147
Muchmore & Co. 8.92%
P.O. Box 1205
Cranford, NJ 07016
</TABLE>
- ----------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
12
<PAGE> 37
CONSTELLATION
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding shares of the Retail Class of
Constellation as of April 3, 1995, and the Institutional Class of Constellation
as of April 3, 1995 and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- ---------------- ------------
<S> <C>
RETAIL CLASS
Merrill Lynch Pierce Fenner & Smith 24.6%
AIDS/Street Account
Mutual Fund Operations
ATTN: Private Client Group
P.O. Box 45286
Jacksonville, FL 32232-5286
INSTITUTIONAL CLASS
Nationwide DVCA 8.58%
P.O. Box 182029
Columbus, OH 43218
West One Bank Idaho, NA 7.26%
101 S. Capital Blvd., Rm. 315
Boise, ID 83707
City of New York 56.39**
Deferred Compensation Plan
40 Rector Street, 3rd Floor
New York, NY 10006
</TABLE>
As of April 3, 1995, the directors/trustees and officers of the Company
as a group owned beneficially less than 1% of the outstanding shares of each of
any class of Charter, Weingarten, Aggressive Growth and Constellation.
- -------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
13
<PAGE> 38
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Institutional Classes of the Funds that are offered by
the Prospectus are sold at their net asset value. The investor's price for
purchase or redemption will be determined by the net asset value of the
Institutional Class of the applicable Fund's shares next determined following
the receipt of an order to purchase or a request to redeem such shares.
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of 4:15 p.m.
Eastern Time on each business day of the Fund. In the event the New York Stock
Exchange closes early (i.e., before 4:00 p.m. Eastern Time) on a particular day,
the net asset value of a Fund's share is determined 15 minutes following the
close of the New York Stock Exchange on such day. Determination of a Fund's net
asset value per share is made in accordance with generally accepted accounting
principles. The net asset values per share of the Institutional Class and the
Retail Classes of a Fund will differ because different expenses are attributable
to each class. The income or loss and the expenses common to both classes of a
Fund are allocated to each class on the basis of the net assets of the Fund
allocable to each such class, calculated as of the close of business on the
previous business day, as adjusted for the current day's shareholder activity of
each class. In addition to certain common expenses which are allocated to both
classes of a Fund, certain expenses, such as those related to the distribution
of shares of a class, are allocated only to the class to which such expenses
relate. The net asset value per share of a class is determined by subtracting
the liabilities (e.g., the expenses) of the Fund allocated to the class from the
assets of the Fund allocated to the class and dividing the result by the total
number of shares outstanding of such class. Determination of each Fund's net
asset value per share is made in accordance with generally acceptable accounting
principles.
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. 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. 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. (See also "How to Purchase
Shares," "How to Redeem Shares" and "Determination of Net Asset Value" in the
Prospectus.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, 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.
14
<PAGE> 39
THE DISTRIBUTION AGREEMENT
The Company, on behalf of the Institutional Class of each Fund, has
entered into a Master Distribution Agreement, effective as of October 18, 1993,
(the "Distribution Agreement") with FMC, a registered broker-dealer and a
wholly-owned subsidiary of AIM to act as the exclusive distributor of the
Institutional Classes of the Funds' shares. The address of FMC is 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173. See "Directors and Officers" and
"The Investment Advisor" for information as to the affiliation of certain
directors and officers of the Company with FMC and A I M Management Group Inc.
The Distribution Agreement provides that FMC has the exclusive right to
distribute the Institutional Classes of shares of the Funds either directly or
through other broker-dealers. The Distribution Agreement also provides that FMC
will pay promotional expenses, including the incremental costs of printing
prospectuses and statements of additional information, annual reports and other
periodic reports for distribution to persons who are not shareholders of the
Institutional Classes of the Funds and the costs of preparing and distributing
any other supplemental sales literature. FMC has not undertaken to sell any
specified number of shares of the Institutional Classes of the Funds. FMC does
not receive any fees from the Company on behalf of the Institutional Classes
pursuant to the Distribution Agreement.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of the shares of the Institutional Class of a Fund during a specific period of
time. In some instances, these incentives may be offered only to certain dealers
or institutions who have sold or may sell significant amounts of shares. The
total amount of such additional bonus payments or other consideration shall not
exceed .10% of the net asset value of the shares sold of such Institutional
Class. Any such bonus or incentive programs will not change the price paid by
investors for the purchase of shares or the amount received as proceeds from
such sales. Dealers or institutions may not use the sale of shares of the
Institutional Class of a Fund to qualify for any incentives to the extent that
such incentives may be prohibited by the laws of any jurisdiction.
The Distribution Agreement became effective October 18, 1993 and will
continue in effect until June 30, 1995 and from year to year thereafter only if
such continuation is specifically approved at least annually by (i) the
Company's Board of Directors or the vote of a "majority of the outstanding
voting securities" of the Funds (as defined in the 1940 Act) and (ii) the
affirmative vote of a majority of the Non-Interested Directors by votes cast in
person at a meeting called for such purpose. The Company, on behalf of a Fund,
or FMC may terminate the Distribution Agreement on sixty days' written notice
without penalty. The Distribution Agreement will terminate automatically in the
event of its "assignment," as defined in the 1940 Act.
PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical investment in a particular Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that a Fund's performance is not constant over time, but changes from year to
year, and that average annual returns do not represent the actual year-to-year
performance of such Fund.
15
<PAGE> 40
In addition to average annual returns, the Institutional Class of each
Fund may quote unaveraged or cumulative total returns, reflecting the simple
change in value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar amount,
and may be calculated for a single investment, a series of investments, and/or a
series of redemptions, over any time period. Total returns may be broken down
into their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors and
their contributions to total return. Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration.
From time to time, Fund sales literature and/or advertisements may
disclose top holdings included in the Fund's portfolio.
YIELD QUOTATIONS
The standard formula for calculating yield, as described in the
Prospectus, is as follows:
YIELD = 2[((a-b)/(c x d) + 1)6-1]
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued rather
than recorded on the ex-dividend date. Interest earned under this
formula must generally be calculated based on the yield to
maturity of each obligation (or, if more appropriate, based on
yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the period.
d = the maximum offering price per share on the last day of the
period.
The yield for the Institutional Class of Charter for the 30-day period
ended June 30, 1994 was 3.09%.
HISTORICAL PORTFOLIO RESULTS
The average return of the Institutional Class of Charter was -2.03% for
the fiscal year ended October 31, 1994. The cumulative return of the
Institutional Class of Charter was 26.37% for the period of July 30, 1991 (date
operations commenced) through October 31, 1994. The average return of the
Institutional Class of Weingarten was 4.38% for the fiscal year ended October
31, 1994. The cumulative return of the Institutional Class of Weingarten was
23.54% for the period of October 8, 1991 (date operations commenced) through
October 31, 1994. The average return of the Institutional Class of Constellation
was 7.94% for the fiscal year ended October 31, 1994. The cumulative return of
the Institutional Class of Constellation was 50.45% for the period of April 8,
1992 (date operations commenced) through October 31, 1994.
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Fund not reasonably
practicable.
16
<PAGE> 41
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The following discussion of investment policies supplements the
discussion of the investment objectives and policies set forth in the Prospectus
under the heading "Investment Programs."
Each of the Funds may be invested, for temporary or defensive purposes,
with regard to all or substantially all of their assets, in investment grade
(high quality) corporate bonds, commercial paper, or U.S. Government
obligations. In addition, a portion of each Fund's assets may be held, from time
to time, in cash, repurchase agreements, or other debt securities, when such
positions are deemed advisable in light of economic or market conditions. For a
description of the various rating categories of corporate bonds and commercial
paper in which the Fund may invest, see the Appendix to this Statement of
Additional Information.
FOREIGN SECURITIES
Charter, Weingarten and Constellation may each invest up to 20% of its
total assets in foreign securities. For purposes of computing such limitation
American Depository Receipts, European Depository Receipts and other securities
representing underlying securities of foreign issuers are treated as foreign
securities. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs are
receipts issued in Europe which evidence a similar ownership arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets, and EDRs, in bearer form, are designed for use in European
securities markets. ADRs and EDRs may be listed on stock exchanges, or traded in
OTC markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. Investments by the Fund in securities of foreign corporations may involve
considerations and risks that are different in certain respects from an
investment in securities of U.S. companies. Such risks include possible
imposition of withholding taxes on interest or dividends, possible adoption of
foreign governmental restrictions on repatriation of income or capital invested,
or other adverse political or economic developments. Additionally, it may be
more difficult to enforce the rights of a security holder against a foreign
corporation, and information about the operations of foreign corporations may be
more difficult to obtain and evaluate.
RULE 144A SECURITIES
The Funds may each purchase securities which, while privately placed,
are eligible for purchase and sale pursuant to Rule 144A under the Securities
Act of 1933 (the "1933 Act"). This Rule permits certain qualified institutional
buyers, such as a Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Company's Board of Directors, will consider whether securities purchased
under Rule 144A are illiquid and thus subject to the Fund's restriction of
investing no more than 15% of its assets in illiquid securities. Determination
of whether a Rule 144A security is liquid or not is a question of fact. In
making this determination AIM will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, AIM could consider the (i) frequency of trades and quotes, (ii) number
of dealers and potential purchasers, (iii) dealer undertakings to make a market,
and (iv) nature of the security and of market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities will also be
monitored by AIM and, if as a result of changed conditions, it is determined
that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid
securities will be reviewed to determine what, if any, action is required to
assure that the Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A
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securities could have the effect of increasing the amount of the Fund's
investments in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. At the present time, it is not possible
to predict with certainty how the market for Rule 144A securities will develop.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make
secured loans of portfolio securities amounting to not more than 33 1/3% of its
total assets. Securities loans are made to banks, brokers and other financial
institutions pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the securities
lent marked to market on a daily basis. The collateral received will consist of
cash, U.S. Government securities, letters of credit or such other collateral as
may be permitted under the Fund's investment program. While the securities are
being lent, the Fund will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. The Fund has a right to
call each loan and obtain the securities on five business days' notice or, in
connection with securities trading on foreign markets, within such longer period
of time which coincides with the normal settlement period for purchases and
sales of such securities in such foreign markets. The Fund will not have the
right to vote securities while they are being lent, but it will call a loan in
anticipation of any important vote. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially. Loans
will only be made to persons deemed by AIM to be of good standing and will not
be made unless, in the judgment of AIM, the consideration to be earned from such
loans would justify the risk.
REPURCHASE AGREEMENTS
The Funds may each enter into repurchase agreements. A repurchase
agreement is an instrument under which a Fund acquires ownership of a debt
security and the seller (usually a broker or bank) agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. A repurchase agreement is collateralized
by the security acquired by the Fund and its value is marked to market daily in
order to minimize the Fund's risk. Repurchase agreements usually are for short
periods, such as one or two days, but may be entered into for longer periods of
time.
Charter may enter into repurchase agreements (at any time, up to 50% of
its net assets), using only U.S. Government securities, for the sole purpose of
increasing its yield on idle cash. Charter will not invest in a repurchase
agreement of more than seven days' duration if, as a result of that investment,
the amount of repurchase agreements of more than seven days' duration would
exceed 15% of the assets of Charter.
SPECIAL SITUATIONS
Although Constellation does not currently intend to do so, it may,
invest in "special situations." A special situation arises when, in the opinion
of the Fund's management, the securities of a particular company will, within a
reasonable estimable period of time, be accorded market recognition at an
appreciated value solely by reason of a development applicable to that company,
and regardless of general business conditions or movements of the market as a
whole. Developments creating special situations might include, among others:
liquidations, reorganizations, recapitalizations, mergers, material litigation,
technical breakthroughs and new management or management policies. Although
large and well known companies may be involved, special situations more often
involve comparatively small or unseasoned
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companies. Investments in unseasoned companies and special situations often
involve much greater risk than is inherent in ordinary investment securities.
Constellation will not, however, purchase securities of any company with a
record of less than three years continuous operation (including that of
predecessors) if such purchase would cause the Fund's investment in all such
companies, taken at cost, to exceed 5% of the value of the Fund's total assets.
SHORT SALES
Although Weingarten and Constellation do not currently intend to do so,
they may each enter into short sales transactions. Neither Weingarten nor
Constellation will make short sales of securities nor maintain a short position
unless at all times when a short position is open, the Fund owns an equal amount
of such securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issue as, and
equal in amount to, the securities sold short. This is a technique known as
selling short "against the box." Such short sales will be used by each of
Weingarten and Constellation for the purpose of deferring recognition of gain or
loss for federal income tax purposes. In no event may more than 10% of the value
of either Fund's net assets be deposited or pledged as collateral for such sales
at any time.
WARRANTS
The Funds may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors. The
investment in warrants by the Funds valued at the lower of cost or market, may
not exceed 5% of the value of the respective Fund's net assets and not more than
2% of such value may be warrants which are not listed on the New York or
American Stock Exchanges.
WRITING COVERED CALL OPTIONS
Weingarten and Constellation are authorized to write (sell) covered
call options on the securities in which it may invest and to enter into closing
purchase transactions with respect to such options. Writing a call option
obligates Weingarten and Constellation to sell or deliver the option's
underlying security, in return for the strike price, upon exercise of the
option. By writing a call option, Weingarten and Constellation receive an option
premium from the purchaser of the call option. Writing covered call options is
generally a profitable strategy if prices remain the same or fall. Through
receipt of the option premium, Weingarten and Constellation would seek to
mitigate the effects of a price decline. By writing covered call options,
however, Weingarten and Constellation give up the opportunity, while the option
is in effect, to profit from any price increase in the underlying security above
the option exercise price. In addition, the Funds' ability to sell the
underlying security will be limited while the option is in effect unless
Weingarten and Constellation effect a closing purchase transaction.
FUTURES CONTRACTS
Each of the Funds may purchase futures contracts. In cases of purchases
of futures contracts, an amount of cash and cash equivalents, equal to the
market value of the futures contracts (less any related
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margin deposits), will be deposited in a segregated account with the Funds'
custodian to collateralize the position and ensure that the use of such futures
contracts is unleveraged. Unlike when a Fund purchases or sells a security, no
price is paid or received by a Fund upon the purchase or sale of a futures
contract. Initially, a Fund will be required to deposit with its custodian for
the account of the broker a stated amount, as called for by the particular
contract, of cash or U.S. Treasury bills. This amount is known as "initial
margin." The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract margin does
not involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called "variation margin," to and from the broker will be
made on a daily basis as the price of the futures contract fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." For example, when a Fund has purchased a
stock index futures contract and the price of the underlying stock index has
risen, that position will have increased in value and the Fund will receive from
the broker a variation margin payment with respect to that increase in value.
Conversely, where a Fund has purchased a stock index futures contract and the
price of the underlying stock index has declined, that position would be less
valuable and the Fund would be required to make a variation margin payment to
the broker. Variation margin payments would be made in a similar fashion when a
Fund has purchased an interest rate futures contract. At any time prior to
expiration of the futures contract, a Fund may elect to close the position by
taking an opposite position which will operate to terminate the Fund's position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund and the Fund
realizes a loss or gain.
A description of the type of futures contract that may be utilized by
the Funds is as follows:
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made. Currently, stock index futures contracts
can be purchased or sold primarily with respect to broad based stock indices
such as the S&P's 500 Stock Index, the New York Stock Exchange Composite Index,
the American Stock Exchange Major Market Index, the NASDAQ -- 100 Stock Index
and the Value Line Stock Index. The stock indices listed above consist of a
spectrum of stocks not limited to any one industry such as utility stocks.
Utility stocks, at most, would be expected to comprise a minority of the stocks
comprising the portfolio of the index. The Funds will only enter into stock
index futures contracts as a hedge against changes resulting from market
conditions in the values of the securities held or which it intends to purchase.
When a Fund anticipates a significant market or market sector advance, the
purchase of a stock index futures contract affords a hedge against not
participating in such advance. Conversely, in anticipation of or in a general
market or market sector decline that adversely affects the market values of a
Fund's portfolio of securities, the Fund may sell stock index futures contracts.
RISKS AS TO FUTURES CONTRACTS
There are several risks in connection with the use of futures contracts
as hedging devices. One risk arises because of the imperfect correlation between
movements in the price of hedging instruments and movements in the price of the
stock, debt security or foreign currency which are the subject of the hedge. If
the price of a hedging instrument moves less than the price of the stock, debt
security or foreign currency which is the subject of the hedge, the hedge will
not be fully effective. If the price of a hedging instrument moves more than the
price of the stock, debt security or foreign currency, a Fund will experience
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either a loss or gain on the hedging instrument which will not be completely
offset by movements in the price of the stock, debt security or foreign currency
which is the subject of the hedge.
Successful use of hedging instruments by the Funds is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of foreign exchange rates. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments and
the investments being hedged, even a correct forecast by AIM of general market
trends may not result in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in its portfolio may decline. If
this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts may be closed out only on an exchange on
which such contracts are traded. Although the Funds intend to purchase or sell
futures contracts there is no assurance that a liquid market on an exchange or a
board of trade will exist for any particular contract at any particular time. If
there is not a liquid market, it may not be possible to close a futures position
at such time. In the event of adverse price movements under those circumstances,
the Fund would continue to be required to make daily cash payments of
maintenance margin on its futures positions. The extent to which a Fund may
engage in futures contracts will be limited by Internal Revenue Code
requirements for qualification as a regulated investment company and a Fund's
intent to continue to qualify as such. The result of a hedging program cannot be
foreseen and may cause a Fund to suffer losses which it would not otherwise
sustain.
The investment policies stated above are not fundamental policies of
the Funds and may be changed by the Board of Directors of the Company without
shareholder approval. Shareholders will be notified before any material change
in the investment policies stated above become effective.
INVESTMENT RESTRICTIONS
The following additional fundamental policies and investment
restrictions have been adopted by each Fund as indicated and, except as noted,
such policies cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund, as defined in the 1940 Act.
CHARTER
Charter may not:
(a) purchase the securities of any one issuer (except securities issued
or guaranteed by the U.S. Government) if, immediately after and as a result of
such purchase, (i) the value of the holdings of the Fund in the securities of
such issuer exceeds 5% of the value of the Fund's total assets, or (ii) the Fund
owns more than 10% of the outstanding voting securities of any one class of
securities of such issuer;
(b) purchase securities of other investment companies;
(c) concentrate its investments; that is, invest more than 25% of the
value of its assets in any particular industry;
(d) purchase or sell real estate or other interests in real estate
(except that this restriction does not preclude investments in marketable
securities of companies engaged in real estate activities);
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(e) write, purchase, or sell puts, calls, straddles, spreads or
combinations thereof, or deal in commodities or oil, gas, or other mineral
exploration or development programs;
(f) make loans (except that the purchase of a portion of an issue of
publicly distributed bonds, debentures or other debt securities, or entering
into a repurchase agreement, is not considered to be a loan for purposes of this
restriction), provided that the Fund may lend its portfolio securities provided
the value of such loaned securities does not exceed 33 1/3% of its total assets;
(g) purchase securities on margin or sell short;
(h) borrow money or pledge its assets except that, as a temporary
measure for extraordinary or emergency purposes and not for investment purposes,
the Fund may borrow from banks (including the Fund's custodian bank) amounts of
up to 10% of the value of its total assets, and may pledge amounts of up to 20%
of its total assets to secure such borrowings;
(i) invest in companies for the purpose of exercising control or
management;
(j) act as an underwriter of securities of other issuers;
(k) purchase from or sell to any officer, director or employee of the
Fund, or its advisors or distributor, or to any of their officers or directors,
any securities other than shares of the capital stock of Charter;
(l) purchase or retain the securities of any issuer if those officers
and directors of the Company, its advisors or distributor owning individually
more than 1/2 of 1% of the securities of such issuer, together own more than 5%
of the securities of such issuer; or
(m) invest any of its assets in securities of companies having a record
of less than five years' continuous operation, including the operations of their
predecessors.
To permit the sale of shares of Charter in Texas, investments by
Charter in warrants, valued at the lower of cost or market, may not exceed 5% of
the value of Charter's net assets. Included within that amount, but not to
exceed 2% of Charter's net assets, may be warrants which are not listed on the
New York or American Stock Exchanges. This restriction is not a fundamental
policy.
The Fund will comply with Texas Rule 123.2(6), and follow SEC
guidelines, that provide that loans of the Fund's securities will be fully
collateralized.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
WEINGARTEN
Weingarten may not:
(a) issue bonds, debentures or senior equity securities;
(b) underwrite securities of other companies or purchase restricted
securities ("letter stock");
(c) invest in real estate, except that the Fund may purchase securities
of real estate investment trusts;
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(d) lend money, except in connection with the acquisition of a portion
of an issue of publicly distributed bonds, debentures or other corporate or
governmental obligations, provided that the Fund may lend its portfolio
securities provided the value of such loaned securities does not exceed 33 1/3%
of its total assets;
(e) purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(f) purchase shares in order to control management of a company;
(g) invest in commodities or commodity contracts or in puts or calls
except as set forth above under "Investment Objectives and Policies - Writing
Call Option Contracts";
(h) invest in securities of other investment companies;
(i) invest more than 25% of the value of its total assets in securities
of issuers all of which conduct their principal business activities in the same
industry; or
(j) borrow money or pledge its assets, except that, as a temporary
measure for extraordinary or emergency purposes and not for investment purposes,
the Fund may borrow from banks (including the Fund's custodian bank) amounts of
up to 10% of the value of its total assets, and may pledge amounts of up to 20%
of its total assets to secure such borrowings.
In addition, Weingarten may not (a) purchase warrants, valued at the
lower of cost or market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges; (b) purchase or retain the securities of
any issuer, if the officers and directors of the Company, its advisors or
distributor who own individually more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such issuer; (c) invest
more than 5% of the total assets of the Fund (valued at market) in securities of
any one issuer (other than obligations of the U.S. Government and its
instrumentalities); (d) purchase more than 10% of the outstanding securities of
any one issuer or more than 10% of any class of securities of an issuer; (e)
deal in forward contracts; (f) invest in interests in oil, gas or other mineral
exploration or development programs; or (g) invest in securities of companies
which have a record of less than three years of continuous operation if such
purchase at the time thereof would cause more than 5% of the total assets of the
Fund to be invested in the securities of such companies (with such period of
three years to include the operation of any predecessor company or companies,
partnership or individual enterprise if the company whose securities are
proposed for investment by the Fund has come into existence as the result of a
merger, consolidation, reorganization or purchase of substantially all of the
assets of such predecessor company or companies, partnership or individual
enterprise). These additional restrictions are not fundamental, and may be
changed by the Board of Directors of the Company without shareholder approval.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
CONSTELLATION
Constellation may not:
(a) invest for the purpose of exercising control over or management of
any company;
(b) engage in the underwriting of securities of other issuers;
(c) purchase and sell real estate or commodities or commodity
contracts:
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(d) make loans, except by the purchase of a portion of an issue of
publicly distributed bonds, debentures or other obligations, provided that the
Fund may lend its portfolio securities provided the value of such loaned
securities does not exceed 33 1/3% of its total assets;
(e) invest in interests in oil, gas or other mineral exploration or
development programs;
(f) invest in securities of other investment companies; or
(g) invest more than 25% of the value of its total assets in securities
of issuers all of which conduct their principal business activities in the same
industry.
