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[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS(R)
RETAIL CLASS OF AIM EQUITY FUNDS, INC.
AIM AGGRESSIVE GROWTH FUND
(Growth)
PROSPECTUS
JUNE 15, 1995
AS REVISED
JULY 3, 1995
This Prospectus contains information about THE AGGRESSIVE
GROWTH FUND ("AGGRESSIVE GROWTH or the "Fund"), one of four
separate investment portfolios comprising series of AIM
Equity Funds, Inc. (the "Company"), an open-end, series,
management investment company.
The Fund is a diversified portfolio which seeks to achieve
long-term growth of capital by investing primarily in
common stocks, convertible bonds, convertible preferred stocks
and warrants of companies which in the opinion of the Fund's
investment advisor are expected to achieve earnings growth
over time at a rate in excess of 15% per year. Effective July
17, 1995, the Fund will temporarily offer its shares to new
investors. See "Summary" and "Closure of the Fund to New
Investors" in this Prospectus for more complete information.
This Prospectus sets forth concisely the information about
the Fund 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 (as revised July 3, 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 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND THE FUND'S 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 FUND
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.
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TABLE OF CONTENTS
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PAGE PAGE
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SUMMARY.................................. 2 How to Purchase Shares................. A-1
THE FUND................................. 4 Terms and Conditions of Purchase of the
Table of Fees and Expenses............. 4 AIM Funds........................... A-2
Financial Highlights................... 5 Special Plans.......................... A-8
Performance............................ 6 Exchange Privilege..................... A-10
Investment Program..................... 6 How to Redeem Shares................... A-12
Management............................. 9 Determination of Net Asset Value....... A-15
Organization of the Company............ 11 Dividends, Distributions and Tax
Closure of the Fund to New Investors... 11 Matters............................. A-16
INVESTOR'S GUIDE TO THE AIM FAMILY OF General Information.................... A-18
FUNDS(R)............................... A-1 APPLICATION INSTRUCTIONS................. B-1
Introduction to The AIM Family of
Funds(R)............................ A-1
</TABLE>
SUMMARY
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THE FUND
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, each
of which pursues unique investment objectives. This Prospectus relates only to
AGGRESSIVE GROWTH. The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which, in the opinion of
the Fund's investment advisor, are expected to achieve earnings growth over time
at a rate in excess of 15% per year. There is no assurance that the investment
objective of the Fund will be achieved. For more complete information on the
Fund's investment policies, see "Investment Program."
The Company also offers other classes of shares in three other investment
portfolios, AIM CHARTER FUND, AIM CONSTELLATION FUND and AIM WEINGARTEN FUND
each of which pursues unique investment objectives. The other classes of shares
of the other Funds of the Company have different sales charges and expenses,
which may affect performance. To obtain information about the other shares of
AIM CHARTER FUND, AIM CONSTELLATION FUND, or AIM WEINGARTEN FUND call (800)
347-4246. See "General Information."
The Board of Directors of the Company has authorized the reopening of
AGGRESSIVE GROWTH to new investors effective July 17, 1995, on the terms
described in the Investor's Guide, except that purchases by new investors will
be subject to a minimum initial purchase amount of $5,000 per account and a
maximum initial purchase amount of $250,000 per account. These minimum and
maximum purchase amounts will apply to all new accounts in the Fund.
AGGRESSIVE GROWTH will cease acceptance of purchase orders for new accounts at
the close of the fifth business day after the date that total purchases, as
measured from the opening of business on July 17, 1995, and including purchases
by shareholders who had opened accounts prior to July 17, 1995, are anticipated
to reach $150 million. New account purchase orders received by the Fund after
such date that are postmarked on or before such closing date will be accepted by
the Fund.
Shareholders who maintain an open account will be able to continue to make
investments in the Fund and reinvest any dividends and capital gains
distributions, as well as open additional accounts in the Fund under certain
conditions. If an account is closed, however, additional investments in the Fund
may not be possible. The Fund may resume sales of its shares to new investors at
some future date. See "Closure of the Fund to New Investors" in this Prospectus
for additional information.
The assets of each Fund are invested in a separate portfolio. The classes 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 the 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 the shares of such class.
Consequently, the amounts available for payment of dividends and the net asset
value per share of each class will vary. See "General Information."