In addition, Constellation treats as fundamental its policy concerning
borrowing described under the caption "Investment Programs - Investment
Restrictions - Borrowing" in the Prospectus. In accordance with this policy, the
Fund may borrow funds from a bank (including its custodian bank) to purchase or
carry securities only if, immediately after such borrowing, the value of the
Fund's assets, including the amount borrowed, less its liabilities, is equal to
at least 300% of the amount borrowed, plus all outstanding borrowings. For the
purpose of determining this 300% asset coverage requirement, the Fund's
liabilities will not include the amount borrowed but will include the market
value, at the time of computation, of all securities borrowed by the Fund in
connection with short sales. The amount of borrowing will also be limited by the
applicable margin limitations imposed by the Federal Reserve Board. If at any
time the value of the Fund's assets should fail to meet the 300% asset coverage
requirement, the Fund will, within three days, reduce its borrowings to the
extent necessary. The Fund may be required to eliminate partially or totally its
outstanding borrowings at times when it may not be desirable for it to do so.
The Board of Directors of the Company has also adopted the following
limitations which are not matters of fundamental policy of Constellation and
which may be changed without shareholder approval:
(a) the Fund may not purchase or retain the securities of any issuer,
if those officers and directors of the Company, its advisors or distributor
owning individually more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer; or
(b) the Fund may not purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of the Fund's net assets, and no more than
2% of such value may be warrants which are not listed on the New York or
American Stock Exchanges.
Except for the borrowing policy, if a percentage restriction is adhered
to at the time of investment, a later change in the percentage of such
investment held by a Fund resulting solely from changes in values or assets,
will not be considered to be a violation of the restriction.
ADDITIONAL RESTRICTIONS
In order to permit the sale of the Funds' shares in certain states,
each Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of fundamental
policy, and should a Fund determine that any such commitment is no longer in the
best interests of the Fund and its shareholders, it will revoke the commitment
by terminating sales of its shares in the states involved.
In order to comply with an undertaking to the State of Texas, each Fund
has agreed that any restriction on investments in "oil, gas and other mineral
exploration or development programs" shall include mineral leases, and any
restriction on investments in "real estate or other interests in real estate"
shall include real estate limited partnerships.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Directors of the
Company, AIM is responsible for decisions to buy and sell securities for each
Fund, for the selection of broker-dealers, for the execution of each Fund's
investment portfolio transactions and for the allocation of brokerage fees in
connection with such transactions. AIM's primary consideration in effecting a
security transaction is to obtain the best net price and the most favorable
execution of the order. While AIM generally seeks reasonably competitive
commission rates, each Fund does not necessarily pay the lowest commission or
spread available.
A portion of the securities in which each Fund invests are traded in
over-the-counter markets, and in such transactions, a Fund deals directly with
the dealers who make markets in the securities involved, except in those
circumstances where better prices and executions are available elsewhere.
Portfolio transactions placed through dealers serving as primary market makers
are effected at net prices, generally without commissions as such, but which
include compensation in the form of mark up or mark down.
AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Funds) over a certain time period. The target levels will be
determined based upon the following factors, among others: (a) the execution
services provided by the broker; (b) the research services provided by the
broker; and (c) the broker's attitude toward and interest in mutual funds in
general and in the Funds and other mutual funds advised by AIM or AIM Capital in
particular. No specific formula will be used in connection with any of the
foregoing considerations in determining the target levels. However, if a broker
has indicated a certain level of desired commissions in return for certain
research services provided by the broker, this factor will be taken into
consideration by AIM. Subject to the overall objective of obtaining the best
price and execution for the Fund, AIM may also consider sales of shares of the
Fund and of the other mutual funds managed or advised by AIM and AIM Capital as
a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund. AIM will seek, whenever possible, to recapture for the benefit of
each Fund any commission, fee, brokerage or similar payment paid by such Fund on
portfolio transactions. Normally, the only fees which may be recaptured are the
soliciting dealer fees on the tender of an account's portfolio securities in a
tender or exchange offer.
None of the Funds is under any obligation to deal with any broker or
group of brokers in the execution of transactions in portfolio securities.
Brokers who provide supplemental investment research to AIM and AIM Capital may
receive orders for transactions by the Fund. Information so received will be in
addition to and not in lieu of the services required to be performed by AIM and
AIM Capital under their agreements with the Funds and the expenses of AIM and
AIM Capital will not necessarily be reduced as a result of the receipt of such
supplemental information. Certain research services furnished by broker-dealers
may be useful to AIM and AIM Capital in connection with their services to other
advisory clients, including the investment companies which they advise. Also,
each Fund may pay a higher price for securities or higher commissions in
recognition of research services furnished by broker-dealers.
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Company from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The
Company has obtained an order of exemption from the SEC which permits the
Company to engage in certain transactions with such 5% holder, if the Company
complies with conditions and procedures designed to ensure that such
transactions are executed at fair market value and present no conflicts of
interest.
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AIM, AIM Capital and their affiliates manage several other investment
accounts, some of which may have investment objectives similar to those of one
or more of the Funds. It is possible that, at times, identical securities will
be appropriate for investment by one or more of the Funds and by one or more of
such investment accounts. The position of each account, however, in the
securities of the same issue may vary and the length of time that each account
may choose to hold its investment in the securities of the same issue may
likewise vary. The timing and amount of purchase by each account will also be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of a Fund and one or more of these
accounts is considered at or about the same time, transactions in such
securities will be allocated among the Fund(s) and such accounts in a manner
deemed equitable by AIM. AIM may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Simultaneous transactions could, however, adversely affect
the ability of a Fund to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Company are prohibited
from dealing with the Funds as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
The Board of Directors has adopted procedures pursuant to Rule 17a-7 under the
1940 Act relating to portfolio transactions among the Funds other accounts
advised by AIM or AIM Capital and each of the Funds may from time to time enter
into transactions in accordance with such Rule and procedures.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or AIM Capital and simultaneously
purchased by another investment account advised by AIM or AIM Capital when such
transactions comply with applicable rules and regulations and are deemed
consistent with the investment objective(s) and policies of the investment
accounts involved. Procedures pursuant to Rule 17a-7 under the 1940 Act
regarding transactions between investment accounts advised by AIM or AIM Capital
have been adopted by the Board of Directors/Trustees of the various AIM Funds,
including the Company. Although such transactions may result in custodian, tax
or other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by AIM
or AIM Capital.
In some cases, the procedure for allocating portfolio transactions
among the various investment accounts advised by AIM and AIM Capital could have
an adverse effect on the price or amount of securities available to a Fund. In
making such allocations, the main factors considered by AIM are the respective
investment objectives and policies of its advisory clients, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
judgments of the persons responsible for recommending the investment.
SECTION 28(e) STANDARDS
Under Section 28(e) of the Securities Exchange Act of 1934, AIM shall
not be "deemed to have acted unlawfully or to have breached its fiduciary duty"
solely because under certain circumstances it has caused the account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), AIM must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or [its]
overall responsibilities with respect to the accounts as to which [it] exercises
investment discretion" and that the services provided by a broker provide AIM
and AIM Capital with lawful and appropriate assistance in the performance of
their investment decision-making responsibilities. Accordingly, the price to a
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM and AIM Capital to be
beneficial to the Funds' investment programs. Research
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services received from brokers supplement AIM's and AIM Capital's own research
(and the research of sub-advisors to other clients of AIM and AIM Capital), and
may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities, markets,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services to AIM and AIM Capital and to the Company's
directors with respect to the performance, investment activities and fees and
expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the provision of equipment used to communicate research information, the
arranging of meetings with management of companies and the providing of access
to consultants who supply research information.
The outside research assistance is useful to AIM and AIM Capital since
the brokers utilized by AIM as a group tend to follow a broader universe of
securities and other matters than AIM's and AIM Capital's staff can follow. In
addition, this research provides AIM and AIM Capital with a diverse perspective
on financial markets. Research services which are provided to AIM and AIM
Capital by brokers are available for the benefit of all accounts managed or
advised by AIM and AIM Capital or by sub-advisors to other accounts managed or
advised by AIM and AIM Capital. In some cases, the research services are
available only from the broker providing such services. In other cases, the
research services may be obtainable from alternative sources in return for cash
payments. AIM is of the opinion that because the broker research supplements,
rather than replaces, its research, the receipt of such research does not tend
to decrease its expenses, but tends to improve the quality of its investment
advice. However, to the extent that AIM or AIM Capital would have purchased any
such research services had such services not been provided by brokers, the
expenses of such services to AIM or AIM Capital could be considered to have been
reduced accordingly. Certain research services furnished by broker-dealers may
be useful to AIM or AIM Capital with clients other than the Funds. Similarly,
any research services received by AIM or AIM Capital through the placement of
portfolio transactions of other clients may be of value to AIM or AIM Capital in
fulfilling their obligations to the Funds. AIM is of the opinion that this
material is beneficial in supplementing AIM's and AIM Capital's research and
analysis; and, therefore, it may benefit the Funds by improving the quality of
the advisors' investment advice. The advisory fees paid by the Funds are not
reduced because AIM and AIM Capital receive such services. Some broker-dealers
may indicate that the provision of research services is dependent upon the
generation of certain specified levels of commissions and underwriting
concessions by AIM's and AIM Capital's clients, including the Funds.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1994, 1993 and 1992, Charter
paid brokerage commissions of $4,188,692, $5,005,249 and $3,162,762,
respectively. For the fiscal year ended October 31, 1994, AIM directed certain
of Charter's brokerage transactions to certain broker-dealers that provided AIM
with certain research, statistical and other information. Such transactions
amounted to $259,006,038 and the related brokerage commissions were $405,344.
For the fiscal years ended October 31, 1994, 1993 and 1992, Weingarten
paid brokerage commissions of $17,841,982, $17,367,904 and $7,392,373,
respectively. For the fiscal year ended October 31, 1994, AIM directed certain
of Weingarten's brokerage transactions to certain broker-dealers that provided
AIM with certain research, statistical and other information. Such transactions
amounted to $723,370,559 and the related brokerage commissions were $1,170,252.
For the fiscal years ended October 31, 1994, 1993 and 1992,
Constellation paid brokerage commissions of $6,921,543, $4,683,461 and
$2,126,828, respectively. For the fiscal year ended October 31, 1994, AIM
directed certain of Constellation's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $282,557,777 and the related
brokerage commissions were $594,494.
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PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial
Highlights" in the Prospectus. Higher portfolio turnover increases transaction
costs to the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares of the Institutional Class of the applicable
Fund unless the shareholder has requested in writing to receive such dividends
and distributions in cash or that they be invested in shares of the
Institutional Class of another Fund offered pursuant to the Prospectus. If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, each Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by a Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (b) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forward contracts, will not be
characterized as Short-Short Gain if they are directly related to the regulated
investment company's principal business of investing in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, a Fund may
have to limit the sale of appreciated securities that it has held for less
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than three months. However, the Short-Short Gain Test will not prevent a Fund
from disposing of investments at a loss, since the recognition of a loss before
the expiration of the three-month holding period is disregarded. Interest
(including original issue discount and accrued market discount) received by a
Fund at maturity or upon the disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of a security within the meaning of the Short-Short Gain Test.
However, any other income that is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of securities
for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract or of foreign currency itself, will generally
be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (b) the
asset is otherwise held by the Fund as part of a "straddle" or (c) the asset is
stock and the Fund grants certain call options with respect thereto. However,
for purposes of the Short-Short Gain Test, the holding period of the asset
disposed of is reduced only in the case described in clause (a) above. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by certain of the Funds (such as
futures contracts and options on stock indexes and futures contracts) will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. The
net amount of such gain or loss for the entire taxable year from transactions
involving Section 1256 contracts (including gain or loss arising as a
consequence of the year-end deemed sale of Section 1256 contracts) is treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss. A
Fund may elect not to have this special tax treatment apply to Section 1256
contracts that are part of a "mixed straddle" with other investments of the Fund
that are not Section 1256 contracts. The Internal Revenue Service has held in
several private rulings that gain arising from Section 1256 contracts will be
treated for purposes of the Short-Short Gain Test as being derived from
securities held for not less than three months if the gains arise as a result of
a constructive sale under Code Section 1256.
In addition to satisfying the requirement described above, each Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of each Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and
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securities of other issuers (as to which companies and securities of other
issuers the Fund has not invested more than 5% of the value of the Fund's total
assets in securities of such issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of such issuer), and no more than
25% of the value of its total assets may be invested in the securities of any
other issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(a) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (b) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends-received deduction for
corporations only to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. Conversely, if a Fund elects to retain its net capital
gain, the Fund will be taxed thereon (except to the extent of any available
capital loss carryforwards) at the 35% corporate tax rate. If a Fund elects to
retain its net capital gain, it is expected that the Fund also will elect to
have shareholders treated as if each received a distribution of its pro rata
share of such gain, with the result that each shareholder will be required to
report its pro rata share of such gain on its tax return as long-term capital
gain, will receive a refundable tax credit for its share of tax paid
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by the Fund on the gain, and will increase the tax basis for its shares by an
amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend and (ii) any period during
which the Fund has an option to sell, is under a contractual obligation to sell,
has made and not closed a short sale of, has granted certain options to buy or
has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (b) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (c) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed or
reduced (i) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund or (ii) by application of
Code Section 246(b) which in general limits the dividends received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
In addition, under the Superfund Amendments and Reauthorization Act of 1986, a
tax is imposed for taxable years beginning after 1986 and before 1996 at the
rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined without
regard to the deduction for this tax and the AMT net operating loss deduction)
over $2 million. The corporate dividends-received deduction is not itself an
item of tax preference that must be added back to taxable income or is otherwise
disallowed in determining a corporation's AMTI. However, corporate shareholders
will generally be required to take the full amount of any dividend received from
the Fund into account (without a dividends received deduction) in determining
their adjusted current earnings, which are used in computing an additional
corporate preference item (i.e., 75% of the excess of a corporate taxpayer's
adjusted current earnings over its AMTI (determined without regard to this item
and the AMT net operating loss deduction)) that is includable in AMTI.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by a Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund
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reflects undistributed net investment income or recognized capital gain net
income, or unrealized appreciation in the value of the assets of the Fund,
distributions of such amounts will be taxable to the shareholder in the manner
described above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Funds will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares paid to any shareholder (a) who has
provided either an incorrect tax identification number or no number at all, (b)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income property, or (c) who has
failed to certify to a Fund that it is not subject to backup withholding or that
it is a corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of non-corporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of
ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
a Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder. If the income from a Fund is not effectively connected with a
U.S. trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gain dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the dividend. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of a Fund, capital
gain dividends and amounts retained by a Fund that are designated as
undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
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In the case of foreign non-corporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Funds.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain Information contained in the Registration Statement which the Company
has filed with the SEC under the Securities Act of 1933 and reference is hereby
made to the Registration Statement for further information with respect to the
Funds and the securities offered hereby. The Registration Statement is available
for inspection by the public at the SEC in Washington. D.C.
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APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S
Commercial paper rated by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well-established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's Commercial Paper is rated A-1 or A-2. A-1 indicates the
degree of safety regarding time of payment is very strong. A-2 indicates that
the capacity for timely payment is strong, but that the relative degree of
safety is not as overwhelming as for issues designated A-1.
MOODY'S
Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by
Moody's in assigning ratings are the following: (a) evaluation of the management
of the issuer; (b) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (c) evaluation of the issuer's products in relation to competition and
customer acceptance; (d) liquidity; (e) amount and quality of long-term debt;
(f) trend of earnings over a period of ten years; (g) financial strength of a
parent company and the relationships which exist with the issuer; and (h)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or Prime-2.
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
MOODY'S
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
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FINANCIAL STATEMENTS
FS
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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, 1994, and the related statements of operations,
changes in its net assets and financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The financial
statements of AIM Charter Fund as of October 31,1993, were audited by other
auditors whose report thereon dated November 12, 1993, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 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, 1994, and the results of its operations, the
changes in its net assets, and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
December 9, 1994
F-1
<PAGE> 61
FINANCIALS
SCHEDULE OF INVESTMENT
October 31, 1994
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
COMMON STOCKS-65.12%
BASIC INDUSTRIES-3.57%
CHEMICALS-2.54%
200,000 Air Products & Chemicals, Inc. $ 9,550,000
- -----------------------------------------------------------------------
240,000 Dow Chemical Co. 17,640,000
- -----------------------------------------------------------------------
240,000 Hanna (M.A.) Co. 6,150,000
- -----------------------------------------------------------------------
120,000 Rohm & Haas Co. 7,245,000
- -----------------------------------------------------------------------
40,585,000
- -----------------------------------------------------------------------
METALS (NONFERROUS)-0.53%
100,000 Aluminum Company of America 8,525,000
- -----------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.50%
160,000 Mead Corp. (The) 7,940,000
- -----------------------------------------------------------------------
Total Basic Industries 57,050,000
- -----------------------------------------------------------------------
BUSINESS SERVICES-4.81%
COMPUTER SOFTWARE & SERVICES-2.03%
140,000 General Motors Corp.-Class E 5,127,500
- -----------------------------------------------------------------------
80,000 Lotus Development Corp.(a) 3,060,000
- -----------------------------------------------------------------------
200,000 Microsoft Corporation(a) 12,600,000
- -----------------------------------------------------------------------
140,000 Oracle Systems Corp.(a) 6,440,000
- -----------------------------------------------------------------------
100,000 Sybase, Inc.(a) 5,237,500
- -----------------------------------------------------------------------
32,465,000
- -----------------------------------------------------------------------
POLLUTION CONTROL SERVICES-0.32%
160,000 Browning-Ferris Industries, Inc. 5,080,000
- -----------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES-0.91%
160,000 Airtouch Communications(a) 4,780,000
- -----------------------------------------------------------------------
160,000 Telefonaktiebolaget L.M. Ericsson-ADR 9,750,000
- -----------------------------------------------------------------------
14,530,000
- -----------------------------------------------------------------------
MISCELLANEOUS-1.55%
640,000 Equifax, Inc. 18,640,000
- -----------------------------------------------------------------------
160,000 Value Health, Inc.(a) 6,220,000
- -----------------------------------------------------------------------
24,860,000
- -----------------------------------------------------------------------
Total Business Services 76,935,000
- -----------------------------------------------------------------------
CAPITAL GOODS-15.85%
AEROSPACE/DEFENSE-0.40%
160,000 Loral Corp. 6,340,000
- -----------------------------------------------------------------------
</TABLE>
F-2
<PAGE> 62
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
COMPUTER & OFFICE EQUIPMENT-5.08%
200,000 Apple Computer, Inc. $ 8,637,500
- ------------------------------------------------------------------------------
160,000 COMPAQ Computer Corp.(a) 6,420,000
- ------------------------------------------------------------------------------
240,000 Diebold, Inc. 10,140,000
- ------------------------------------------------------------------------------
60,000 Hewlett Packard Co. 5,865,000
- ------------------------------------------------------------------------------
400,000 International Business Machines Corp. 29,800,000
- ------------------------------------------------------------------------------
200,000 Xerox Corp. 20,500,000
- ------------------------------------------------------------------------------
81,362,500
- ------------------------------------------------------------------------------
CONTAINERS-0.35%
200,000 Ball Corp. 5,650,000
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.56%
160,000 Emerson Electric Co. 9,720,000
- ------------------------------------------------------------------------------
640,000 General Electric Co. 31,280,000
- ------------------------------------------------------------------------------
41,000,000
- ------------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.44%
80,000 Sensormatic Electronics Corp. 3,010,000
- ------------------------------------------------------------------------------
110,700 Varian Associates, Inc. 4,095,900
- ------------------------------------------------------------------------------
7,105,900
- ------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS/COMPONENTS)-1.88%
70,500 Adaptec, Inc.(a) 1,639,125
- ------------------------------------------------------------------------------
100,000 Applied Materials, Inc.(a) 5,200,000
- ------------------------------------------------------------------------------
200,000 Cisco Systems, Inc.(a) 6,025,000
- ------------------------------------------------------------------------------
200,000 Micron Technology, Inc. 7,925,000
- ------------------------------------------------------------------------------
200,000 Parker-Hannifin Corp. 9,350,000
- ------------------------------------------------------------------------------
30,139,125
- ------------------------------------------------------------------------------
MACHINERY-1.18%
19,000 Briggs & Stratton Corp. 1,320,500
- ------------------------------------------------------------------------------
200,000 Caterpillar Inc. 11,950,000
- ------------------------------------------------------------------------------
160,000 Trinova Corp. 5,600,000
- ------------------------------------------------------------------------------
18,870,500
- ------------------------------------------------------------------------------
OFFICE FURNISHINGS & SUPPLIES-0.42%
200,000 Avery Dennison Corp. 6,725,000
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-1.81%
200,000 DSC Communications Corp.(a) 6,150,000
- ------------------------------------------------------------------------------
320,000 ECI Telecom Ltd. 6,200,000
- ------------------------------------------------------------------------------
260,000 GTE Corp. 7,995,000
- ------------------------------------------------------------------------------
240,000 Northern Telecom Ltd. 8,670,000
- ------------------------------------------------------------------------------
29,015,000
- ------------------------------------------------------------------------------
</TABLE>
F-3
<PAGE> 63
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
TRANSPORTATION EQUIPMENT, EXCLUDING AEROSPACE-0.51%
400,000 Brunswick Corp. $ 8,200,000
- ----------------------------------------------------------------------------
MULTIPLE INDUSTRY-1.22%
180,000 Illinois Tool Works, Inc. 8,077,500
- ----------------------------------------------------------------------------
160,000 TRW Inc. 11,400,000
- ----------------------------------------------------------------------------
19,477,500
- ----------------------------------------------------------------------------
Total Capital Goods 253,885,525
- ----------------------------------------------------------------------------
CONSUMER DURABLES-4.07%
AUTO PARTS-0.97%
320,000 Dana Corp. 8,200,000
- ----------------------------------------------------------------------------
240,000 Echlin Inc. 7,380,000
- ----------------------------------------------------------------------------
15,580,000
- ----------------------------------------------------------------------------
HOUSEHOLD APPLIANCES/FURNISHINGS-0.56%
200,000 Premark International Inc. 8,950,000
- ----------------------------------------------------------------------------
MEDICAL EQUIPMENT & SUPPLIES-0.97%
600,000 Baxter International Inc. 15,600,000
- ----------------------------------------------------------------------------
PERSONAL ITEMS-0.57%
360,000 Black & Decker Corp. (The) 9,045,000
- ----------------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES-0.48%
160,000 Eastman Kodak Co. 7,700,000
- ----------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.52%
200,000 Armstrong World Industries, Inc. 8,300,000
- ----------------------------------------------------------------------------
Total Consumer Durables 65,175,000
- ----------------------------------------------------------------------------
CONSUMER NONDURABLES-9.75%
COSMETICS/TOILETRIES-0.24%
60,000 Avon Products, Inc. 3,795,000
- ----------------------------------------------------------------------------
DRUGS-2.62%
600,000 Abbott Laboratories 18,600,000
- ----------------------------------------------------------------------------
120,000 Genentech, Inc.(a) 6,090,000
- ----------------------------------------------------------------------------
120,000 Schering-Plough Corp. 8,550,000
- ----------------------------------------------------------------------------
320,000 Teva Pharmaceuticals Industries Ltd.-ADR 8,720,000
- ----------------------------------------------------------------------------
41,960,000
- ----------------------------------------------------------------------------
</TABLE>
F-4
<PAGE> 64
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
HOUSEHOLD PRODUCTS-1.17%
300,000 Procter & Gamble Co. $ 18,750,000
- --------------------------------------------------------------------
PUBLISHING-0.75%
160,000 McGraw-Hill, Inc. 11,960,000
- --------------------------------------------------------------------
TEXTILES-0.51%
160,000 VF Corp. 8,100,000
- --------------------------------------------------------------------
TOBACCO-0.46%
280,000 UST Inc. 7,420,000
- --------------------------------------------------------------------
MULTIPLE INDUSTRY-4.00%
240,000 Gillette, Co. (The) 17,850,000
- --------------------------------------------------------------------
400,000 Johnson & Johnson 21,850,000
- --------------------------------------------------------------------
240,000 Pepsico Inc. 8,400,000
- --------------------------------------------------------------------
260,000 Philip Morris Companies, Inc. 15,925,000
- --------------------------------------------------------------------
64,025,000
- --------------------------------------------------------------------
Total Consumer Nondurables 156,010,000
- --------------------------------------------------------------------
CONSUMER SERVICES-1.60%
HEALTH CARE-0.85%
100,000 Mid-Atlantic Medical Services, Inc.(a) 2,300,000
- --------------------------------------------------------------------
240,000 U.S. Healthcare, Inc. 11,340,000
- --------------------------------------------------------------------
13,640,000
- --------------------------------------------------------------------
HOSPITAL MANAGEMENT-0.31%
200,000 Humana Inc.(a) 4,875,000
- --------------------------------------------------------------------
MISCELLANEOUS-0.44%
160,000 Block (H & R), Inc. 7,100,000
- --------------------------------------------------------------------
Total Consumer Services 25,615,000
- --------------------------------------------------------------------
ENERGY-2.20%
OIL & GAS (INTEGRATED)-2.20%
80,000 Atlantic Richfield Co. 8,670,000
- --------------------------------------------------------------------
200,000 Mobil Corp. 17,200,000
- --------------------------------------------------------------------
80,000 Royal Dutch Petroleum Co.-ADR 9,320,000
- --------------------------------------------------------------------
Total Energy 35,190,000
- --------------------------------------------------------------------
</TABLE>
F-5
<PAGE> 65
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
FINANCIAL-11.77%
BANKING-3.53%
200,000 BankAmerica Corp. $ 8,700,000
- ----------------------------------------------------------------------------
320,000 First Interstate Bancorp 25,600,000
- ----------------------------------------------------------------------------
240,000 Mellon Bank Corp. 13,350,000
- ----------------------------------------------------------------------------
60,000 Wells Fargo & Co. 8,917,500
- ----------------------------------------------------------------------------
56,567,500
- ----------------------------------------------------------------------------
INSURANCE (LIFE)-0.39%
320,000 Bankers Life Holding Corp. 6,160,000
- ----------------------------------------------------------------------------
INSURANCE (OTHER)-1.76%
320,000 Allstate Financial Corp. 7,720,000
- ----------------------------------------------------------------------------
320,000 American General Corp. 8,800,000
- ----------------------------------------------------------------------------
320,000 Lincoln National Corp. 11,600,000
- ----------------------------------------------------------------------------
28,120,000
- ----------------------------------------------------------------------------
PERSONAL CREDIT-2.34%
260,000 American Express Co. 7,995,000
- ----------------------------------------------------------------------------
320,000 Beneficial Corp. 12,520,000
- ----------------------------------------------------------------------------
240,000 Household International, Inc. 8,430,000
- ----------------------------------------------------------------------------
320,000 MBNA Corp. 8,560,000
- ----------------------------------------------------------------------------
37,505,000
- ----------------------------------------------------------------------------
MISCELLANEOUS-3.75%
320,000 Federal Home Loan Mortgage Corp. 17,440,000
- ----------------------------------------------------------------------------
400,000 Federal National Mortgage Association 30,400,000
- ----------------------------------------------------------------------------
320,000 Student Loan Marketing Association 10,280,000
- ----------------------------------------------------------------------------
50,000 SunAmerica, Inc. 1,943,750
- ----------------------------------------------------------------------------
60,063,750
- ----------------------------------------------------------------------------
Total Financial 188,416,250
- ----------------------------------------------------------------------------
RETAIL-3.27%
DEPARTMENT STORES-2.34%
120,000 Mercantile Stores Co., Inc. 5,460,000
- ----------------------------------------------------------------------------
320,000 Penney (J.C.) Co., Inc. 16,200,000
- ----------------------------------------------------------------------------
320,000 Sears, Roebuck & Co. 15,840,000
- ----------------------------------------------------------------------------
37,500,000
- ----------------------------------------------------------------------------
GENERAL MERCHANDISE, EXCLUDING DEPARTMENT, STORES-0.61%
600,000 K Mart Corp. 9,825,000
- ----------------------------------------------------------------------------
</TABLE>
F-6
<PAGE> 66
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
SPECIALTY STORES-0.32%
200,000 Circuit City Stores, Inc. $ 5,100,000
- ---------------------------------------------------------------
Total Retail 52,425,000
- ---------------------------------------------------------------
TRANSPORTATION-0.18%
MISCELLANEOUS-0.18%
122,900 Ryder System, Inc. 2,888,150
- ---------------------------------------------------------------
Total Transportation 2,888,150
- ---------------------------------------------------------------
UTILITIES-6.45%
NATURAL GAS-1.01%
560,000 Williams Companies, Inc. (The) 16,240,000
- ---------------------------------------------------------------
TELEPHONE-4.92%
460,000 ALLTEL Corp. 11,902,500
- ---------------------------------------------------------------
480,000 American Telephone & Telegraph Co. 26,400,000
- ---------------------------------------------------------------
200,000 Ameritech Corp. 8,075,000
- ---------------------------------------------------------------
400,000 Southwestern Bell Corp. 16,750,000
- ---------------------------------------------------------------
480,000 Sprint Corp. 15,660,000
- ---------------------------------------------------------------
78,787,500
- ---------------------------------------------------------------
MULTIPLE INDUSTRY-0.52%
280,000 WMX Technologies Inc. 8,225,000
- ---------------------------------------------------------------
Total Utilities 103,252,500
- ---------------------------------------------------------------
OTHER-1.60%
DIVERSIFIED-1.05%
280,000 Allied-Signal Inc. 9,695,000
- ---------------------------------------------------------------
120,000 Du Pont (E.I.) de Nemours & Co. 7,155,000
- ---------------------------------------------------------------
16,850,000
- ---------------------------------------------------------------
NONRESIDENTIAL CONSTRUCTION-0.55%
240,000 Halliburton Co. 8,880,000
- ---------------------------------------------------------------
Total Other 25,730,000
- ---------------------------------------------------------------
Total Common Stocks 1,042,572,425
- ---------------------------------------------------------------
</TABLE>
F-7
<PAGE> 67
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C>
CONVERTIBLE BONDS-15.46%
BASIC INDUSTRIES-0.36%
METAL MINING-0.15%
$ 2,000,000 Inco Ltd., Conv. Deb., 5.75%,
07/01/04 $ 2,380,000
- -------------------------------------------------------------------------------
STEEL-0.21%
3,000,000 Titan Wheel International Inc., Conv.
Sub. Notes, 4.75%, 12/01/00 3,300,000
- -------------------------------------------------------------------------------
Total Basic Industries 5,680,000
- -------------------------------------------------------------------------------
BUSINESS SERVICES-1.19%
COMPUTER SOFTWARE & SERVICES-0.71%
10,000,000 Automatic Data Processing, Inc., Sub.
Liquid Yield Option Notes, 5.25%,
02/20/12(b) 4,100,000
- -------------------------------------------------------------------------------
6,000,000 Sterling Software, Inc., Conv. Sub.
Deb., 5.75%, 02/01/03 7,350,000
- -------------------------------------------------------------------------------
11,450,000
- -------------------------------------------------------------------------------
POLLUTION CONTROL SERVICES-0.20%
3,250,000 Sanifill, Inc., Conv. Deb., 7.50%,
06/01/06 3,144,375
- -------------------------------------------------------------------------------
MISCELLANEOUS-0.28%
4,000,000 Olsten Corp., Conv. Sub. Deb.,
4.875%, 05/15/03 4,560,000
- -------------------------------------------------------------------------------
Total Business Services 19,154,375
- -------------------------------------------------------------------------------
CAPITAL GOODS-6.30%
BUILDING MATERIALS-0.26%
4,000,000 Cemex S.A., Euro. Conv. Sub. Notes,
4.25%, 11/01/97(c) 4,125,000
- -------------------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT-1.56%
500,000 EMC Corp., Conv. Sub. Deb., 6.25%,
04/01/02 3,511,469
- -------------------------------------------------------------------------------
10,000,000 EMC Corp., Conv. Sub. Notes, 4.25%,
01/01/01 11,937,500
- -------------------------------------------------------------------------------
18,000,000 Silicon Graphics, Conv. Sub. Deb.,
4.15%, 11/02/13(b)(c) 9,540,000
- -------------------------------------------------------------------------------
24,988,969
- -------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE> 68
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C>
ELECTRONICS (SEMICONDUCTORS/COMPONENTS)-2.42%
Cypress Semiconductor Corp., Conv. Sub. Notes,
$ 5,000,000 3.15%, 03/15/01(c) $ 4,375,000
- -------------------------------------------------------------------------------
LSI Logic Corp., Conv. Sub. Notes, 5.50%,
5,000,000 03/15/01(c) 9,112,500
- -------------------------------------------------------------------------------
Motorola, Inc., Sub. Liquid Yield Option Notes,
5,000,000 6.00%, 09/07/09(b) 5,380,770
- -------------------------------------------------------------------------------
Motorola, Inc., Sub. Liquid Yield Option Notes,
10,000,000 2.25%, 09/27/13(b) 7,200,000
- -------------------------------------------------------------------------------
Solectron Corp., Conv. Liquid Yield Option Notes,
8,000,000 7.00%, 05/02/12(b) 4,740,000
- -------------------------------------------------------------------------------
Texas Instruments Inc., Euro. Conv. Sub., 2.75%,
8,000,000 09/29/02 7,880,000
- -------------------------------------------------------------------------------
38,688,270
- -------------------------------------------------------------------------------
MACHINE TOOLS & RELATED PRODUCTS-0.27%
Lam Research Corp., Conv. Sub. Deb., 6.00%,
2,350,000 05/01/03 4,365,125
- -------------------------------------------------------------------------------
MACHINERY-0.89%
Thermo Electron Corp., Conv. Deb., 5.00%,
3,500,000 04/15/01(c) 3,858,750
- -------------------------------------------------------------------------------
Thermo Electron Corp., Sr. Conv. Deb., 4.625%,
7,000,000 08/01/97(c) 10,377,500
- -------------------------------------------------------------------------------
14,236,250
- -------------------------------------------------------------------------------
METAL PRODUCTS & SERVICES-0.18%
Coleman Worldwide Corp., Sr. Liquid Yield Option
10,000,000 Notes, 7.25%, 05/27/13(b) 2,837,500
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-0.72%
Aspect Telecommunications Corp., Conv. Sub. Deb.,
2,500,000 5.00%, 10/15/03(c) 2,593,750
- -------------------------------------------------------------------------------
General Instrument Corp., Jr. Conv. Sub. Notes,
6,000,000 5.00%, 06/15/00 8,920,404
- -------------------------------------------------------------------------------
11,514,154
- -------------------------------------------------------------------------------
Total Capital Goods 100,755,268
- -------------------------------------------------------------------------------
CONSUMER DURABLES-0.26%
MEDICAL EQUIPMENT & SUPPLIES-0.26%
Elan International Finance, Sub. Liquid Yield
10,000,000 Option Notes, 5.75%, 10/16/12(b) 4,225,000
- -------------------------------------------------------------------------------
Total Consumer Durables 4,225,000
- -------------------------------------------------------------------------------
CONSUMER NONDURABLES-0.23%
DRUGS-0.23%
4,000,000 Ivax Corp., Conv. Sub. Notes, 6.50%, 11/15/01(c) 3,680,000
- -------------------------------------------------------------------------------
Total Consumer Nondurables 3,680,000
- -------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE> 69
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C>
CONSUMER SERVICES-1.93%
HEALTH CARE, EXCLUDING HOSPITAL MANAGEMENT-0.95%
Healthsouth Rehabilitation Corp., Conv. Sub.
$ 4,000,000 Deb., 5.00%, 4/01/01 $ 4,600,000
- ------------------------------------------------------------------------------
Omnicare Inc., Conv. Sub. Notes, 5.75%,
3,000,000 10/01/03 3,975,000
- ------------------------------------------------------------------------------
Quantum Health Resources, Inc., Conv. Sub.
4,000,000 Deb., 4.75%, 10/01/00 5,170,000
- ------------------------------------------------------------------------------
Sun Healthcare Group, Euro. Conv. Sub.
1,285,000 Notes, 6.00%, 03/01/04 1,530,756
- ------------------------------------------------------------------------------
15,275,756
- ------------------------------------------------------------------------------
HOSPITAL MANAGEMENT-0.98%
Integrated Health Services Inc., Conv. Sub.
3,000,000 Deb., 6.00%, 01/01/03 3,975,000
- ------------------------------------------------------------------------------
Integrated Health Services Inc., Sr. Conv.
5,000,000 Deb., 5.75%, 01/01/01 6,762,500
- ------------------------------------------------------------------------------
Vencor, Inc., Conv. Sub. Deb., 6.00%,
4,000,000 10/01/02 4,920,000
- ------------------------------------------------------------------------------
15,657,500
- ------------------------------------------------------------------------------
Total Consumer Services 30,933,256
- ------------------------------------------------------------------------------
FINANCIAL-1.12%
BANKING-0.81%
Banco Nacional de Mexico S.A., Exch. Sub.
8,000,000 Deb., 7.00%, 12/15/99(c) 8,900,000
- ------------------------------------------------------------------------------
Empresas ICA Sociedad Controladora, S.A. de
4,000,000 C.V., Conv. Sub. Deb., 5.00%, 03/15/04 4,130,000
- ------------------------------------------------------------------------------
13,030,000
- ------------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.31%
Wharf Capital International Limited, Euro.
4,000,000 Conv. Deb., 5.00%, 07/15/00(c) 4,880,000
- ------------------------------------------------------------------------------
Total Financial 17,910,000
- ------------------------------------------------------------------------------
RETAIL-2.85%
FOOD STORES-0.36%
Kroger Co., Jr. Conv. Sub. Notes, 6.375%,
4,000,000 12/01/99 5,740,000
- ------------------------------------------------------------------------------
GENERAL MERCHANDISE, EXCLUDING DEPARTMENT, STORES-0.18%
3,000,000 Waban Inc., Conv. Sub. Deb., 6.50%, 07/01/02 2,835,000
- ------------------------------------------------------------------------------
RESTAURANTS-0.20%
Starbucks Corp., Conv. Sub. Deb., 4.50%,
3,250,000 08/01/03 3,245,938
- ------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE> 70
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C>
SPECIALTY STORES-2.11%
Home Depot, Inc., Conv. Sub. Notes, 4.50%,
$14,000,000 02/15/97 $ 16,520,000
- -----------------------------------------------------------------------------
Lowe's Companies, Inc., Conv. Sub. Notes,
6,000,000 3.00%, 07/22/03 9,322,872
- -----------------------------------------------------------------------------
Michaels Stores, Inc., Conv. Sub. Notes,
3,000,000 4.75%, 01/15/03 3,480,000
- -----------------------------------------------------------------------------
Rite Aid Corp., Conv. Liquid Yield Option
10,000,000 Notes, 6.75%, 07/24/06(b) 4,500,000
- -----------------------------------------------------------------------------
33,822,872
- -----------------------------------------------------------------------------
Total Retail 45,643,810
- -----------------------------------------------------------------------------
WHOLESALE-0.89%
DURABLE GOODS-0.38%
Arrow Electronics, Inc., Conv. Sub. Deb.,
5,000,000 5.75%, 10/15/02 6,125,000
- -----------------------------------------------------------------------------
NONDURABLE GOODS-0.51%
Office Depot, Sub. Liquid Yield Option
5,000,000 Notes, 5.00%, 12/11/07(b) 3,750,000
- -----------------------------------------------------------------------------
Office Depot, Sub. Liquid Yield Option
7,500,000 Notes, 4.00%, 11/01/08(b) 4,368,750
- -----------------------------------------------------------------------------
8,118,750
- -----------------------------------------------------------------------------
Total Wholesale 14,243,750
- -----------------------------------------------------------------------------
OTHER-0.33%
DIVERSIFIED-0.33%
Service Co. International, Conv. Deb.,
4,000,000 6.50%, 09/01/01 5,270,000
- -----------------------------------------------------------------------------
Total Other 5,270,000
- -----------------------------------------------------------------------------
Total Convertible Bonds 247,495,459
- -----------------------------------------------------------------------------
SHARES
CONVERTIBLE PREFERRED STOCKS-9.08%
BASIC INDUSTRY-1.49%
STEEL-1.49%
AK Steel Holding Corp.-$2.1525 Conv. Pfd.
260,000 SAILS 8,450,000
- -----------------------------------------------------------------------------
120,000 USX Corp.-$3.25 Conv. Pfd. 6,075,000
- -----------------------------------------------------------------------------
100,000 WHX Corp., Series A, $3.25 Conv. Pfd. 5,412,500
- -----------------------------------------------------------------------------
80,000 WHX Corp., Series B, $3.75 Conv. Pfd. 3,960,000
- -----------------------------------------------------------------------------
Total Basic Industry 23,897,500
- -----------------------------------------------------------------------------
</TABLE>
F-11
<PAGE> 71
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
BUSINESS SERVICES-0.86%
COMPUTER SOFTWARE & SERVICES-0.63%
160,000 Ceridian Corp.-$2.75 Conv. Pfd. $ 10,020,000
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES-0.23%
160,000 First Chicago Corp.-$1.994 Conv. Pfd. DECS 3,720,000
- -----------------------------------------------------------------------------
Total Business Services 13,740,000
- -----------------------------------------------------------------------------
CAPITAL GOODS-0.45%
MACHINERY-0.45%
100,000 Agco Corp.-$1.625 Conv. Pfd. 7,225,000
- -----------------------------------------------------------------------------
Total Capital Goods 7,225,000
- -----------------------------------------------------------------------------
CONSUMER DURABLES-2.28%
AUTOMOBILE-2.28%
Chrysler Corp.-Series A, $4.625 Dep. Conv.
100,000 Pfd.(c) 13,617,750
- -----------------------------------------------------------------------------
120,000 Ford Motor Co.-Series A, $4.20 Conv. Pfd. 11,610,000
- -----------------------------------------------------------------------------
General Motors Corp.-Class C, $3.25 Dep.
200,000 Conv. Pfd. 11,225,000
- -----------------------------------------------------------------------------
Total Consumer Durables 36,452,750
- -----------------------------------------------------------------------------
CONSUMER SERVICES-0.72%
HEALTH CARE, EXCLUDING HOSPITAL MANAGEMENT-0.72%
Beverly Enterprises, Inc.-$2.75 Exch. Conv.
80,000 Pfd. 4,950,000
- -----------------------------------------------------------------------------
240,000 FHP International Corp.-$1.25 Conv. Pfd. 6,570,000
- -----------------------------------------------------------------------------
Total Consumer Services 11,520,000
- -----------------------------------------------------------------------------
ENERGY-0.42%
OIL & GAS (INTEGRATED)-0.42%
Atlantic Richfield Co.-$2.2275 Conv. Pfd.
250,000 DECS 6,781,250
- -----------------------------------------------------------------------------
Total Energy 6,781,250
- -----------------------------------------------------------------------------
FINANCIAL-1.04%
BANKING-0.66%
80,000 Citicorp-$5.375 Dep. Conv. Pfd. 10,585,656
- -----------------------------------------------------------------------------
</TABLE>
F-12
<PAGE> 72
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
MISCELLANEOUS-0.12%
Sun America, Inc.-Series D, $2.78 Dep.
50,000 Conv. Pfd. $ 1,931,250
- -----------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.26%
120,000 First USA-$6.25 Conv. Pfd. 4,140,000
- -----------------------------------------------------------------------------
Total Financial 16,656,906
- -----------------------------------------------------------------------------
RETAIL-0.51%
SPECIALTY STORES-0.51%
163,000 Best Buy Capital-$3.25 Conv. Pfd. 8,211,125
- -----------------------------------------------------------------------------
Total Retail 8,211,125
- -----------------------------------------------------------------------------
TRANSPORTATION-0.30%
RAILROAD-0.30%
Burlington Northern Inc.-Series A, $3.12
80,000 Conv. Pfd. 4,740,000
- -----------------------------------------------------------------------------
Total Transportation 4,740,000
- -----------------------------------------------------------------------------
UTILITIES-0.63%
TELEPHONE-0.63%
160,000 LCI International-$1.25 Exch. Conv. Pfd. 5,400,000
- -----------------------------------------------------------------------------
80,000 Nacional Financiera-$6.79 Conv. Pfd. 4,640,000
- -----------------------------------------------------------------------------
Total Utilities 10,040,000
- -----------------------------------------------------------------------------
OTHER-0.38%
DIVERSIFIED-0.38%
120,000 Corning Delaware LP- $3.00 Conv. Pfd. 6,135,000
- -----------------------------------------------------------------------------
Total Other 6,135,000
- -----------------------------------------------------------------------------
Total Convertible Preferred Stocks 145,399,531
- -----------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 73
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C>
U.S. TREASURY SECURITIES-7.39%
$10,000,000 U.S. Treasury Notes, 4.25%, 11/30/95 $ 9,792,200
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 4.25%, 12/31/95 9,771,900
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 4.00%, 01/31/96 9,717,200
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 4.625%, 02/29/96 9,771,900
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 5.125%, 03/31/96 9,817,200
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 5.50%, 04/30/96 9,850,000
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 5.875%, 05/31/96 9,889,100
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 6.00%, 06/30/96 9,898,400
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 6.125%, 07/31/96 9,903,100
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 6.25%, 08/31/96 9,910,900
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 6.50%, 09/30/96 9,951,600
- ------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 6.875%, 10/31/96 10,009,400
- ------------------------------------------------------------------------------
Total U.S. Treasury Securities 118,282,900
- ------------------------------------------------------------------------------
MASTER NOTE AGREEMENT-0.35%
J.P. Morgan Securities, Inc. 5.0125%,
5,560,000 01/19/95(d) 5,560,000
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-4.57%(e)
3,122,988 Goldman, Sachs & Co., 4.78%, 11/01/94(f) 3,122,988
- ------------------------------------------------------------------------------
70,000,000 Goldman, Sachs & Co., 4.85%, 11/01/94(g) 70,000,000
- ------------------------------------------------------------------------------
Total Repurchase Agreements 73,122,988
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS-101.97% 1,632,433,303
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(1.97)% (31,519,515)
- ------------------------------------------------------------------------------
NET ASSETS-100.00% $1,600,913,788
- ------------------------------------------------------------------------------
</TABLE>
F-14
<PAGE> 74
FINANCIALS
ABBREVIATIONS:
Conv. -Convertible
Deb. -Debenture
DECS -Debt Exchangeable for Common Stock
Dep. -Depositary
Euro. -Eurodollar
Exch. -Exchangeable
Jr. -Junior
Pfd. -Preferred
SAILS -Stock Appreciation Income Linked Securities
Sr. -Senior
Sub. -Subordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(c) Restricted security-See Note 3.
(d) Master Note Purchase Agreement may be terminated by either party upon
thirty business days written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on October 31,
1994.
(e) 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.
(f) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$114,492,117. Collateralized by $119,992,000 U.S. Treasury obligations,
5.125% to 8.00% due 06/30/98 to 11/15/24. The aggregate market value of the
collateral at 10/31/94 was $116,879,377. The Fund's pro-rata interest in
the collateral at 10/31/94 was $3,188,528.
(g) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$390,052,542. Collateralized by $384,015,000 U.S. Treasury obligations,
4.375% to 12.375% due 11/15/95 to 11/15/24. The aggregate market value of
the collateral at 10/31/94 was $398,183,007. The Fund's pro-rata interest
in the collateral at 10/31/94 was $71,468,745.
See Notes to Financial Statements.
F-15
<PAGE> 75
FINANCIALS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,550,340,929) $1,632,433,303
- -------------------------------------------------------------------------
Foreign currencies, at market value (cost $141) 149
- -------------------------------------------------------------------------
Receivables for:
- -------------------------------------------------------------------------
Investments sold 49,822,081
- -------------------------------------------------------------------------
Capital stock sold 2,066,600
- -------------------------------------------------------------------------
Dividends and interest 5,660,274
- -------------------------------------------------------------------------
Investment for deferred compensation plan 7,027
- -------------------------------------------------------------------------
Other assets 43,918
- -------------------------------------------------------------------------
Total assets 1,690,033,352
- -------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 81,412,312
- -------------------------------------------------------------------------
Capital stock reacquired 5,254,419
- -------------------------------------------------------------------------
Variation margin 656,250
- -------------------------------------------------------------------------
Deferred compensation 7,027
- -------------------------------------------------------------------------
Accrued advisory fees 866,566
- -------------------------------------------------------------------------
Accrued administrative service fees 80,326
- -------------------------------------------------------------------------
Accrued distribution fees 364,221
- -------------------------------------------------------------------------
Accrued operating expenses 478,443
- -------------------------------------------------------------------------
Total liabilities 89,119,564
- -------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,600,913,788
- -------------------------------------------------------------------------
NET ASSETS:
Institutional Class $ 21,839,930
- -------------------------------------------------------------------------
Retail Class $1,579,073,858
- -------------------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 200,000,000
- -------------------------------------------------------------------------
Outstanding 2,446,941
- -------------------------------------------------------------------------
Retail Class:
Authorized 750,000,000
- -------------------------------------------------------------------------
Outstanding 177,353,321
- -------------------------------------------------------------------------
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $8.93
- -------------------------------------------------------------------------
RETAIL CLASS:
Net asset value and redemption price per share $8.90
- -------------------------------------------------------------------------
Offering price per share:
(Net asset value of $8.90/94.50%) $9.42
- -------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-16
<PAGE> 76
FINANCIALS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 29,991,080
- -----------------------------------------------------------------------------
Interest 26,822,038
- -----------------------------------------------------------------------------
Total investment income 56,813,118
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 10,447,924
- -----------------------------------------------------------------------------
Administrative service fees 980,837
- -----------------------------------------------------------------------------
Directors' fees 14,971
- -----------------------------------------------------------------------------
Distribution fees 4,822,450
- -----------------------------------------------------------------------------
Transfer agent fees 1,827,894
- -----------------------------------------------------------------------------
Other 797,153
- -----------------------------------------------------------------------------
Total expenses 18,891,229
- -----------------------------------------------------------------------------
Net investment income 37,921,889
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain on sales of:
Investment securities 56,410,993
- -----------------------------------------------------------------------------
Foreign currencies 3,645
- -----------------------------------------------------------------------------
56,414,638
- -----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities (137,879,179)
- -----------------------------------------------------------------------------
Foreign currencies 8
- -----------------------------------------------------------------------------
Futures contracts 1,250,000
- -----------------------------------------------------------------------------
(136,629,171)
- -----------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies
and futures contracts (80,214,533)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (42,292,644)
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-17
<PAGE> 77
FINANCIALS
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
OPERATIONS:
Net investment income $ 37,921,889 $ 28,367,275
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities and foreign currencies 56,414,638 38,661,603
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities, foreign currencies
and futures contracts (136,629,171) 164,593,733
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (42,292,644) 231,622,611
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (29,198,024) (46,258,327)
- ------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investments (28,498,470) --
- ------------------------------------------------------------------------------
Net equalization credits (charges) (146,699) 1,099,729
- ------------------------------------------------------------------------------
Share transactions-net:
- ------------------------------------------------------------------------------
Institutional Class (1,032,133) 14,372,128
- ------------------------------------------------------------------------------
Retail Class (12,596,188) 249,891,362
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets (113,764,158) 450,727,503
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,714,677,946 1,263,950,443
- ------------------------------------------------------------------------------
End of period $1,600,913,788 $1,714,677,946
- ------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,453,610,355 $1,461,619,766
- ------------------------------------------------------------------------------
Undistributed net investment income 8,577,166 5,618,910
- ------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities and foreign
currencies 55,383,885 27,467,717
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 83,342,382 219,971,553
- ------------------------------------------------------------------------------
$1,600,913,788 $1,714,677,946
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-18
<PAGE> 78
FINANCIALS
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
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, AIM Weingarten Fund and AIM Constellation
Fund currently offer two different classes of shares: the Retail Class and the
Institutional Class. AIM Aggressive Growth Fund currently offers only one class
of shares. 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. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date. 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 the pricing service 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. On November 1, 1993, the
Fund adopted the American Institute of Certified Public Accountants
Statement of Position 93-2 ("SOP") which requires appropriate components of
capital in the statement of changes in net assets, namely undistributed net
investment income, to be reclassified to/from paid-in capital if
distributions in excess of total financial basis net income are the result
of permanent book/tax differences. The effect of adopting the SOP increased
beginning of the year paid-in capital by $5,618,910 with an equivalent
offset to undistributed net investment income. Net assets of the Fund were
unaffected.
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. Expenses of the
Company which are not directly attributable to the operations of any class
of shares or portfolio of the Company are prorated among the classes to
which the expense relates based upon the relative net assets of each class.
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-19
<PAGE> 79
FINANCIALS
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.
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 and shareholder services to the Fund. During the year ended October
31, 1994, AIM was reimbursed $980,837 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Retail Class 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 Retail Class. The Fund, pursuant to the Plan, will pay AIM
Distributors an annual rate of 0.30% of the average daily net assets
attributable to the Retail Class. The 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, in amounts of up to 0.25% of the average net assets of
the Retail Class attributable to the customers of such dealers or financial
institutions, who furnish continuing personal shareholder services to their
customers who purchase and own Shares of the Retail Class. Any amounts not paid
as a service fee under the Plan would constitute an asset-based sales charge.
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 Retail Class. During the year ended October 31, 1994, the Retail Class
paid AIM Distributors $4,822,450 as compensation under the Plan.
AIM Distributors received commissions of $1,386,255 from sales of shares of
the Retail Class' capital stock during the year ended October 31, 1994. 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 and FMC.
During the year ended October 31, 1994, the Fund paid legal fees of $14,165
for services rendered by Reid & Priest as counsel to the Company's directors.
Effective September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was
appointed as counsel to the Company's directors. A member of that firm is a
director of the Company.
F-20
<PAGE> 80
FINANCIALS
NOTE 3 - RESTRICTED SECURITIES
The Fund may invest in restricted securities. Restricted securities are
securities which have not been registered under the Securities Act of 1933, as
amended, and as a result are subject to restrictions on resale. Investments in
restricted securities are valued at fair value according to procedures
described in Note 1A. Costs of registration, if any, will be borne by the
issuer. A summary of the restricted securities held at October 31, 1994:
<TABLE>
<CAPTION>
DATE(S) OF
NAME OF ISSUER ACQUISITION COST
<S> <C> <C>
CORPORATE CONVERTIBLE BONDS
09/14/93-
Aspect Telecommunications Corp., 5.00%, 10/15/03 12/06/93 $ 2,654,375
- -----------------------------------------------------------------------------
12/01/92-
Banco Nacional de Mexico S.A., 7.00%, 12/15/99 06/22/93 8,056,875
- -----------------------------------------------------------------------------
09/28/94-
Cemex S.A., 4.25%, 11/01/97 09/29/94 4,025,000
- -----------------------------------------------------------------------------
03/23/94-
Cypress Semiconductor Corp., 3.15%, 03/15/01 03/24/94 4,217,605
- -----------------------------------------------------------------------------
03/09/94-
Ivax Corp., 6.50%, 11/15/01 10/14/94 4,256,750
- -----------------------------------------------------------------------------
03/16/94-
LSI Logic Corp., 5.50%, 03/15/01 03/30/94 4,975,000
- -----------------------------------------------------------------------------
10/26/93-
Silicon Graphics, 4.15%, 11/02/13 04/22/94 8,067,240
- -----------------------------------------------------------------------------
02/28/94-
Thermo Electron Corp., 4.625%, 08/01/97 09/28/94 9,845,940
- -----------------------------------------------------------------------------
Thermo Electron Corp., 5.00%, 04/15/01 04/07/94 3,502,000
- -----------------------------------------------------------------------------
06/23/93-
Wharf Capital International Limited, 5.00%, 07/15/00 08/26/93 4,162,500
- -----------------------------------------------------------------------------
PREFERRED STOCKS
07/28/92-
Chrysler Corp.-Series A, $4.625 Dep. Conv. 03/31/94 8,251,900
- -----------------------------------------------------------------------------
Total restricted securities: (Market Value
$75,060,250) (4.69% of Net Assets) $62,015,185
- -----------------------------------------------------------------------------
</TABLE>
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of the Company. The Company may invest directors'
fees, if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
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,
1994 was $1,915,298,705 and $1,735,639,348, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1994, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $106,084,535
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (24,420,833)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 81,663,702
- ---------------------------------------------------------------------------
Cost of investments for tax purposes is $1,550,769,601.
</TABLE>
F-21
<PAGE> 81
FINANCIALS
NOTE 6 - FUTURES CONTRACTS
As of October 31, 1994, $81,469,000 U.S. Treasury Notes were pledged as
collateral to cover margin requirements for futures contracts.
Futures Contracts at October 31, 1994:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
<S> <C>
S&P 500 Index 350 contracts/Dec/Buy $1,250,000
- -------------------------------------------------------------------------------
</TABLE>
NOTE 7 - CAPITAL STOCK
Changes in the Retail Class capital stock outstanding for the years ended
October 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C>
Sold 40,711,895 $ 363,174,892 58,781,292 $ 520,215,593
- -------------------------------------------------------------------------------
Issued as reinvestment
of dividends 4,862,946 43,539,217 3,940,884 34,163,779
- -------------------------------------------------------------------------------
Reacquired (46,996,269) (419,310,297) (34,227,864) (304,488,010)
- -------------------------------------------------------------------------------
(1,421,428) $ (12,596,188) 28,494,312 $ 249,891,362
- -------------------------------------------------------------------------------
</TABLE>
F-22
<PAGE> 82
FINANCIALS
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding
during each of the years in the ten-year period ended October 31, 1994.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986(A) 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.46 $ 8.36 $ 8.42 $ 6.55 $ 6.97 $ 5.40 $ 6.61 $ 8.18 $ 6.83 $ 6.15
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.21 0.17 0.18 0.18 0.18 0.21 0.15 0.09 0.16 0.17
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Net gains (losses) on
securities (both
realized
and unrealized) (0.45) 1.22 0.16 2.15 0.08 1.55 0.16 0.35 1.87 0.69
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Total from investment
operations (0.24) 1.39 0.34 2.33 0.26 1.76 0.31 0.44 2.03 0.86
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.16) (0.29) (0.17) (0.15) (0.26) (0.19) (0.12) (0.14) (0.17) (0.18)
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Distributions from
capital gains (0.16) -- (0.23) (0.31) (0.42) -- (1.40) (1.87) (0.51) --
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Total distributions (0.32) (0.29) (0.40) (0.46) (0.68) (0.19) (1.52) (2.01) (0.68) (0.18)
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55 $ 6.97 $ 5.40 $ 6.61 $ 8.18 $ 6.83
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Total return(b) (2.55)% 16.92% 4.17% 37.65% 3.86% 33.68% 5.90% 6.72% 31.59% 14.41%
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $1,579,074 $1,690,482 $1,256,151 $443,546 $102,499 $70,997 $65,799 $82,756 $81,985 $75,555
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets 1.17%(c) 1.17% 1.17% 1.29% 1.35% 1.35% 1.46% 1.15% 1.21% 1.09%
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets 2.32%(c) 1.89% 2.14% 2.14% 2.51% 3.73% 2.83% 1.57% 1.91% 2.39%
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
Portfolio turnover rate 126% 144% 95% 144% 215% 131% 247% 225% 75% 68%
- ----------------------- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- -------
</TABLE>
(a) The Fund changed investment advisers on May 2, 1986.
(b) Does not include sales charges.
(c) Ratios are based on average net assets of $1,607,483,471.
F-23
<PAGE> 83
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, 1994, the related statements of operations
for the year then ended, 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 six 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, 1994, 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, 1994, 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 six 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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
December 9, 1994
F-24
<PAGE> 84
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
COMMON STOCKS-84.12%
BASIC INDUSTRIES-7.41%
CHEMICALS-3.23%
250,000 Air Products & Chemicals, Inc. $ 11,937,500
- -----------------------------------------------------------------
270,000 Dow Chemical Co. 19,845,000
- -----------------------------------------------------------------
250,000 Georgia Gulf Corp.(a) 9,687,500
- -----------------------------------------------------------------
222,800 IMC Global Inc.(a) 9,469,000
- -----------------------------------------------------------------
500,000 Lyondell Petrochemical Co. 13,687,500
- -----------------------------------------------------------------
606,800 PPG Industries, Inc. 24,727,100
- -----------------------------------------------------------------
850,000 Praxair, Inc. 19,656,250
- -----------------------------------------------------------------
175,000 Rohm & Haas Co. 10,565,625
- -----------------------------------------------------------------
300,000 Union Carbide Corp. 9,937,500
- -----------------------------------------------------------------
129,512,975
- -----------------------------------------------------------------
METALS (NONFERROUS)-1.25%
380,000 Alcan Aluminum Ltd. 10,165,000
- -----------------------------------------------------------------
437,600 Alumax Inc.(a) 13,018,600
- -----------------------------------------------------------------
125,000 Aluminum Company of America 10,656,250
- -----------------------------------------------------------------
515,600 Asarco Inc. 16,176,950
- -----------------------------------------------------------------
50,016,800
- -----------------------------------------------------------------
PAPER & FOREST PRODUCTS-2.23%
266,300 Boise Cascade Corp. 7,056,950
- -----------------------------------------------------------------
280,000 Champion International Corp. 10,360,000
- -----------------------------------------------------------------
400,000 Federal Paper Board Co., Inc. 12,000,000
- -----------------------------------------------------------------
250,000 Georgia-Pacific Corp. 18,468,750
- -----------------------------------------------------------------
250,000 International Paper Co. 18,625,000
- -----------------------------------------------------------------
175,000 Mead Corp. (The) 8,684,375
- -----------------------------------------------------------------
96,700 Temple-Inland Inc. 4,569,075
- -----------------------------------------------------------------
200,000 Union Camp Corp. 9,500,000
- -----------------------------------------------------------------
89,264,150
- -----------------------------------------------------------------
STEEL-0.70%
500,000 LTV Corp.(a) 9,562,500
- -----------------------------------------------------------------
300,000 Nucor Corp. 18,525,000
- -----------------------------------------------------------------
28,087,500
- -----------------------------------------------------------------
Total Basic Industries 296,881,425
- -----------------------------------------------------------------
BUSINESS SERVICES-6.59%
COMPUTER SOFTWARE & SERVICES-4.20%
957,100 Adobe Systems, Inc. 34,455,600
- -----------------------------------------------------------------
279,400 Autodesk Inc. 9,639,300
- -----------------------------------------------------------------
</TABLE>
F-25
<PAGE> 85
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
Computer Software & Services-(continued)
200,000 Cadence Design Systems, Inc.(a) $ 4,000,000
- -----------------------------------------------------------------------
750,000 Computer Associates International, Inc. 37,218,750
- -----------------------------------------------------------------------
240,000 Computer Sciences Corp.(a) 11,160,000
- -----------------------------------------------------------------------
330,000 Microsoft Corp.(a) 20,790,000
- -----------------------------------------------------------------------
650,000 Oracle Systems, Corp.(a) 29,900,000
- -----------------------------------------------------------------------
400,000 Sybase, Inc.(a) 20,950,000
- -----------------------------------------------------------------------
168,113,650
- -----------------------------------------------------------------------
POLLUTION CONTROL SERVICES-0.26%
325,000 Browning-Ferris Industries, Inc. 10,318,750
- -----------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES-1.13%
750,000 Airtouch Communications, Inc.(a) 22,406,250
- -----------------------------------------------------------------------
600,000 ALC Communications Corp.(a) 22,725,000
- -----------------------------------------------------------------------
45,131,250
- -----------------------------------------------------------------------
MULTIPLE INDUSTRY-1.00%
300,000 Equifax, Inc. 8,737,500
- -----------------------------------------------------------------------
200,000 Manpower Inc. 5,825,000
- -----------------------------------------------------------------------
500,000 Olsten Corp. 17,937,500
- -----------------------------------------------------------------------
200,000 Value Health, Inc.(a) 7,775,000
- -----------------------------------------------------------------------
40,275,000
- -----------------------------------------------------------------------
Total Business Services 263,838,650
- -----------------------------------------------------------------------
CAPITAL GOODS-27.81%
AEROSPACE/DEFENSE-0.30%
303,400 Loral Corp. 12,022,225
- -----------------------------------------------------------------------
BUILDING MATERIALS-0.13%
161,300 Owens-Corning Fiberglass Corporation(a) 5,222,088
- -----------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT-7.62%
1,250,000 Cabletron Systems, Inc.(a) 62,812,500
- -----------------------------------------------------------------------
100,000 Chipcom Corp.(a) 6,025,000
- -----------------------------------------------------------------------
1,000,000 COMPAQ Computer Corp.(a) 40,125,000
- -----------------------------------------------------------------------
270,000 Cyrix Corp.(a) 11,205,000
- -----------------------------------------------------------------------
250,000 Diebold, Inc. 10,562,500
- -----------------------------------------------------------------------
1,335,100 EMC Corp.(a) 28,704,650
- -----------------------------------------------------------------------
110,000 Hewlett-Packard Co. 10,752,500
- -----------------------------------------------------------------------
300,000 International Business Machines Corp. 22,350,000
- -----------------------------------------------------------------------
250,000 Komag, Inc.(a) 6,210,937
- -----------------------------------------------------------------------
680,400 Silicon Graphics Inc.(a) 20,667,150
- -----------------------------------------------------------------------
</TABLE>
F-26
<PAGE> 86
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
Computer & Office Equipment-(continued)
275,000 Stratus Computer, Inc.(a) $ 10,243,750
- -------------------------------------------------------------------------
900,000 Sun Microsystems Inc.(a) 29,475,000
- -------------------------------------------------------------------------
700,000 3COM Corp.(a) 28,175,000
- -------------------------------------------------------------------------
175,000 Xerox Corp. 17,937,500
- -------------------------------------------------------------------------
305,246,487
- -------------------------------------------------------------------------
CONTAINERS (METALS & GLASS)-0.47%
480,800 Crown Cork & Seal Co., Inc.(a) 18,691,100
- -------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.62%
250,000 Eaton Corp. 13,093,750
- -------------------------------------------------------------------------
400,000 Reliance Electric Co. Class A(a) 11,900,000
- -------------------------------------------------------------------------
24,993,750
- -------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.50%
750,000 Cypress Semiconductor Corp.(a) 15,656,250
- -------------------------------------------------------------------------
406,100 KLA Instruments Corp.(a) 21,421,775
- -------------------------------------------------------------------------
90,200 Teradyne, Inc.(a) 2,965,325
- -------------------------------------------------------------------------
538,500 Varian Associates, Inc. 19,924,500
- -------------------------------------------------------------------------
59,967,850
- -------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS/COMPONENTS)-9.28%
32,500 Adaptec, Inc.(a) 755,625
- -------------------------------------------------------------------------
360,000 Altera Corp.(a) 14,197,500
- -------------------------------------------------------------------------
600,000 Analog Devices, Inc.(a) 21,450,000
- -------------------------------------------------------------------------
900,000 Applied Materials, Inc.(a) 46,800,000
- -------------------------------------------------------------------------
450,000 Atmel Corp.(a) 16,593,750
- -------------------------------------------------------------------------
380,000 Cisco Systems, Inc.(a) 11,447,500
- -------------------------------------------------------------------------
575,000 LAM Research Corp.(a) 25,875,000
- -------------------------------------------------------------------------
412,500 Linear Technology Corp. 19,800,000
- -------------------------------------------------------------------------
600,000 LSI Logic Corp.(a) 25,500,000
- -------------------------------------------------------------------------
600,000 Micron Technology, Inc. 23,775,000
- -------------------------------------------------------------------------
700,000 Motorola, Inc. 41,212,500
- -------------------------------------------------------------------------
416,500 National Semiconductor Corp.(a) 7,392,875
- -------------------------------------------------------------------------
559,300 Novellus Systems, Inc.(a) 30,481,850
- -------------------------------------------------------------------------
992,600 Texas Instruments Inc. 74,320,925
- -------------------------------------------------------------------------
250,000 Vishay Intertechnology, Inc.(a) 12,281,250
- -------------------------------------------------------------------------
371,883,775
- -------------------------------------------------------------------------
MACHINERY-1.96%
39,400 Briggs & Stratton Corp. 2,738,300
- -------------------------------------------------------------------------
398,100 Case Corporation 8,360,100
- -------------------------------------------------------------------------
</TABLE>
F-27
<PAGE> 87
<TABLE>
<CAPTION>
FINANCIALS
<S> <C>
SHARES MARKET VALUE
Machinery-(continued)
400,000 Caterpillar, Inc. $ 23,900,000
- -----------------------------------------------------------------------------
653,100 Thermo Electron Corp.(a) 29,797,688
- -----------------------------------------------------------------------------
250,000 Trinova Corp. 8,750,000
- -----------------------------------------------------------------------------
132,000 Varity Corp.(a) 5,049,000
- -----------------------------------------------------------------------------
78,595,088
- -----------------------------------------------------------------------------
OFFICE FURNISHINGS & SUPPLIES-0.38%
300,000 Avery Dennison Corp. 10,087,500
- -----------------------------------------------------------------------------
200,000 Reynolds & Reynolds Co. 4,975,000
- -----------------------------------------------------------------------------
15,062,500
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-3.32%
355,300 ADC Telecommunications, Inc.(a) 16,743,512
- -----------------------------------------------------------------------------
1,000,000 DSC Communications Corp.(a) 30,750,000
- -----------------------------------------------------------------------------
700,000 General Instruments Corp.(a) 23,450,000
- -----------------------------------------------------------------------------
650,000 Northern Telecom Ltd. 23,481,250
- -----------------------------------------------------------------------------
1,000,000 Scientific-Atlanta, Inc. 21,625,000
- -----------------------------------------------------------------------------
350,000 Tellabs, Inc.(a) 17,062,500
- -----------------------------------------------------------------------------
133,112,262
- -----------------------------------------------------------------------------
TRANSPORTATION EQUIPMENT, EXCLUDING AEROSPACE-1.09%
1,000,000 Brunswick Corp. 20,500,000
- -----------------------------------------------------------------------------
820,000 Harley-Davidson, Inc. 22,960,000
- -----------------------------------------------------------------------------
43,460,000
- -----------------------------------------------------------------------------
MANUFACTURING (OTHER)-0.33%
133,333 Lancaster Colony Corp. 4,633,322
- -----------------------------------------------------------------------------
191,300 Loctite Corp. 8,536,763
- -----------------------------------------------------------------------------
13,170,085
- -----------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.81%
250,000 Illinois Tool Works, Inc. 11,218,750
- -----------------------------------------------------------------------------
300,000 TRW Inc. 21,375,000
- -----------------------------------------------------------------------------
32,593,750
- -----------------------------------------------------------------------------
Total Capital Goods 1,114,020,960
- -----------------------------------------------------------------------------
CONSUMER DURABLES-4.96%
AUTOMOBILES-0.51%
700,000 Ford Motor Co. 20,650,000
- -----------------------------------------------------------------------------
AUTO PARTS-0.44%
690,600 Dana Corp. 17,696,625
- -----------------------------------------------------------------------------
</TABLE>
F-28
<PAGE> 88
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
HOUSEHOLD APPLIANCES/FURNISHINGS-1.51%
600,000 Maytag Corp. $ 9,525,000
- ------------------------------------------------------------------------------
725,000 Newell Co. 15,225,000
- ------------------------------------------------------------------------------
800,000 Premark International Inc. 35,800,000
- ------------------------------------------------------------------------------
60,550,000
- ------------------------------------------------------------------------------
MEDICAL EQUIPMENT & SUPPLIES-0.65%
500,000 Medtronic, Inc. 26,062,500
- ------------------------------------------------------------------------------
PERSONAL ITEMS/MISCELLANEOUS-0.11%
170,000 Black & Decker Corp. 4,271,250
- ------------------------------------------------------------------------------
TIRE & RUBBER GOODS-0.24%
216,800 Goodrich (B.F.) Co. (The) 9,728,900
- ------------------------------------------------------------------------------
TOYS & SPORTING GOODS-1.28%
650,000 Callaway Golf Co. 24,862,500
- ------------------------------------------------------------------------------
900,000 Mattel, Inc. 26,325,000
- ------------------------------------------------------------------------------
51,187,500
- ------------------------------------------------------------------------------
TRANSPORTATION EQUIPMENT, EXCLUDING AUTO.-0.22%
380,000 Fleetwood Enterprises, Inc. 8,740,000
- ------------------------------------------------------------------------------
Total Consumer Durables 198,886,775
- ------------------------------------------------------------------------------
CONSUMER NONDURABLES-7.42%
BEVERAGES-0.25%
200,000 Coca-Cola Enterprises, Inc. 10,050,000
- ------------------------------------------------------------------------------
BIOTECHNOLOGY-0.69%
500,000 Amgen Inc.(a) 27,875,000
- ------------------------------------------------------------------------------
COSMETICS/TOILETRIES-0.10%
193,100 Dial Corp. (The) 3,982,688
- ------------------------------------------------------------------------------
DRUGS-2.45%
400,000 Forest Laboratories, Inc.(a) 18,400,000
- ------------------------------------------------------------------------------
400,000 Genentech, Inc.(a) 20,300,000
- ------------------------------------------------------------------------------
800,000 Mylan Laboratories, Inc. 22,400,000
- ------------------------------------------------------------------------------
140,000 Pfizer Inc. 10,377,500
- ------------------------------------------------------------------------------
375,000 Schering-Plough Corp. 26,718,750
- ------------------------------------------------------------------------------
98,196,250
- ------------------------------------------------------------------------------
FOOD PROCESSING-0.27%
350,000 Conagra, Inc. 10,893,750
- ------------------------------------------------------------------------------
SHOES-0.87%
180,500 Nike, Inc. 10,987,938
- ------------------------------------------------------------------------------
600,000 Reebok International, Ltd. 23,925,000
- ------------------------------------------------------------------------------
34,912,938
- ------------------------------------------------------------------------------
</TABLE>
F-29
<PAGE> 89
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
TEXTILES-0.15%
165,900 Cintas Corporation $ 5,889,450
- -------------------------------------------------------------------------
TOBACCO-0.66%
1,000,000 UST Inc. 26,500,000
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY-1.98%
200,000 Gillette Co. (The) 14,875,000
- -------------------------------------------------------------------------
200,000 Johnson & Johnson 10,925,000
- -------------------------------------------------------------------------
300,000 PepsiCo Inc. 10,500,000
- -------------------------------------------------------------------------
700,000 Philip Morris Companies, Inc. 42,875,000
- -------------------------------------------------------------------------
79,175,000
- -------------------------------------------------------------------------
Total Consumer Nondurables 297,475,076
- -------------------------------------------------------------------------
CONSUMER SERVICES-7.11%
BROADCAST MEDIA-0.83%
400,000 Capital Cities/ABC Inc. 33,250,000
- -------------------------------------------------------------------------
HEALTH CARE-5.26%
800,000 Columbia Healthcare Corp. 33,300,000
- -------------------------------------------------------------------------
318,100 Foundation Health Corp.(a) 10,417,775
- -------------------------------------------------------------------------
500,000 Healthcare Compare Corp.(a) 13,937,500
- -------------------------------------------------------------------------
1,745,500 Humana Inc.(a) 42,546,562
- -------------------------------------------------------------------------
834,900 Mid Atlantic Medical Services, Inc.(a) 19,307,063
- -------------------------------------------------------------------------
101,400 Oxford Health Plans, Inc.(a) 8,314,800
- -------------------------------------------------------------------------
875,000 United Healthcare Corp. 46,156,250
- -------------------------------------------------------------------------
777,200 U.S. Healthcare, Inc. 36,722,700
- -------------------------------------------------------------------------
210,702,650
- -------------------------------------------------------------------------
HOSPITAL MANAGEMENT-0.44%
440,000 Health Management Associates, Inc.(a) 11,440,000
- -------------------------------------------------------------------------
159,400 Healthsource, Inc.(a) 6,176,750
- -------------------------------------------------------------------------
17,616,750
- -------------------------------------------------------------------------
LODGING-0.46%
400,000 Hospitality Franchise Systems, Inc.(a) 10,900,000
- -------------------------------------------------------------------------
300,000 Laquinta Motor Inns Inc. 7,537,500
- -------------------------------------------------------------------------
18,437,500
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.12%
235,800 Ralcorp Holdings Inc.(a) 4,715,764
- -------------------------------------------------------------------------
Total Consumer Services 284,722,664
- -------------------------------------------------------------------------
</TABLE>
F-30
<PAGE> 90
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
ENERGY-0.41%
NATURAL GAS (PIPELINES & DISTRIBUTORS)-0.14%
200,000 Williams Companies, Inc. (The) $ 5,800,000
- -------------------------------------------------------------------------
OIL AND GAS (INTEGRATED)-0.27%
288,000 Phillips Petroleum Co. 10,620,000
- -------------------------------------------------------------------------
Total Energy 16,420,000
- -------------------------------------------------------------------------
FINANCIAL-9.56%
BANKING-4.83%
725,000 Bank of Boston Corp. 20,843,750
- -------------------------------------------------------------------------
1,378,100 Bank of New York Co., Inc. 43,754,675
- -------------------------------------------------------------------------
235,000 Chase Manhattan Corp. (The) 8,430,625
- -------------------------------------------------------------------------
650,000 Citicorp 31,037,500
- -------------------------------------------------------------------------
275,000 First Bank System, Inc. 10,243,750
- -------------------------------------------------------------------------
402,600 First Interstate Bancorp 32,208,000
- -------------------------------------------------------------------------
604,400 GP Financial Corp. 13,523,450
- -------------------------------------------------------------------------
288,000 NationsBank Corp. 14,256,000
- -------------------------------------------------------------------------
130,000 Wells Fargo & Co. 19,321,250
- -------------------------------------------------------------------------
193,619,000
- -------------------------------------------------------------------------
INSURANCE (PROPERTY AND CASUALTY)-0.56%
347,500 AFLAC Inc. 11,858,437
- -------------------------------------------------------------------------
241,900 St. Paul Companies, Inc. 10,552,888
- -------------------------------------------------------------------------
22,411,325
- -------------------------------------------------------------------------
PERSONAL CREDIT-1.54%
26,000 Advanta Corp.-Class A 741,000
- -------------------------------------------------------------------------
274,000 Advanta Corp.-Class B 7,192,500
- -------------------------------------------------------------------------
201,100 Dean Witter, Discover & Co. 7,767,488
- -------------------------------------------------------------------------
550,000 First USA, Inc. 19,387,500
- -------------------------------------------------------------------------
1,000,000 MBNA Corp. 26,750,000
- -------------------------------------------------------------------------
61,838,488
- -------------------------------------------------------------------------
MISCELLANEOUS-2.63%
200,000 Federal Home Loan Mortgage Corp. 10,900,000
- -------------------------------------------------------------------------
800,000 Federal National Mortgage Association 60,800,000
- -------------------------------------------------------------------------
800,000 Green Tree Acceptance, Inc. 21,900,000
- -------------------------------------------------------------------------
300,000 Sunamerica, Inc. 11,662,500
- -------------------------------------------------------------------------
105,262,500
- -------------------------------------------------------------------------
Total Financial 383,131,313
- -------------------------------------------------------------------------
</TABLE>
F-31
<PAGE> 91
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
RETAIL-8.37%
DEPARTMENT STORES-0.86%
200,000 Dayton-Hudson Corp. $ 15,500,000
- -------------------------------------------------------------------
500,000 Federated Department Stores, Inc.(a) 10,375,000
- -------------------------------------------------------------------
189,600 Mercantile Stores Co., Inc. 8,626,800
- -------------------------------------------------------------------
34,501,800
- -------------------------------------------------------------------
FOOD STORES-1.01%
346,400 Hannaford Bros. Co. 8,573,400
- -------------------------------------------------------------------
428,500 Kroger Co.(a) 11,194,563
- -------------------------------------------------------------------
700,000 Safeway Inc.(a) 20,650,000
- -------------------------------------------------------------------
40,417,963
- -------------------------------------------------------------------
GENERAL MERCHANDISE STORES-0.43%
600,050 Dollar General Corp. 17,401,450
- -------------------------------------------------------------------
SPECIALTY STORES-6.07%
168,500 Ann Taylor Stores Corp.(a) 6,992,750
- -------------------------------------------------------------------
500,000 Best Buy Co., Inc.(a) 18,875,000
- -------------------------------------------------------------------
1,000,000 Circuit City Stores, Inc. 25,500,000
- -------------------------------------------------------------------
500,000 Gateway 2000 Inc.(a) 11,718,750
- -------------------------------------------------------------------
500,000 Home Depot, Inc. (The) 22,750,000
- -------------------------------------------------------------------
835,000 Lowe's Companies, Inc. 33,191,250
- -------------------------------------------------------------------
417,800 Michaels Stores, Inc.(a) 16,947,013
- -------------------------------------------------------------------
845,300 Nordstrom, Inc. 41,631,025
- -------------------------------------------------------------------
788,200 Pep Boys-Manny, Moe, & Jack 28,178,150
- -------------------------------------------------------------------
656,800 Rite Aid Corp. 15,763,200
- -------------------------------------------------------------------
262,500 Staples, Inc.(a) 6,037,500
- -------------------------------------------------------------------
260,000 Toys "R" Us, Inc.(a) 10,010,000
- -------------------------------------------------------------------
305,500 United States Shoe Corp. 5,460,812
- -------------------------------------------------------------------
243,055,450
- -------------------------------------------------------------------
Total Retail 335,376,663
- -------------------------------------------------------------------
TRANSPORTATION-0.88%
AIR TRANSPORT/FREIGHT-0.81%
188,500 Federal Express Corp.(a) 11,451,375
- -------------------------------------------------------------------
1,000,000 Northwest Airlines Corp.(a) 21,000,000
- -------------------------------------------------------------------
32,451,375
- -------------------------------------------------------------------
MISCELLANEOUS-0.07%
126,800 Ryder System, Inc. 2,979,800
- -------------------------------------------------------------------
Total Transportation 35,431,175
- -------------------------------------------------------------------
</TABLE>
F-32
<PAGE> 92
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
UTILITIES-1.38%
TELEPHONE-1.09%
350,000 American Telephone & Telegraph Co. $ 19,250,000
- ----------------------------------------------------------------------------
350,000 Century Telephone Enterprises, Inc. 10,500,000
- ----------------------------------------------------------------------------
275,000 Telephone and Data Systems, Inc. 13,612,500
- ----------------------------------------------------------------------------
43,362,500
- ----------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.29%
400,000 WMX Technologies Inc. 11,750,000
- ----------------------------------------------------------------------------
Total Utilities 55,112,500
- ----------------------------------------------------------------------------
WHOLESALE-1.00%
DURABLE GOODS-0.38%
400,000 Arrow Electronics, Inc.(a) 15,100,000
- ----------------------------------------------------------------------------
NONDURABLE GOODS-0.62%
1,005,750 Office Depot, Inc.(a) 24,892,312
- ----------------------------------------------------------------------------
Total Wholesale 39,992,312
- ----------------------------------------------------------------------------
OTHER-1.22%
DIVERSIFIED-0.92%
450,000 Corning, Inc. 15,300,000
- ----------------------------------------------------------------------------
171,500 Du Pont De Nemours 10,225,687
- ----------------------------------------------------------------------------
396,100 Hechinger Co. Class A 4,406,612
- ----------------------------------------------------------------------------
250,000 Pittston Services Group 6,906,250
- ----------------------------------------------------------------------------
36,838,549
- ----------------------------------------------------------------------------
NONRESIDENTIAL CONSTRUCTION-0.30%
325,000 Halliburton Co. 12,025,000
- ----------------------------------------------------------------------------
Total Other 48,863,549
- ----------------------------------------------------------------------------
Total Common Stocks 3,370,153,062
- ----------------------------------------------------------------------------
FOREIGN STOCKS-9.94%
AUSTRALIA-0.66%
Broken Hill Proprietary Co. Ltd.
425,000 (Diversified) 6,511,000
- ----------------------------------------------------------------------------
1,482,549 National Australia Bank Ltd. (Banking) 11,712,137
- ----------------------------------------------------------------------------
1,352,650 News Corp. Ltd. (The) (Consumer Services) 8,332,324
- ----------------------------------------------------------------------------
Total Australia 26,555,461
- ----------------------------------------------------------------------------
</TABLE>
F-33
<PAGE> 93
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
CANADA-0.56%
355,600 Magna International Inc. Class A (Auto Parts) $ 12,623,800
- -------------------------------------------------------------------------------
Potash Corp. of Saskatchewan (Metals-
275,000 Diversified) 9,728,125
- -------------------------------------------------------------------------------
Total Canada 22,351,925
- -------------------------------------------------------------------------------
FINLAND-0.61%
130,000 Nokia Corp.-ADR (Telecommunications Equipment) 9,766,250
- -------------------------------------------------------------------------------
Nokia Corp. Cum. Pfd. (Telecommunications
97,600 Equipment) 14,722,960
- -------------------------------------------------------------------------------
Total Finland 24,489,210
- -------------------------------------------------------------------------------
FRANCE-0.91%
135,600 Lafarge Coppee S.A. (Building Materials) 10,758,504
- -------------------------------------------------------------------------------
65,500 LVMH Moet Hennessy Louis Vuitton (Beverage) 10,564,495
- -------------------------------------------------------------------------------
49,200 PSA Peugeot Citroen (Automobile) 7,371,144
- -------------------------------------------------------------------------------
62,500 Saint Gobain (Building Materials) 7,930,625
- -------------------------------------------------------------------------------
Total France 36,624,768
- -------------------------------------------------------------------------------
GERMANY-0.33%
30,400 Mannesmann A.G. (Machinery) 8,128,048
- -------------------------------------------------------------------------------
15,800 Veba A.G. (Utilities) 5,296,318
- -------------------------------------------------------------------------------
Total Germany 13,424,366
- -------------------------------------------------------------------------------
HONG KONG-0.51%
800,000 Cheung Kong Holdings Ltd. (Real Estate) 3,848,000
- -------------------------------------------------------------------------------
680,000 China Light & Power Co. Ltd. (Electric Services) 3,536,000
- -------------------------------------------------------------------------------
1,000,000 Hutchinson Whampoa Ltd. (Diversified) 4,610,000
- -------------------------------------------------------------------------------
1,100,000 Sun Hung Kai Properties Ltd. (Real Estate) 8,393,000
- -------------------------------------------------------------------------------
Total Hong Kong 20,387,000
- -------------------------------------------------------------------------------
ITALY-0.34%
1,400,000 Fiat S.P.A. (Automobile) 5,712,000
- -------------------------------------------------------------------------------
2,919,000 Telecom Italia (Utilities)(a) 7,998,060
- -------------------------------------------------------------------------------
Total Italy 13,710,060
- -------------------------------------------------------------------------------
JAPAN-0.35%
110,000 Autobacs Seven (Specialty Stores) 13,853,400
- -------------------------------------------------------------------------------
Total Japan 13,853,400
- -------------------------------------------------------------------------------
MALAYSIA-0.32%
810,500 Malayan Banking Berhad (Banking) 5,519,505
- -------------------------------------------------------------------------------
900,000 Telecom Malaysia Berhad (Telephone) 7,290,000
- -------------------------------------------------------------------------------
Total Malaysia 12,809,505
- -------------------------------------------------------------------------------
</TABLE>
F-34
<PAGE> 94
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
NETHERLANDS-1.82%
50,000 AKZO N.V. (Chemicals) $ 6,318,500
- ---------------------------------------------------------------------------
63,500 DSM N.V. (Chemicals) 5,502,910
- ---------------------------------------------------------------------------
1,600,000 Philips NV-ADR (Multiple Industry) 52,400,000
- ---------------------------------------------------------------------------
120,000 Wolters Kluwer N.V. (Publishing) 8,682,000
- ---------------------------------------------------------------------------
Total Netherlands 72,903,410
- ---------------------------------------------------------------------------
SINGAPORE-0.33%
544,000 Development Bank of Singapore Ltd. (Banking) 5,777,280
- ---------------------------------------------------------------------------
790,000 Keppel Corp. Ltd. (Diversified) 7,260,100
- ---------------------------------------------------------------------------
Total Singapore 13,037,380
- ---------------------------------------------------------------------------
SWEDEN-1.63%
Aktiebolaget Electrolux "B" Free (Household
150,000 Appliances) 7,785,000
- ---------------------------------------------------------------------------
250,000 ASTRA AB (Drugs) 6,670,000
- ---------------------------------------------------------------------------
Ericsson (L.M.) Telephone Co., Inc.-ADR
406,140 (Telecommunications Services) 24,749,156
- ---------------------------------------------------------------------------
Ericsson (L.M.) Telephone Co., Inc. Class B
168,860 (Telecommunications Services) 10,264,999
- ---------------------------------------------------------------------------
318,000 Sandvik AB B-F (Machine Tools) 5,390,100
- ---------------------------------------------------------------------------
525,000 Volvo AB-ADR (Automobile) 10,368,750
- ---------------------------------------------------------------------------
Total Sweden 65,228,005
- ---------------------------------------------------------------------------
SWITZERLAND-0.31%
BBC Brown Boveri Ltd. (Chemicals & Allied
6,500 Products) 5,585,450
- ---------------------------------------------------------------------------
11,500 Ciba-Geigy Ltd. (Drugs) 6,710,135
- ---------------------------------------------------------------------------
Total Switzerland 12,295,585
- ---------------------------------------------------------------------------
UNITED KINGDOM-1.26%
800,000 Barclays Bank PLC (Banking) 7,608,000
- ---------------------------------------------------------------------------
1,000,000 BPB Industries PLC (Building Materials) 4,900,000
- ---------------------------------------------------------------------------
1,000,000 Granada Group PLC (Broadcast Media) 8,480,000
- ---------------------------------------------------------------------------
730,000 Pearson PLC (Diversified) 7,562,800
- ---------------------------------------------------------------------------
Peninsular & Oriental Steam Navigation Co.
960,000 (Transportation Equipment) 9,984,000
- ---------------------------------------------------------------------------
807,950 Rank Organisation PLC (Entertainment) 5,348,629
- ---------------------------------------------------------------------------
410,000 Thorn EMI PLC (Entertainment) 6,514,900
- ---------------------------------------------------------------------------
Total United Kingdom 50,398,329
- ---------------------------------------------------------------------------
Total Foreign Stocks 398,068,404
- ---------------------------------------------------------------------------
Total Investments (excluding short-term
investments) 3,768,221,466
- ---------------------------------------------------------------------------
</TABLE>
F-35
<PAGE> 95
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C>
SHORT-TERM INVESTMENTS-6.34%
REPURCHASE AGREEMENTS-1.35%(b)
$ 989,982 Goldman, Sachs & Co., 4.78%, 11/01/94(c) $ 989,982
- ------------------------------------------------------------------------
53,000,000 Goldman, Sachs & Co., 4.85%, 11/01/94(d) 53,000,000
- ------------------------------------------------------------------------
53,989,982
- ------------------------------------------------------------------------
U.S. TREASURY SECURITIES-4.99%(e)
50,000,000 U.S. Treasury Bills, 4.68%, 1/05/95 49,566,000
- ------------------------------------------------------------------------
100,000,000 U.S. Treasury Bills, 4.94%, 1/12/95 99,022,000
- ------------------------------------------------------------------------
52,000,000 U.S. Treasury Bills, 4.875%, 1/19/95 51,430,600
- ------------------------------------------------------------------------
Total U.S Treasury Securities 200,018,600
- ------------------------------------------------------------------------
Total Short-Term Investments 254,008,582
- ------------------------------------------------------------------------
TOTAL INVESTMENTS-100.40% 4,022,230,048
- ------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.40)% (15,885,256)
- ------------------------------------------------------------------------
NET ASSETS-100.00% $4,006,344,792
- ------------------------------------------------------------------------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement.
(c) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$114,492,117. Collateralized by $119,992,000 U.S. Treasury Obligations,
5.125% to 8.00% due 06/30/98 to 11/15/24. The aggregate market value of the
collateral at 10/31/94 was $116,879,377. The Fund's pro-rata interest in
the collateral at 10/31/94 was $1,010,758.
(d) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$390,052,542. Collateralized by $384,015,000 U.S. Treasury Obligations,
4.375% to 12.375% due 11/15/95 to 11/15/24. The aggregate market value of
the collateral at 10/31/94 was $398,183,007. The Fund's pro-rata interest
in the collateral at 10/31/94 was $54,112,050.
(e) 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.
See Notes to Financial Statements.
F-36
<PAGE> 96
FINANCIALS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $3,485,980,473) $4,022,230,048
- ------------------------------------------------------------------------
Foreign currencies, at market value (cost $23,673,033) 24,032,931
- ------------------------------------------------------------------------
Receivables for:
Investments sold 146,706,930
- ------------------------------------------------------------------------
Capital stock sold 3,172,821
- ------------------------------------------------------------------------
Interest and dividends 3,364,019
- ------------------------------------------------------------------------
Investment for deferred compensation plan 24,273
- ------------------------------------------------------------------------
Other assets 132,351
- ------------------------------------------------------------------------
Total assets 4,199,663,373
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 170,999,845
- ------------------------------------------------------------------------
Capital stock reacquired 15,957,674
- ------------------------------------------------------------------------
Deferred compensation 24,273
- ------------------------------------------------------------------------
Variation margin 1,181,250
- ------------------------------------------------------------------------
Accrued advisory fees 2,074,974
- ------------------------------------------------------------------------
Accrued administrative service fees 239,268
- ------------------------------------------------------------------------
Accrued distribution fees 990,917
- ------------------------------------------------------------------------
Accrued operating expenses 1,850,380
- ------------------------------------------------------------------------
Total liabilities 193,318,581
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $4,006,344,792
- ------------------------------------------------------------------------
NET ASSETS:
Institutional Class $ 40,486,324
- ------------------------------------------------------------------------
Retail Class $3,965,858,468
- ------------------------------------------------------------------------
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------------------
Outstanding 2,257,098
- ------------------------------------------------------------------------
Retail Class:
Authorized 750,000,000
- ------------------------------------------------------------------------
Outstanding 222,514,272
- ------------------------------------------------------------------------
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $17.94
- ------------------------------------------------------------------------
RETAIL CLASS:
Net asset value and redemption price per share $17.82
- ------------------------------------------------------------------------
Offering price per share:
(Net asset value of $17.82/94.50%) $18.86
- ------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-37
<PAGE> 97
FINANCIALS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,096,401 foreign withholding tax) $ 53,607,851
- -----------------------------------------------------------------------------
Interest 16,735,944
- -----------------------------------------------------------------------------
Total investment income 70,343,795
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 26,472,250
- -----------------------------------------------------------------------------
Custodian fees 710,185
- -----------------------------------------------------------------------------
Distribution fees 12,812,644
- -----------------------------------------------------------------------------
Administrative service fees 3,161,130
- -----------------------------------------------------------------------------
Directors' fees 35,848
- -----------------------------------------------------------------------------
Transfer agent fees 6,781,769
- -----------------------------------------------------------------------------
Other 2,141,925
- -----------------------------------------------------------------------------
Total expenses 52,115,751
- -----------------------------------------------------------------------------
Net investment income 18,228,044
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 404,397,369
- -----------------------------------------------------------------------------
Foreign currencies 18,197
- -----------------------------------------------------------------------------
Futures contracts (17,377,980)
- -----------------------------------------------------------------------------
387,037,586
- -----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities (266,289,517)
- -----------------------------------------------------------------------------
Foreign currencies 2,396,639
- -----------------------------------------------------------------------------
Futures contracts 4,055,094
- -----------------------------------------------------------------------------
(259,837,784)
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 127,199,802
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 145,427,846
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-38
<PAGE> 98
FINANCIALS
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,228,044 $ 33,328,292
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies and futures
contracts 387,037,586 168,536,420
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities, foreign currencies
and futures contracts (259,837,784) 96,534,180
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 145,427,846 298,398,892
- ------------------------------------------------------------------------------
Distributions to shareholders from net
investment income (30,271,322) (28,057,862)
- ------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investment securities (90,039,071) --
- ------------------------------------------------------------------------------
Net equalization credits (charges) (10,124,934) (5,702,201)
- ------------------------------------------------------------------------------
Share transactions-net:
Institutional Class 96,085 20,955,946
- ------------------------------------------------------------------------------
Retail Class (1,048,548,626) (461,143,997)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,033,460,022) (175,549,222)
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,039,804,814 5,215,354,036
- ------------------------------------------------------------------------------
End of period $ 4,006,344,792 $5,039,804,814
- ------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 3,040,217,579 $4,088,670,120
- ------------------------------------------------------------------------------
Undistributed net investment income 40,848,632 63,016,844
- ------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies
and futures contracts 384,596,704 87,598,189
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 540,681,877 800,519,661
- ------------------------------------------------------------------------------
$ 4,006,344,792 $5,039,804,814
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-39
<PAGE> 99
FINANCIALS
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
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, AIM Charter Fund and AIM Constellation Fund
currently offer two different classes of shares: the Retail Class and the
Institutional Class. AIM Aggressive Growth Fund currently offers only one
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. 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. 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. 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. 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 first-in, first-out basis. 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.
F. 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.
G. 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. Expenses of the
Company which are not directly attributable to the operations of any class
of shares or portfolio of the Company are prorated among the classes to
which the expense relates based upon the relative net assets of each class.
F-40
<PAGE> 100
FINANCIALS
H. 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, 1994, AIM waived fees of $981,836. 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 and shareholder services to the Fund. During the year ended October
31, 1994, AIM was reimbursed $3,161,130 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Retail Class and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Company
has also adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan"),
with respect to the Retail Class, whereby the Fund will pay AIM Distributors an
annual rate of 0.30% of the Retail Class' average daily net assets as
compensation for services related to the sales and distribution of the Retail
Class' shares. The Plan provides that payments to dealers and other financial
institutions that provide continuing personal shareholder services to their
customers who purchase and own shares of the Retail Class, in amounts of up to
0.25% of the average net assets of the Retail Class attributable to the
customers of such dealers or financial institutions, may be characterized as a
service fee. The Plan also provides that payments to dealers and other
financial institutions in excess of such amount, and payments to AIM
Distributors, 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 Retail Class. During the year ended October 31, 1994, the Retail Class
paid AIM Distributors $12,812,644 as compensation pursuant to the Plan.
AIM Distributors received commissions of $1,494,020 from sales of shares of
the Retail Class' capital stock during the year ended October 31, 1994. 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 a
director of the Company are officers and directors of AIM, AIM Capital, AIM
Distributors and FMC.
During the year ended October 31, 1994 the Fund paid legal fees of $33,304 for
services rendered by Reid & Priest as counsel to the Company's directors.
Effective September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was
appointed as counsel to the Company's directors. A member of that firm is a
director of the Company.
F-41
<PAGE> 101
FINANCIALS
NOTE 3 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended October 31, 1994 was
$5,408,723,779 and $6,527,638,245, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of October 31, 1994 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $575,267,420
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (43,216,146)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $532,051,274
- ---------------------------------------------------------------------------
</TABLE>
Cost of investments for tax purposes is $3,490,178,774.
NOTE 4 - BANK BORROWINGS
The Fund has a $110,000,000 committed line of credit with Morgan Guaranty Trust
Company of New York. Interest on borrowings under the line of credit is payable
on maturity. During the year ended October 31, 1994, the Fund did not borrow
under the line of credit agreement. The Fund is charged a commitment fee at the
rate of 3/16 of 1% per annum on the unused portion of the commitment.
NOTE 5 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of the Company. The Company invests directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 6 - FUTURES CONTRACTS
On October 31, 1994, $200,018,600 U.S. Treasury Bills were pledged as
collateral to cover margin requirements for futures contracts.
Futures contracts at October 31, 1994:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
<S> <C>
S&P 500 Index
630 contracts/December/Buy $4,057,387
- -----------------------------------------------------------------------
</TABLE>
NOTE 7 - CAPITAL STOCK
Changes in the Retail Class capital stock outstanding during the years ended
October 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------- -----------------------------
SHARES VALUE SHARES VALUE
----------- --------------- ------------ ---------------
<S> <C>
Sold 22,715,102 $ 385,995,119 74,437,935 $ 1,245,482,528
- ------------------------------------------------------------------------------------
Issued as reinvestment
of dividends 4,979,521 84,004,521 1,061,414 18,151,601
- ------------------------------------------------------------------------------------
Reacquired (88,892,319) (1,518,548,266) (103,453,527) (1,724,778,126)
- ------------------------------------------------------------------------------------
(66,197,696) $(1,048,548,626) (27,954,178) $ (461,143,997)
- ------------------------------------------------------------------------------------
</TABLE>
F-42
<PAGE> 102
FINANCIALS
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Retail Class share
outstanding during each of the years in the six-year period ended October 31,
1994, the ten months ended October 31, 1988, and for each of the years in the
three-year period ended December 31, 1987(a).
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(B)
---------- ---------- ---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 17.62 $ 16.68 $ 15.76 $ 11.15 $ 12.32 $ 9.23 $ 8.36
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Income from
investment
operations:
Net investment
income 0.07 0.10 0.10 0.11 0.09 0.10 0.07
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Net gains
(losses) on
securities (both
realized and
unrealized) 0.57 0.93 0.98 4.80 (0.56) 3.10 0.80
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Total from
investment
operations 0.64 1.03 1.08 4.91 (0.47) 3.20 0.87
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Less
distributions:
Dividends from
net investment
income (0.11) (0.09) (0.07) (0.09) (0.06) (0.11) --
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Distributions
from net
realized capital
gains (0.33) -- (0.09) (0.21) (0.64) -- --
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Total
distributions (0.44) (0.09) (0.16) (0.30) (0.70) (0.11) --
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Net asset value,
end of period $17.82 $17.62 $16.68 $ 15.76 $ 11.15 $ 12.32 $ 9.23
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Total return(c) 3.76% 6.17% 6.85% 44.88% (4.03)% 35.13% 10.41%
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $3,965,858 $4,999,983 $5,198,835 $2,534,331 $632,522 $393,320 $297,284
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Ratio of expenses
to average net
assets 1.2%(d) 1.1% 1.1% 1.2% 1.3% 1.2% 1.1%(e)
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Ratio of net
investment income
to average net
assets 0.4%(d) 0.6% 0.6% 0.7% 0.8% 1.0% 0.9%(e)
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Portfolio turnover
rate 136% 109% 37% 46% 79% 87% 93%
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Borrowings for the
period:
Amount of debt
outstanding at
end of period
(000s omitted) -- -- -- -- -- $3,781,000 --
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Average amount of
debt outstanding
during the period
(000s omitted)(f) -- -- -- -- $485 $1,083 $229
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Average number of
shares
outstanding
during the period
(000s omitted)(f) 249,351 314,490 246,273 102,353 44,770 31,275 33,031
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
Average amount of
debt per share
during the period -- -- -- -- $ 0.011 $ 0.035 $ 0.007
- ------------------ ---------- ---------- ---------- ---------- -------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1987 1986(B) 1985
--------- --------- ---------
<S> <C> <C> <C>
Net asset value,
beginning of
period $ 8.82 $ 9.10 $ 6.73
- -------------------- --------- --------- ---------
Income from
investment
operations:
Net investment
income 0.07 0.09 0.08
- -------------------- --------- --------- ---------
Net gains
(losses) on
securities (both
realized and
unrealized) 0.83 2.11 2.34
- -------------------- --------- --------- ---------
Total from
investment
operations 0.90 2.20 2.42
- -------------------- --------- --------- ---------
Less
distributions:
Dividends from
net investment
income (0.09) (0.09) (0.05)
- -------------------- --------- --------- ---------
Distributions
from net
realized capital
gains (1.27) (2.39) --
- -------------------- --------- --------- ---------
Total
distributions (1.36) (2.48) (0.05)
- -------------------- --------- --------- ---------
Net asset value,
end of period $ 8.36 $ 8.82 $9.10
- -------------------- --------- --------- ---------
Total return(c) 9.75% 25.06% 36.12%
- -------------------- --------- --------- ---------
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $286,453 $171,138 $168,492
- -------------------- --------- --------- ---------
Ratio of expenses
to average net
assets 1.0% 1.0% 1.0%
- -------------------- --------- --------- ---------
Ratio of net
investment income
to average net
assets 0.7% 0.8% 1.0%
- -------------------- --------- --------- ---------
Portfolio turnover
rate 108% 113% 99%
- -------------------- --------- --------- ---------
Borrowings for the
period:
Amount of debt
outstanding at
end of period
(000s omitted) $355,000 -- --
- -------------------- --------- --------- ---------
Average amount of
debt outstanding
during the period
(000s omitted)(f) $509 $56 $24
- -------------------- --------- --------- ---------
Average number of
shares
outstanding
during the period
(000s omitted)(f) 25,825 18,519 18,598
- -------------------- --------- --------- ---------
Average amount of
debt per share
during the period $ 0.020 $ 0.003 $ 0.001
- -------------------- --------- --------- ---------
</TABLE>
(a) Per share information has been restated to reflect 2 for 1 stock splits,
effected in the form of dividends, on September 29, 1987, and July 15,
1983.
(b) The Fund changed investment advisors on May 1, 1986, and on September 30,
1988.
(c) Does not include sales charges and, for periods less than one year, total
returns are not annualized.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees were 1.2% and 0.4%,
respectively. Ratios are based on average net assets of $4,271,844,336.
(e) Annualized.
(f) Averages computed on a daily basis.
F-43
<PAGE> 103
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, 1994, 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 six 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, 1994, 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, 1994, 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 six-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.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
December 9, 1994
F-44
<PAGE> 104
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
COMMON STOCKS-75.62%
BASIC INDUSTRIES-2.16%
CHEMICALS-1.46%
150,000 Albermarle Corp. $ 2,287,500
- -------------------------------------------------------------------------
330,000 Geon Co. 9,900,000
- -------------------------------------------------------------------------
250,000 Hanna (M.A.) Co. 6,406,250
- -------------------------------------------------------------------------
196,700 IMC Global, Inc.(a) 8,359,750
- -------------------------------------------------------------------------
300,000 Rohm & Haas Co. 18,112,500
- -------------------------------------------------------------------------
300,000 Wellman, Inc. 9,862,500
- -------------------------------------------------------------------------
54,928,500
- -------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.22%
225,000 Champion International Corp. 8,325,000
- -------------------------------------------------------------------------
STEEL-0.48%
200,000 AK Steel Holding Corp.(a) 6,550,000
- -------------------------------------------------------------------------
300,000 LTV Corp.(a) 5,737,500
- -------------------------------------------------------------------------
374,900 WHX Corp.(a) 5,623,500
- -------------------------------------------------------------------------
17,911,000
- -------------------------------------------------------------------------
Total Basic Industries 81,164,500
- -------------------------------------------------------------------------
BUSINESS SERVICES-10.15%
COMPUTER SOFTWARE & SERVICES-8.35%
1,117,800 Adobe System, Inc. 40,240,800
- -------------------------------------------------------------------------
232,100 Alliance Semiconductor Corp.(a) 5,976,575
- -------------------------------------------------------------------------
272,000 Autodesk, Inc. 9,384,000
- -------------------------------------------------------------------------
300,000 BMC Software(a) 13,575,000
- -------------------------------------------------------------------------
950,000 Cadence Design System(a) 19,000,000
- -------------------------------------------------------------------------
250,000 Ceridian Corp.(a) 6,500,000
- -------------------------------------------------------------------------
187,800 Cerner, Inc.(a) 7,652,850
- -------------------------------------------------------------------------
675,000 Computer Associates International, Inc. 33,496,875
- -------------------------------------------------------------------------
200,000 FileNet Corp.(a) 5,100,000
- -------------------------------------------------------------------------
418,000 Fiserv, Inc.(a) 9,823,000
- -------------------------------------------------------------------------
500,000 HBO & Co. 16,250,000
- -------------------------------------------------------------------------
300,000 Microsoft Corp.(a) 18,900,000
- -------------------------------------------------------------------------
450,000 Network General Corp.(a) 9,731,250
- -------------------------------------------------------------------------
750,000 Oracle Systems Corp.(a) 34,500,000
- -------------------------------------------------------------------------
700,000 Parametric Technology Corp.(a) 25,200,000
- -------------------------------------------------------------------------
29,800 Powersoft, Inc.(a) 1,884,850
- -------------------------------------------------------------------------
200,000 Pyxis Corp.(a) 3,850,000
- -------------------------------------------------------------------------
</TABLE>
F-45
<PAGE> 105
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
Computer Software & Services-(continued)
250,000 Sterling Software, Inc.(a) $ 7,812,500
- -----------------------------------------------------------------------
400,000 Sybase, Inc.(a) 20,950,000
- -----------------------------------------------------------------------
600,000 Symantec Industries, Inc.(a) 10,650,000
- -----------------------------------------------------------------------
300,000 Synopsys, Inc.(a) 13,837,500
- -----------------------------------------------------------------------
314,315,200
- -----------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES-0.82%
500,000 ALC Communications Corp.(a) 18,937,500
- -----------------------------------------------------------------------
400,000 Airtouch Communications, Inc.(a) 11,950,000
- -----------------------------------------------------------------------
30,887,500
- -----------------------------------------------------------------------
MISCELLANEOUS-0.98%
300,000 American Management Systems, Inc.-Class A 4,762,500
- -----------------------------------------------------------------------
200,000 Manpower, Inc. 5,825,000
- -----------------------------------------------------------------------
300,000 Olsten Corp. 10,762,500
- -----------------------------------------------------------------------
400,000 Value Health, Inc.(a) 15,550,000
- -----------------------------------------------------------------------
36,900,000
- -----------------------------------------------------------------------
Total Business Services 382,102,700
- -----------------------------------------------------------------------
CAPITAL GOODS-30.51%
COMPUTER & OFFICE EQUIPMENT-9.01%
1,200,000 American Power Conversion Corp.(a) 22,200,000
- -----------------------------------------------------------------------
875,000 Cabletron Systems, Inc.(a) 43,968,750
- -----------------------------------------------------------------------
300,000 Chipcom Corp. 18,075,000
- -----------------------------------------------------------------------
750,000 COMPAQ Computer Corp.(a) 30,093,750
- -----------------------------------------------------------------------
450,000 Cyrix Corp.(a) 18,675,000
- -----------------------------------------------------------------------
200,000 Dell Computer Corp.(a) 8,900,000
- -----------------------------------------------------------------------
200,000 Diebold, Inc. 8,450,000
- -----------------------------------------------------------------------
1,968,600 EMC Corp.(a) 42,324,900
- -----------------------------------------------------------------------
400,000 Exabyte Corp.(a) 8,800,000
- -----------------------------------------------------------------------
450,000 Komag, Inc.(a) 11,179,688
- -----------------------------------------------------------------------
225,000 Network Equipment Technologies, Inc.(a) 4,893,750
- -----------------------------------------------------------------------
700,000 Read Rite Corp.-Class A(a) 12,162,500
- -----------------------------------------------------------------------
600,000 Sequent Computer Systems, Inc.(a) 11,400,000
- -----------------------------------------------------------------------
519,100 Silicon Graphics, Inc.-Class A(a) 15,767,662
- -----------------------------------------------------------------------
175,000 Storage Technology Corp.(a) 4,856,250
- -----------------------------------------------------------------------
250,000 Stratus Computer, Inc.(a) 9,312,500
- -----------------------------------------------------------------------
800,000 Sun Microsystems, Inc.(a) 26,200,000
- -----------------------------------------------------------------------
200,000 Symbol Technologies, Inc.(a) 6,750,000
- -----------------------------------------------------------------------
</TABLE>
F-46
<PAGE> 106
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
Computer & Office Equipment--(continued)
700,000 3Com Corp.(a) $ 28,175,000
- ---------------------------------------------------------------------------
201,600 Western Digital Corp.-Class A(a) 3,427,200
- ---------------------------------------------------------------------------
200,000 Xircom, Inc.(a) 3,500,000
- ---------------------------------------------------------------------------
339,111,950
- ---------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.47%
200,000 Ametek, Inc. 3,625,000
- ---------------------------------------------------------------------------
187,000 Microchip Technology, Inc.(a) 8,765,625
- ---------------------------------------------------------------------------
300,000 SCI Systems, Inc.(a) 5,475,000
- ---------------------------------------------------------------------------
17,865,625
- ---------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-2.81%
700,000 Cypress Semiconductor Corp.(a) 14,612,500
- ---------------------------------------------------------------------------
350,000 KLA Instruments Corp.(a) 18,462,500
- ---------------------------------------------------------------------------
375,000 Sensormatic Electronics Corp. 14,109,375
- ---------------------------------------------------------------------------
350,000 Tektronix, Inc. 13,300,000
- ---------------------------------------------------------------------------
1,000,000 Teradyne, Inc.(a) 32,875,000
- ---------------------------------------------------------------------------
337,600 Varian Associates, Inc. 12,491,200
- ---------------------------------------------------------------------------
105,850,575
- ---------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS/COMPONENTS)-9.09%
450,000 Altera Corp.(a) 17,746,875
- ---------------------------------------------------------------------------
300,000 Amphenol Corp.(a) 6,562,500
- ---------------------------------------------------------------------------
800,000 Analog Devices, Inc.(a) 28,600,000
- ---------------------------------------------------------------------------
750,000 Applied Materials, Inc.(a) 39,000,000
- ---------------------------------------------------------------------------
800,000 Atmel Corp.(a) 29,500,000
- ---------------------------------------------------------------------------
350,000 Cisco Systems, Inc.(a) 10,543,750
- ---------------------------------------------------------------------------
150,000 Credence Systems Corp.(a) 3,825,000
- ---------------------------------------------------------------------------
226,600 Electroglas, Inc.(a) 9,007,350
- ---------------------------------------------------------------------------
300,000 Intel Corp. 18,637,500
- ---------------------------------------------------------------------------
625,000 Lam Research Corp.(a) 28,125,000
- ---------------------------------------------------------------------------
250,000 Lattice Semiconductor Corp.(a) 4,218,750
- ---------------------------------------------------------------------------
300,000 Linear Technology Corp. 14,400,000
- ---------------------------------------------------------------------------
800,000 LSI Logic Corp.(a) 34,000,000
- ---------------------------------------------------------------------------
525,000 Micron Technology, Inc. 20,803,125
- ---------------------------------------------------------------------------
100,000 Molex, Inc. 4,450,000
- ---------------------------------------------------------------------------
150,000 Molex, Inc.-Class A 6,150,000
- ---------------------------------------------------------------------------
497,100 Novellus Systems(a) 27,091,950
- ---------------------------------------------------------------------------
500,000 Texas Instruments, Inc. 37,437,500
- ---------------------------------------------------------------------------
75,000 Zilog, Inc.(a) 2,156,250
- ---------------------------------------------------------------------------
342,255,550
- ---------------------------------------------------------------------------
</TABLE>
F-47
<PAGE> 107
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
MACHINE TOOLS & RELATED PRODUCTS-0.43%
385,100 Cincinnati Milacron, Inc. $ 10,542,113
- --------------------------------------------------------------------
200,000 Kennametal, Inc. 5,625,000
- --------------------------------------------------------------------
16,167,113
- --------------------------------------------------------------------
MACHINERY-0.68%
200,000 Clark Equipment Co.(a) 14,025,000
- --------------------------------------------------------------------
400,000 Smith International, Inc.(a) 6,700,000
- --------------------------------------------------------------------
130,000 Varity Corp.(a) 4,972,500
- --------------------------------------------------------------------
25,697,500
- --------------------------------------------------------------------
METAL PRODUCTS & SERVICES-0.09%
100,000 Timken Co. (The) 3,487,500
- --------------------------------------------------------------------
OFFICE FURNISHINGS & SUPPLIES-0.41%
276,900 Avery Dennison Corp. 9,310,763
- --------------------------------------------------------------------
250,000 Reynolds & Reynolds Co.-Class A 6,218,750
- --------------------------------------------------------------------
15,529,513
- --------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-4.06%
266,400 ADC Telecommunications, Inc.(a) 12,554,100
- --------------------------------------------------------------------
200,000 Andrew Corp.(a) 10,350,000
- --------------------------------------------------------------------
300,000 Aspect Telecommunications Corp.(a) 10,350,000
- --------------------------------------------------------------------
250,000 California Microwave, Inc.(a) 7,750,000
- --------------------------------------------------------------------
1,000,000 DSC Communications Corp.(a) 30,750,000
- --------------------------------------------------------------------
600,000 General Instrument Corp.(a) 20,100,000
- --------------------------------------------------------------------
1,000,000 Scientific-Atlanta, Inc. 21,625,000
- --------------------------------------------------------------------
150,000 StrataCom, Inc.(a) 8,493,750
- --------------------------------------------------------------------
430,000 Tellabs, Inc.(a) 20,962,500
- --------------------------------------------------------------------
250,000 U.S. Robotics, Inc.(a) 10,062,500
- --------------------------------------------------------------------
152,997,850
- --------------------------------------------------------------------
TRANSPORTATION EQUIPMENT-0.61%
256,300 Allen Group, Inc. 6,215,275
- --------------------------------------------------------------------
600,000 Harley-Davidson, Inc. 16,800,000
- --------------------------------------------------------------------
23,015,275
- --------------------------------------------------------------------
</TABLE>
F-48
<PAGE> 108
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
MISCELLANEOUS-1.34%
250,000 AGCO Corp. $ 13,750,000
- ---------------------------------------------------------------------
75,000 Dover Corp. 4,162,500
- ---------------------------------------------------------------------
200,000 Nautica Enterprises, Inc.(a) 5,800,000
- ---------------------------------------------------------------------
250,000 Parker-Hannifin Corp. 11,687,500
- ---------------------------------------------------------------------
218,000 Superior Industries International, Inc. 6,431,000
- ---------------------------------------------------------------------
250,000 Trinova Corp. 8,750,000
- ---------------------------------------------------------------------
50,581,000
- ---------------------------------------------------------------------
MULTIPLE INDUSTRY-1.51%
50,000 Illinois Tool Works, Inc. 2,243,750
- ---------------------------------------------------------------------
200,000 Mark IV Industries, Inc. 4,250,000
- ---------------------------------------------------------------------
500,000 Motorola, Inc. 29,437,500
- ---------------------------------------------------------------------
375,100 Thermo Electron Corp.(a) 17,113,938
- ---------------------------------------------------------------------
77,691 Tyco Laboratories, Inc. 3,748,589
- ---------------------------------------------------------------------
56,793,777
- ---------------------------------------------------------------------
Total Capital Goods 1,149,353,228
- ---------------------------------------------------------------------
CONSUMER DURABLES-3.53%
AUTO PARTS-0.41%
500,000 Echlin,Inc. 15,375,000
- ---------------------------------------------------------------------
AUTOMOBILE-0.10%
150,000 Automotive Industries Holdings(a) 3,637,500
- ---------------------------------------------------------------------
HOUSEHOLD APPLIANCES/FURNISHINGS-0.20%
300,000 Sunbeam Oster Co., Inc. 7,425,000
- ---------------------------------------------------------------------
MEDICAL EQUIPMENT & SUPPLIES-0.89%
350,000 Cordis Corp.(a) 20,168,750
- ---------------------------------------------------------------------
250,000 Heart Technology, Inc.(a) 5,968,750
- ---------------------------------------------------------------------
125,000 Nellcor, Inc.(a) 3,875,000
- ---------------------------------------------------------------------
100,000 Stryker Corp. 3,425,000
- ---------------------------------------------------------------------
761 Surgical Laser Technologies, Inc.(a) 2,283
- ---------------------------------------------------------------------
33,439,783
- ---------------------------------------------------------------------
PERSONAL ITEMS-0.16%
250,000 Black & Decker Corp. 6,281,250
- ---------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION-0.35%
402,848 Clayton Homes, Inc.(a) 7,301,620
- ---------------------------------------------------------------------
250,000 Oakwood Homes Corp. 5,937,500
- ---------------------------------------------------------------------
13,239,120
- ---------------------------------------------------------------------
</TABLE>
F-49
<PAGE> 109
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
TOYS & SPORTING GOODS-1.15%
600,000 Callaway Golf Co. $ 22,950,000
- -------------------------------------------------------------------
700,000 Mattel, Inc. 20,475,000
- -------------------------------------------------------------------
43,425,000
- -------------------------------------------------------------------
MULTIPLE INDUSTRY-0.27%
500,000 Brunswick Corp. 10,250,000
- -------------------------------------------------------------------
Total Consumer Durables 133,072,653
- -------------------------------------------------------------------
CONSUMER NONDURABLES-2.39%
BEVERAGES-0.23%
150,000 Canandaigua Wine Co., Inc.-Class A(a) 4,931,250
- -------------------------------------------------------------------
200,000 Coca-Cola Enterprises Inc. 3,900,000
- -------------------------------------------------------------------
8,831,250
- -------------------------------------------------------------------
DRUGS-0.86%
258,000 Forest Laboratories, Inc.(a) 11,868,000
- -------------------------------------------------------------------
700,000 Mylan Laboratories, Inc. 19,600,000
- -------------------------------------------------------------------
34,500 Revco D.S., Inc. 771,938
- -------------------------------------------------------------------
32,239,938
- -------------------------------------------------------------------
FOOD PROCESSING-0.09%
274,400 Chiquita Brands International, Inc. 3,395,700
- -------------------------------------------------------------------
PUBLISHING-0.33%
114,100 Belo (A.H.) Corp. 6,246,975
- -------------------------------------------------------------------
25,000 Washington Post Co.-Class B 6,125,000
- -------------------------------------------------------------------
12,371,975
- -------------------------------------------------------------------
SHOES-0.50%
30,700 NIKE, Inc.-Class B 1,868,863
- -------------------------------------------------------------------
300,000 Reebok International, Ltd. 11,962,500
- -------------------------------------------------------------------
200,000 Wolverine World Wide, Inc. 4,900,000
- -------------------------------------------------------------------
18,731,363
- -------------------------------------------------------------------
TEXTILES-0.38%
202,100 Ann Taylor Stores Corp.(a) 8,387,150
- -------------------------------------------------------------------
133,500 Tommy Hilfiger Corp. 5,890,688
- -------------------------------------------------------------------
14,277,838
- -------------------------------------------------------------------
Total Consumer Nondurables 89,848,064
- -------------------------------------------------------------------
</TABLE>
F-50
<PAGE> 110
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
CONSUMER SERVICES-12.53%
BROADCAST MEDIA-0.28%
350,000 Infinity Broadcasting-Class A(a) $ 10,631,250
- ------------------------------------------------------------------------------
ENTERTAINMENT-1.71%
400,000 Aldila, Inc.(a) 5,200,000
- ------------------------------------------------------------------------------
325,000 Autotote Corp.-Class A(a) 5,687,500
- ------------------------------------------------------------------------------
460,000 Carnival Cruise Lines, Inc.-Class A 20,930,000
- ------------------------------------------------------------------------------
300,000 MGM Grand, Inc.(a) 9,262,500
- ------------------------------------------------------------------------------
500,000 Mirage Resorts, Inc.(a) 10,375,000
- ------------------------------------------------------------------------------
174,200 Players International, Inc.(a) 3,919,500
- ------------------------------------------------------------------------------
300,000 Royal Caribbean Cruises Ltd. 8,925,000
- ------------------------------------------------------------------------------
64,299,500
- ------------------------------------------------------------------------------
HEALTH CARE, EXCLUDING HOSPITAL MANAGEMENT-7.85%
205,400 Coventry Corp.(a) 5,135,000
- ------------------------------------------------------------------------------
300,000 FHP International Corp.(a) 8,700,000
- ------------------------------------------------------------------------------
427,300 Foundation Health Corp.(a) 13,994,075
- ------------------------------------------------------------------------------
400,000 Health Care & Retirement Corp.(a) 10,750,000
- ------------------------------------------------------------------------------
450,000 Health Systems International, Inc.-Class A(a) 12,093,750
- ------------------------------------------------------------------------------
250,000 Healthcare Compare Corp.-Class A(a) 6,968,750
- ------------------------------------------------------------------------------
318,700 Healthsource, Inc.(a) 12,349,625
- ------------------------------------------------------------------------------
500,000 Healthsouth Rehabilitation Corp.(a) 19,000,000
- ------------------------------------------------------------------------------
103,800 Homedco Group, Inc.(a) 3,749,775
- ------------------------------------------------------------------------------
1,545,000 Humana Inc.(a) 37,659,375
- ------------------------------------------------------------------------------
225,000 Interim Services, Inc.(a) 5,568,750
- ------------------------------------------------------------------------------
300,000 Lincare Holdings, Inc.(a) 8,175,000
- ------------------------------------------------------------------------------
350,000 Mariner Health Group, Inc.(a) 7,918,750
- ------------------------------------------------------------------------------
886,400 Mid-Atlantic Medical Services, Inc.(a) 20,498,000
- ------------------------------------------------------------------------------
200,000 Oxford Health Plans, Inc.(a) 16,400,000
- ------------------------------------------------------------------------------
200,000 Pacificare Health Systems, Inc.-Class A(a) 14,900,000
- ------------------------------------------------------------------------------
200,000 Pacificare Health Systems, Inc.-Class B(a) 14,600,000
- ------------------------------------------------------------------------------
100,000 Quantum Health Resources, Inc.(a) 3,675,000
- ------------------------------------------------------------------------------
80,600 Sun Healthcare Group, Inc.(a) 1,853,800
- ------------------------------------------------------------------------------
700,000 United Healthcare Corp. 36,925,000
- ------------------------------------------------------------------------------
737,400 U.S. Healthcare, Inc. 34,842,150
- ------------------------------------------------------------------------------
295,756,800
- ------------------------------------------------------------------------------
</TABLE>
F-51
<PAGE> 111
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
HOSPITAL MANAGEMENT-2.33%
350,000 Charter Medical Corp. $ 8,662,500
- ---------------------------------------------------------------------------
300,000 Columbia Healthcare Corp. 12,487,500
- ---------------------------------------------------------------------------
129,200 Genesis Health Ventures, Inc. 3,811,400
- ---------------------------------------------------------------------------
348,750 Health Management Associates, Inc.-Class A(a) 9,067,500
- ---------------------------------------------------------------------------
600,000 Healthtrust, Inc.(a) 21,000,000
- ---------------------------------------------------------------------------
250,000 Horizon Health Care Corp.(a) 6,906,250
- ---------------------------------------------------------------------------
300,000 Integrated Health Services(a) 12,225,000
- ---------------------------------------------------------------------------
450,000 Vencor, Inc.(a) 13,443,750
- ---------------------------------------------------------------------------
87,603,900
- ---------------------------------------------------------------------------
LODGING-0.36%
500,000 Hospitality Franchise Systems, Inc.(a) 13,625,000
- ---------------------------------------------------------------------------
Total Consumer Services 471,916,450
- ---------------------------------------------------------------------------
FINANCIAL-2.38%
BANKING-0.20%
160,000 Citicorp(a) 7,640,000
- ---------------------------------------------------------------------------
INSURANCE-0.35%
413,000 Bankers Life Holding Corp. 7,950,250
- ---------------------------------------------------------------------------
150,000 Equitable of Iowa Companies 5,306,250
- ---------------------------------------------------------------------------
13,256,500
- ---------------------------------------------------------------------------
PERSONAL CREDIT-0.79%
250,000 ADVANTA Corp.-Class A 7,125,000
- ---------------------------------------------------------------------------
350,000 ADVANTA Corp.-Class B 9,187,500
- ---------------------------------------------------------------------------
500,000 MBNA Corp. 13,375,000
- ---------------------------------------------------------------------------
29,687,500
- ---------------------------------------------------------------------------
SAVINGS & LOAN-0.45%
350,000 First USA, Inc. 12,337,500
- ---------------------------------------------------------------------------
315,000 Roosevelt Financial Group, Inc. 4,764,375
- ---------------------------------------------------------------------------
17,101,875
- ---------------------------------------------------------------------------
MISCELLANEOUS-0.22%
300,000 Green Tree Financial Corp. 8,212,500
- ---------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.37%
480,000 Equifax, Inc. 13,980,000
- ---------------------------------------------------------------------------
Total Financial 89,878,375
- ---------------------------------------------------------------------------
</TABLE>
F-52
<PAGE> 112
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
RETAIL-7.99%
DEPARTMENT STORES-0.09%
82,400 Kohls Corp.(a) $ 3,481,400
- ----------------------------------------------------------------------------
FOOD STORES-0.79%
300,000 Kroger Co. (The)(a) 7,837,500
- ----------------------------------------------------------------------------
550,000 Safeway, Inc.(a) 16,225,000
- ----------------------------------------------------------------------------
225,000 Stop & Shop Companies, Inc. (The) (a) 5,625,000
- ----------------------------------------------------------------------------
29,687,500
- ----------------------------------------------------------------------------
GENERAL MERCHANDISE, EXCLUDING DEPARTMENT,
STORES-0.78%
400,000 Caldor Corp. (The)(a) 11,450,000
- ----------------------------------------------------------------------------
437,500 Dollar General Corp. 12,687,500
- ----------------------------------------------------------------------------
300,000 Waban, Inc.(a) 5,325,000
- ----------------------------------------------------------------------------
29,462,500
- ----------------------------------------------------------------------------
RESTAURANTS-0.88%
183,000 Applebee's International, Inc. 3,362,625
- ----------------------------------------------------------------------------
300,000 Brinker International, Inc.(a) 6,937,500
- ----------------------------------------------------------------------------
450,000 Outback Steakhouse, Inc.(a) 13,893,750
- ----------------------------------------------------------------------------
600,000 Wendy's International, Inc. 8,850,000
- ----------------------------------------------------------------------------
33,043,875
- ----------------------------------------------------------------------------
SPECIALTY STORES-5.45%
150,000 J. Baker, Inc. 2,531,250
- ----------------------------------------------------------------------------
250,000 Bed Bath & Beyond, Inc.(a) 7,375,000
- ----------------------------------------------------------------------------
430,000 Best Buy & Co.(a) 16,232,500
- ----------------------------------------------------------------------------
150,000 Burlington Coat Factory Warehouse Corp.(a) 1,950,000
- ----------------------------------------------------------------------------
900,000 Circuit City Stores, Inc. 22,950,000
- ----------------------------------------------------------------------------
700,000 Eckerd Corp.(a) 21,700,000
- ----------------------------------------------------------------------------
500,000 Gateway 2000, Inc.(a) 11,718,750
- ----------------------------------------------------------------------------
400,000 General Nutrition Companies(a) 10,200,000
- ----------------------------------------------------------------------------
320,000 Gymboree Corp.(a) 10,400,000
- ----------------------------------------------------------------------------
400,000 Intelligent Electronics, Inc. 6,200,000
- ----------------------------------------------------------------------------
475,000 Lowe's Companies, Inc. 18,881,250
- ----------------------------------------------------------------------------
341,100 Michaels Stores, Inc.(a) 13,835,869
- ----------------------------------------------------------------------------
350,000 Pep Boys-Manny, Moe & Jack 12,512,500
- ----------------------------------------------------------------------------
1,125,000 Staples, Inc.(a) 25,875,000
- ----------------------------------------------------------------------------
98,900 Sunglass Hut International(a) 4,122,894
- ----------------------------------------------------------------------------
</TABLE>
F-53
<PAGE> 113
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
Specialty Stores--(continued)
200,000 Talbots, Inc. $ 6,950,000
- ---------------------------------------------------------------------
250,000 Viking Office Products, Inc.(a) 7,750,000
- ---------------------------------------------------------------------
119,025 Williams Sonoma, Inc.(a) 4,106,362
- ---------------------------------------------------------------------
205,291,375
- ---------------------------------------------------------------------
Total Retail 300,966,650
- ---------------------------------------------------------------------
TRANSPORTATION-0.82%
AIR TRANSPORT/FREIGHT-0.38%
100,000 Atlantic Southeast Airlines, Inc. 1,750,000
- ---------------------------------------------------------------------
400,000 Northwest Airlines Corp.-Class A(a) 8,400,000
- ---------------------------------------------------------------------
200,200 SKYWEST, Inc. 4,104,100
- ---------------------------------------------------------------------
14,254,100
- ---------------------------------------------------------------------
TRUCKING-0.29%
425,000 TNT Freightways Corp. 10,837,500
- ---------------------------------------------------------------------
MISCELLANEOUS-0.15%
112,400 XTRA Corp. 5,732,400
- ---------------------------------------------------------------------
Total Transportation 30,824,000
- ---------------------------------------------------------------------
UTILITIES-0.52%
TELEPHONE-0.52%
320,500 Century Telephone Enterprises, Inc. 9,615,000
- ---------------------------------------------------------------------
200,000 Telephone and Data Systems, Inc. 9,900,000
- ---------------------------------------------------------------------
Total Utilities 19,515,000
- ---------------------------------------------------------------------
WHOLESALE-1.97%
DURABLE GOODS-1.14%
425,000 Arrow Electronics, Inc. 16,043,750
- ---------------------------------------------------------------------
400,000 Avnet, Inc. 15,000,000
- ---------------------------------------------------------------------
600,000 Tech Data Corp.(a) 11,850,000
- ---------------------------------------------------------------------
42,893,750
- ---------------------------------------------------------------------
NONDURABLE GOODS-0.83%
387,500 Cardinal Health, Inc. 18,115,625
- ---------------------------------------------------------------------
525,750 Office Depot, Inc.(a) 13,012,313
- ---------------------------------------------------------------------
31,127,938
- ---------------------------------------------------------------------
Total Wholesale 74,021,688
- ---------------------------------------------------------------------
</TABLE>
F-54
<PAGE> 114
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
OTHER-0.67%
DIVERSIFIED-0.67%
200,000 Cyrk International, Inc.(a) $ 7,800,000
- -------------------------------------------------------------------------------
393,400 Hechinger Co.-Class A 4,376,574
- -------------------------------------------------------------------------------
150,000 Johnson Controls, Inc. 7,462,500
- -------------------------------------------------------------------------------
200,000 Pittston Services Group 5,525,000
- -------------------------------------------------------------------------------
Total Other 25,164,074
- -------------------------------------------------------------------------------
Total Common Stocks 2,847,827,382
- -------------------------------------------------------------------------------
FOREIGN STOCKS-7.19%
AUSTRALIA-0.17%
425,000 Broken Hill Proprietary Co. Ltd. (Diversified) 6,511,000
- -------------------------------------------------------------------------------
CANADA-0.62%
375,000 Corel Corp. (Computer Software & Services) 5,812,500
- -------------------------------------------------------------------------------
237,200 Magna International, Inc.-Class A (Auto Parts) 8,420,600
- -------------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications
250,000 Equipment) 9,031,250
- -------------------------------------------------------------------------------
Total Canada 23,264,350
- -------------------------------------------------------------------------------
FINLAND-0.66%
60,000 Nokia Corp. (Telecommunications Equipment) 9,051,000
- -------------------------------------------------------------------------------
170,000 Nokia Corp.-ADR (Telecommunications Equipment) 12,771,250
- -------------------------------------------------------------------------------
150,000 Outokumpu OY(a) (Metals) 3,174,000
- -------------------------------------------------------------------------------
Total Finland 24,996,250
- -------------------------------------------------------------------------------
FRANCE-0.46%
26,700 Compagnie De Saint-Gobain(a) (Building Materials) 3,387,963
- -------------------------------------------------------------------------------
38,000 Lafarge Coppee S.A. (Building Materials) 3,014,920
- -------------------------------------------------------------------------------
20,000 LVMH Moet Hennessy Louis Vuitton (Beverages) 3,225,800
- -------------------------------------------------------------------------------
11,500 Sidel S.A. (Industrial Machinery) 2,189,945
- -------------------------------------------------------------------------------
50,580 Roussel Uclaf (Drugs) 5,651,303
- -------------------------------------------------------------------------------
Total France 17,469,931
- -------------------------------------------------------------------------------
GERMANY-0.09%
13,000 Mannesmann A.G. (Machinery) 3,475,810
- -------------------------------------------------------------------------------
HONG KONG-0.46%
800,000 Cheung Kong Holdings Ltd. (Real Estate) 3,848,000
- -------------------------------------------------------------------------------
805,000 China Light & Power Co. Ltd. (Electric Services) 4,186,000
- -------------------------------------------------------------------------------
1,000,000 Hutchison Whampoa Ltd. (Diversified) 4,610,000
- -------------------------------------------------------------------------------
628,000 Sun Hung Kai Properties Ltd. (Real Estate) 4,791,640
- -------------------------------------------------------------------------------
Total Hong Kong 17,435,640
- -------------------------------------------------------------------------------
</TABLE>
F-55
<PAGE> 115
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
INDONESIA-0.11%
1,250,000 PT Bank International Indonesia(a) (Banking) $ 4,225,000
- -------------------------------------------------------------------------------
IRELAND-0.44%
Elan Corp. PLC-ADR(a) (Medical Equipment &
450,000 Supplies) 16,593,750
- -------------------------------------------------------------------------------
ITALY-0.08%
Societa Italiana per L'Esercizio delle
1,074,000 Telecomunicazioni, P.A. (Telephone) 2,942,760
- -------------------------------------------------------------------------------
JAPAN-0.29%
27,500 Autobacs Seven (Specialty Stores) 3,463,350
- -------------------------------------------------------------------------------
50,000 Secom Co. Ltd. (Business Services) 3,339,500
- -------------------------------------------------------------------------------
120,000 Tokyo Electron Ltd. (Electronics) 4,012,800
- -------------------------------------------------------------------------------
Total Japan 10,815,650
- -------------------------------------------------------------------------------
MALAYSIA-0.50%
699,000 Genting Berhad (Entertainment) 6,423,810
- -------------------------------------------------------------------------------
938,000 Malayan Banking Berhad (Banking) 6,387,780
- -------------------------------------------------------------------------------
730,000 Telecom Malaysia Berhad (Telephone) 5,913,000
- -------------------------------------------------------------------------------
Total Malaysia 18,724,590
- -------------------------------------------------------------------------------
NETHERLANDS-0.66%
250,000 Madge N.V.(a) (Computer Software & Services) 2,718,750
- -------------------------------------------------------------------------------
OCE Van Der Grinten N.V. (Computer & Office
52,000 Equipment) 2,311,400
- -------------------------------------------------------------------------------
Phillips Electronics N.V.-ADR (Multiple Industry-
500,000 Capital Goods) 16,375,000
- -------------------------------------------------------------------------------
32,850 Ver Ned Uitgever Bezit (Publishing) 3,509,694
- -------------------------------------------------------------------------------
Total Netherlands 24,914,844
- -------------------------------------------------------------------------------
SINGAPORE-0.52%
816,000 Development Bank of Singapore Ltd. (Banking) 8,665,920
- -------------------------------------------------------------------------------
1,184,000 Keppel Corp. Ltd. (Diversified) 10,880,960
- -------------------------------------------------------------------------------
Total Singapore 19,546,880
- -------------------------------------------------------------------------------
SPAIN-0.05%
19,000 Acerinox, S.A. (Steel) 2,102,350
- -------------------------------------------------------------------------------
SWEDEN-1.27%
Aktiebolaget Electrolux (Household
88,000 Appliances/Furnishings) 4,567,200
- -------------------------------------------------------------------------------
140,000 Astra AB (Drugs) 3,735,200
- -------------------------------------------------------------------------------
60,500 Autoliv AB (Auto Parts) 2,135,045
- -------------------------------------------------------------------------------
60,000 Hennes and Mauritz AB (Specialty Stores) 3,318,600
- -------------------------------------------------------------------------------
Telefonaktiebolaget L.M. Ericsson-ADR
500,000 (Telecommunications Services) 30,468,750
- -------------------------------------------------------------------------------
175,000 Volvo AB (Automobile) 3,452,750
- -------------------------------------------------------------------------------
Total Sweden 47,677,545
- -------------------------------------------------------------------------------
</TABLE>
F-56
<PAGE> 116
FINANCIALS
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
SWITZERLAND-0.32%
16,000 Adia S.A.-Bearer(a) (Business Services) $ 2,831,360
- ------------------------------------------------------------------------
3,500 BBC Brown Boveri Ltd. (Engineering) 3,007,550
- ------------------------------------------------------------------------
5,000 Ciba-Geigy Ltd. (Chemicals) 2,917,450
- ------------------------------------------------------------------------
12,000 Merkur Holding A.G. (Retail) 3,147,000
- ------------------------------------------------------------------------
Total Switzerland 11,903,360
- ------------------------------------------------------------------------
UNITED KINGDOM-0.49%
Danka Business Systems PLC-ADR (Computer &
250,000 Software Services) 4,875,000
- ------------------------------------------------------------------------
390,000 Granada Group PLC (Broadcast Media) 3,307,200
- ------------------------------------------------------------------------
444,000 MAI PLC (Financial-Multiple Industry) 1,718,280
- ------------------------------------------------------------------------
765,000 MFI Furniture PLC (Specialty Stores) 1,644,750
- ------------------------------------------------------------------------
330,000 Pearson PLC (Diversified) 3,418,800
- ------------------------------------------------------------------------
210,000 Thorn EMI PLC (Entertainment) 3,336,900
- ------------------------------------------------------------------------
Total United Kingdom 18,300,930
- ------------------------------------------------------------------------
Total Foreign Stocks 270,900,640
- ------------------------------------------------------------------------
</TABLE>
F-57
<PAGE> 117
FINANCIALS
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C>
MASTER NOTE AGREEMENTS-3.98%
Lehman Brothers Holdings Inc., 5.75%,
$ 50,600,000 11/22/94(b) $ 50,600,000
- -------------------------------------------------------------------------
J.P. Morgan Securities Inc., 5.0125%,
99,350,000 01/19/95(c) 99,350,000
- -------------------------------------------------------------------------
Total Master Note Agreements 149,950,000
- -------------------------------------------------------------------------
REPURCHASE AGREEMENTS-2.58%(d)
Goldman, Sachs & Co. Inc., 4.78%,
2,012,778 11/01/94(e) 2,012,778
- -------------------------------------------------------------------------
Goldman, Sachs & Co. Inc., 4.85%,
95,000,000 11/01/94(f) 95,000,000
- -------------------------------------------------------------------------
Total Repurchase Agreements 97,012,778
- -------------------------------------------------------------------------
U.S. TREASURY BILLS-9.21%(g)
9,800,000 U.S. Treasury Bills, 4.57%, 12/22/94 9,734,144
- -------------------------------------------------------------------------
10,000,000 U.S. Treasury Bills, 4.57%, 12/29/94 9,926,400
- -------------------------------------------------------------------------
250,000,000 U.S. Treasury Bills, 4.68%, 01/05/95 247,830,000
- -------------------------------------------------------------------------
50,000,000 U.S. Treasury Bills, 4.77%, 01/12/95 49,511,000
- -------------------------------------------------------------------------
30,000,000 U.S. Treasury Bills, 4.875%, 01/19/95 29,671,500
- -------------------------------------------------------------------------
Total U.S. Treasury Bills 346,673,044
- -------------------------------------------------------------------------
U.S. TREASURY NOTES-2.05%
50,000,000 U.S. Treasury Notes, 7.75%, 02/15/95 50,320,500
- -------------------------------------------------------------------------
27,000,000 U.S. Treasury Notes, 3.875%, 02/28/95 26,865,000
- -------------------------------------------------------------------------
Total U.S. Treasury Notes 77,185,500
- -------------------------------------------------------------------------
TOTAL INVESTMENTS-100.63% 3,789,549,344
- -------------------------------------------------------------------------
OTHER ASSETS LESS LIABIITIES-(0.63%) (23,674,057)
- -------------------------------------------------------------------------
NET ASSETS-100.00% $3,765,875,287
- -------------------------------------------------------------------------
</TABLE>
F-58
<PAGE> 118
FINANCIALS
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Master Note Purchase Agreement may be terminated by the Fund upon three
calendar days telephonic notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on October 31,
1994.
(c) Master Note Purchase Agreement may be terminated by either party upon
thirty business days written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on October 31,
1994.
(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.
(e) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$114,492,117. Collateralized by $119,992,000 U.S. Treasury obligations,
5.125% to 8.00% due 06/30/98 to 11/15/24. The aggregate market value of the
collateral at 10/31/94 was $116,879,377. The Fund's pro-rata interest in
the collateral at 10/31/94 was $2,055,019.
(f) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$390,052,542. Collateralized by $384,015,000 U.S. Treasury obligations,
4.375% to 12.375% due 11/15/95 to 11/15/24. The aggregate market value of
the collateral at 10/31/94 was $398,183,007. The Fund's pro-rata interest
in the collateral at 10/31/94 was $96,993,296.
(g) 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.
See Notes to Financial Statements.
F-59
<PAGE> 119
FINANCIALS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $3,019,759,448) $3,789,549,344
- ------------------------------------------------------------------------
Foreign currencies, at market value (cost $25,632,765) 26,001,950
- ------------------------------------------------------------------------
Cash 1,000,400
- ------------------------------------------------------------------------
Receivables for:
Investments sold 50,063,246
- ------------------------------------------------------------------------
Capital stock sold 17,600,578
- ------------------------------------------------------------------------
Dividends and interest 1,660,576
- ------------------------------------------------------------------------
Investment for deferred compensation plan 10,467
- ------------------------------------------------------------------------
Other assets 171,414
- ------------------------------------------------------------------------
Total assets 3,886,057,975
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 95,292,214
- ------------------------------------------------------------------------
Capital stock reacquired 17,547,214
- ------------------------------------------------------------------------
Deferred compensation 10,467
- ------------------------------------------------------------------------
Variation margin 3,318,750
- ------------------------------------------------------------------------
Accrued advisory fees 1,916,105
- ------------------------------------------------------------------------
Accrued administrative service fees 202,917
- ------------------------------------------------------------------------
Accrued directors' fees 7,195
- ------------------------------------------------------------------------
Accrued distribution fees 916,111
- ------------------------------------------------------------------------
Accrued operating expenses 971,715
- ------------------------------------------------------------------------
Total liabilities 120,182,688
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $3,765,875,287
- ------------------------------------------------------------------------
NET ASSETS:
Institutional Class $ 39,846,690
- ------------------------------------------------------------------------
Retail Class $3,726,028,597
- ------------------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------------------
Outstanding 2,154,465
- ------------------------------------------------------------------------
Retail Class:
Authorized 750,000,000
- ------------------------------------------------------------------------
Outstanding 203,465,955
- ------------------------------------------------------------------------
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $ 18.49
- ------------------------------------------------------------------------
RETAIL CLASS:
Net asset value and redemption price per share $ 18.31
- ------------------------------------------------------------------------
Offering price per share:
(Net asset value of $18.31/94.50%) $ 19.38
- ------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-60
<PAGE> 120
FINANCIALS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $367,126 foreign withholding tax) $ 13,973,647
- --------------------------------------------------------------------------
Interest 19,105,472
- --------------------------------------------------------------------------
Total investment income 33,079,119
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 19,926,116
- --------------------------------------------------------------------------
Administrative service fees 2,196,752
- --------------------------------------------------------------------------
Custodian fees 352,763
- --------------------------------------------------------------------------
Directors' fees 40,328
- --------------------------------------------------------------------------
Distribution fees 9,579,443
- --------------------------------------------------------------------------
Transfer agent fees 3,304,466
- --------------------------------------------------------------------------
Other 2,452,703
- --------------------------------------------------------------------------
Total expenses 37,852,571
- --------------------------------------------------------------------------
Net investment income (loss) (4,773,452)
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain on sales of:
Investment securities 105,423,396
- --------------------------------------------------------------------------
Foreign currencies 101,465
- --------------------------------------------------------------------------
Futures contracts 7,746,837
- --------------------------------------------------------------------------
113,271,698
- --------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 135,035,636
- --------------------------------------------------------------------------
Foreign currencies 384,615
- --------------------------------------------------------------------------
Futures contracts 1,700,754
- --------------------------------------------------------------------------
137,121,005
- --------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 250,392,703
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $245,619,251
- --------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-61
<PAGE> 121
FINANCIALS
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,773,452) $ (6,047,082)
- -----------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies and futures
contracts 113,271,698 13,369,589
- -----------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 137,121,005 441,913,987
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 245,619,251 449,236,494
- -----------------------------------------------------------------------------
Share transactions - net:
Institutional Class 24,797,834 7,517,688
- -----------------------------------------------------------------------------
Retail Class 726,623,024 1,342,521,506
- -----------------------------------------------------------------------------
Net increase in net assets 997,040,109 1,799,275,688
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,768,835,178 969,559,490
- -----------------------------------------------------------------------------
End of period $3,765,875,287 $2,768,835,178
- -----------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,890,417,744 $2,143,770,338
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities, foreign
currencies and futures contracts 103,578,171 (9,693,527)
- -----------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 771,879,372 634,758,367
- -----------------------------------------------------------------------------
$3,765,875,287 $2,768,835,178
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-62
<PAGE> 122
FINANCIALS
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
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, AIM Weingarten Fund and AIM Charter Fund
currently offer two different classes of shares: the Retail Class and the
Institutional Class. AIM Aggressive Growth Fund currently offers only one class
of shares. 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. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date. 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 the pricing service 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 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, 1994,
$4,773,452 was reclassified from undistributed net investment income (loss)
to paid-in capital as a result of permanent book/tax differences. Net assets
of the Fund were unaffected.
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. Expenses of the
Company which are not directly attributable to the operations of any class
of shares or portfolio of the Company are prorated among the classes to
which the expense relates based upon the relative net assets of each class.
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 "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.
F-63
<PAGE> 123
FINANCIALS
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, 1994, AIM waived fees of $298,484. 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 and shareholder services to the Fund. During the year ended October
31, 1994, AIM was reimbursed $2,196,752 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Retail Class 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 Retail Class, whereby the Fund will pay AIM Distributors an
annual rate of 0.30% of the Retail Class' average daily net assets as
compensation for services related to the sales and distribution of the Retail
Class' 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 Retail Class, in amounts of up to
0.25% of the average net assets of the Retail Class attributable to the
customers of such dealers or financial institutions, may be characterized as a
service fee. The Plan also provides that payments to dealers and financial
institutions in excess of such amount, and payments to AIM Distributors, 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 Retail
Class. During the year ended October 31, 1994, the Retail Class paid AIM
Distributors $9,579,443 as compensation under the Plan.
AIM Distributors received commissions of $6,482,169 from sales of shares of
the Retail Class' capital stock during the year ended October 31, 1994. 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 and FMC.
During the year ended October 31, 1994 the Fund paid legal fees of $21,356 for
services rendered by Reid & Priest as counsel to the Company's directors.
Effective September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was
appointed 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 the Company. 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 $40,000,000 committed line of credit with Morgan Guaranty Trust
Company of New York. Interest on borrowings under the line of credit is payable
on maturity. During the year ended October 31, 1994, the Fund did not borrow
under the line of credit agreement. The Fund is charged a commitment fee at the
rate of 3/16 of 1% per annum on the unused portion of the commitment.
F-64
<PAGE> 124
FINANCIALS
NOTE 5 - AFFILIATED COMPANY TRANSACTIONS
Affiliated issuers, as defined in the Investment Company Act of 1940, 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, 1994, were as follows:
<TABLE>
<CAPTION>
SHARE SHARE MARKET
BALANCE BALANCE VALUE
OCTOBER 31, PURCHASES SALES REALIZED DIVIDEND OCTOBER 31, OCTOBER 31,
NAME OF ISSUER: 1993 COST COST GAIN INCOME 1994 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roosevelt Financial
Group, Inc. 105,000 $ 0 $770,975 $92,418 $103,950 315,000* $4,764,375
- ---------------------------------------------------------------------------------------------
</TABLE>
* Includes adjustments for shares received from stock split during the year.
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,
1994 was $3,142,009,072 and $2,256,267,018, respectively. The amount of
unrealized appreciation (depreciation) of investment securities as of October
31, 1994, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $810,386,553
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (44,310,985)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $766,075,568
- ---------------------------------------------------------------------------
</TABLE>
Cost of investments for tax purposes is $3,023,473,776.
NOTE 7 - FUTURES CONTRACT
As of October 31, 1994, $426,800,000 U.S. Treasury obligations were pledged as
collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1994:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
<S> <C>
S&P 500 Index 1,770 contracts/Dec/Buy $1,704,860
- ------------------------------------------------------------------------------
</TABLE>
NOTE 8 - CAPITAL STOCK
Changes in the Retail Class capital stock outstanding for the years ended
October 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold 100,598,652 $1,751,901,830 126,108,990 $1,921,325,662
- ---------------------------------------------------------------------
Reacquired (58,902,798) (1,025,278,806) (37,303,763) (578,804,156)
- ---------------------------------------------------------------------
41,695,854 $ 726,623,024 88,805,227 $1,342,521,506
- ---------------------------------------------------------------------
</TABLE>
F-65
<PAGE> 125
FINANCIALS
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Retail
Class outstanding during each of the years in the six-year period ended
October 31, 1994, the ten months ended October 31, 1988, and each of the years
in the three-year period ended December 31, 1987.(a)
<TABLE>
<CAPTION>
OCTOBER 31,
------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(B)
---------- ---------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $17.04 $13.25 $11.72 $6.59 $9.40 $7.34 $6.35
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Income from
investment
operations:
Net investment
income (loss) (0.02) (0.04) (0.04) (0.03) (0.03) 0.01 (0.03)
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Net gains (losses)
on securities (both
realized
and unrealized) 1.29 3.83 1.76 5.16 (1.23) 2.46 1.02
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Total from
investment
operations 1.27 3.79 1.72 5.13 (1.26) 2.47 0.99
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net
investment income -- -- -- -- (0.01) -- --
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Distributions from
capital gains -- -- (0.19) -- (1.54) (0.41) --
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Total distributions -- -- (0.19) -- (1.55) (0.41) --
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Net asset value, end
of period $18.31 $17.04 $13.25 $11.72 $6.59 $9.40 $7.34
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Total return(c) 7.45 % 28.60 % 14.82 % 77.85 % (16.17)% 35.50% 15.59 %
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $3,726,029 $2,756,497 $966,472 $342,835 $83,304 $74,731 $78,272
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Ratio of expenses to
average net assets 1.2 %(d) 1.2 % 1.2 % 1.4 % 1.4 % 1.4% 1.3 %(e)
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Ratio of net
investment income
(loss) to
average net assets (0.2)%(d) (0.3)% (0.4)% (0.4)% (0.4)% 0.1% (0.6)%(e)
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Portfolio turnover
rate 79 % 70 % 62 % 109 % 192 % 149 % 131 %
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Borrowings for the
period:
Amount of debt
outstanding at end
of period
(000s omitted) -- -- -- -- -- $9,610 $5,266
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Average amount of
debt outstanding
during the period
(000s omitted)(f) -- -- -- -- $2,344 $2,609 $2,148
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Average number of
shares outstanding
during the period
(000s omitted)(f) 182,897 124,101 55,902 21,205 11,397 10,050 10,845
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
Average amount of
debt per share
during the period -- -- -- -- $0.21 $0.26 $0.20
- --------------------- ---------- ---------- -------- -------- ------- ------- -------
</TABLE>
[CAPTION]
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1987 1986(B) 1985
--------- --------- ----------
<S> <C> <C> <C>
Net asset value,
beginning of period $10.58 $10.90 $8.48
- --------------------- --------- --------- ----------
Income from
investment
operations:
Net investment
income (loss) (0.05) (0.07) (0.02)
- --------------------- --------- --------- ---------- ---
Net gains (losses)
on securities (both
realized
and unrealized) 0.36 3.13 2.44
- --------------------- --------- --------- ----------
Total from
investment
operations 0.31 3.06 2.42
- --------------------- --------- --------- ----------
Less distributions:
Dividends from net
investment income -- -- --
- --------------------- --------- --------- ---------- ---
Distributions from
capital gains (4.54) (3.38) --
- --------------------- --------- --------- ----------
Total distributions (4.54) (3.38) --
- --------------------- --------- --------- ----------
Net asset value, end
of period $6.35 $10.58 $10.90
- --------------------- --------- --------- ----------
Total return(c) 2.85 % 28.56 % 28.48%
- --------------------- --------- --------- ----------
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $71,418 $78,885 $101,914
- --------------------- --------- --------- ----------
Ratio of expenses to
average net assets 1.1 % 1.1 % 1.1%
- --------------------- --------- --------- ----------
Ratio of net
investment income
(loss) to
average net assets (0.4)% (0.5)% (0.2)%
- --------------------- --------- --------- ----------
Portfolio turnover
rate 135 % 107 % 117 %
- --------------------- --------- --------- ----------
Borrowings for the
period:
Amount of debt
outstanding at end
of period
(000s omitted) $109 $3,740 $200
- --------------------- --------- --------- ----------
Average amount of
debt outstanding
during the period
(000s omitted)(f) $2,366 $3,188 $1,894
- --------------------- --------- --------- ----------
Average number of
shares outstanding
during the period
(000s omitted)(f) 9,668 8,519 10,811
- --------------------- --------- --------- ----------
Average amount of
debt per share
during the period $0.24 $0.37 $0.18
- --------------------- --------- --------- ----------
</TABLE>
(a) Per share information has been restated to reflect a 2 for 1 stock split,
effected in the form of a dividend, on June 19, 1987.
(b) The Fund changed investment advisors on September 30, 1988 and May 1, 1986.
(c) Does not include sales charges and for periods less than one year, total
returns are not annualized.
(d) Ratios are based on average net assets of $3,174,514,127.
(e) Annualized.
(f) Averages computed on a daily basis.
F-66