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as the Fund's investment
advisor pursuant to a Master Investment 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 (the "Master Advisory Agreement"), AIM receives a
fee for its services based on the Fund's average daily net assets. Under the
Master Administrative Services Agreement between the Company and AIM dated as of
October 18, 1993 (the "Master Administrative Services Agreement"), AIM may
receive reimbursement of its costs to perform certain accounting and other
administrative services to the Fund. Under a Transfer Agency and Service
Agreement, A I M Fund Services, Inc. ("AFS"),
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AIM's wholly-owned subsidiary and a registered transfer agent, receives a fee
for its provision of transfer agency, dividend distribution and disbursement,
and shareholder services to the Retail Classes of the Fund.
The total advisory fees paid by the Fund is higher than those paid by many
other investment companies of all sizes and investment objectives. However, the
effective fee paid by the Fund at its current size is lower than the fees paid
by many other funds with similar investment objectives. See "Management."
PURCHASING SHARES. Class A shares of the Fund are offered by this Prospectus
at net asset value plus a sales charge of 5.50% of the public offering price
(5.82% of the net amount invested). The sales charge is reduced on purchases of
$25,000 or more. Initial investments must be at least $500 and additional
investments must be at least $50. The minimum initial investment is modified for
investments through tax-qualified retirement plans and accounts initially
established with an Automatic Investment Plan. The distributor of the Fund's
shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston,
TX 77210-4739. See "How to Purchase Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds(R)"). Shares of the Fund
may be exchanged for shares of other funds in The AIM Family of Funds(R) in the
manner and subject to the policies and charges set forth herein. See "Exchange
Privilege."
REDEEMING SHARES. Shareholders may redeem all or a portion of their shares at
their net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1.00% may apply to certain redemptions where
a purchase of more than $1 million is made at net asset value. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund makes distributions of
realized capital gains, if any, on an annual basis. Dividends and distributions
of the Fund may be reinvested at net asset value without payment of a sales
charge in the Fund's shares or may be invested in shares of the other funds in
The AIM Family of Funds(R). See "Dividends, Distributions and Tax Matters" and
"Special Plans."
The AIM Family of Funds(R), The AIM Family of Funds(R) and Design (i.e., the
AIM logo), and AIM and Design are registered service marks of A I M Management
Group Inc.
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THE FUND
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TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Fund understand the
various costs that an investor will bear, both directly and indirectly. The fees
and expenses set forth in the table have been restated to reflect current
agreements with AIM. The rules of the United States Securities and Exchange
Commission (the "Commission") require that the maximum sales charge be reflected
in the table, even though certain investors may qualify for reduced sales
charges. See "How to Purchase Shares."
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Shareholder Transaction Expenses (Retail Class)
Maximum sales load imposed on purchase of shares (as a percentage of
offering price)......................................................... 5.50%
Maximum sales load imposed on reinvested dividends and distributions....... None
Deferred sales load(1)..................................................... None
Redemption fees............................................................ None
Exchange fee(2)............................................................ None
Annual Fund Operating Expenses (Retail Class) (as a percentage of average net
assets)
Management fee (after fee waiver).......................................... .68%
Distribution plan payments(3).............................................. .25%
Other expenses:
Transfer agent fees and costs........................................... .18%
Other................................................................... .22%
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Total other expenses.................................................... .40%
----
Total fund operating expenses.............................................. 1.33%
====
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(1) Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months from the end of the calendar month in
which such purchases were made. See the Investor's Guide, under the
caption "How to Redeem Shares -- Contingent Deferred Sales Charge Program
for Large Purchases."
(2) No fee is charged for exchanges among The AIM Family of Funds(R); however,
a $5 service fee will be charged for exchanges by market timers.
(3) As a result of 12b-1 fees, a long-term shareholder may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
rules of the National Association of Securities Dealers, Inc. Given the
Rule 12b-1 fee of the Fund, however, it is estimated that it would take a
substantial number of years for a shareholder to exceed such maximum
front-end sales charges.
EXAMPLES. An investor 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:
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1 year................................................................ $68
3 years............................................................... $95
5 years............................................................... $124
10 years............................................................... $206
</TABLE>
The above examples assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of $1 million or more, which are made at
net asset value and subject to a contingent deferred sales charge for 18 months
following the end of the calendar month of purchase.
The above example should not be considered representative of actual or future
expenses, which may be greater or less than those shown. In addition, while the
example assumes a 5% annual return, actual performance will vary and may result
in an actual return that is greater or less than 5%. The example assumes
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 for the periods indicated are per share data, ratios and
supplemental data of the Fund. The data for the fiscal year ended October 31,
1994 and the ten months ended October 31, 1993 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 from AIM
Distributors, and the data for the eight years ended December 31, 1992 has been
derived from financial statements audited by Price Waterhouse LLP.
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
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FISCAL TEN
YEAR MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, OCTOBER 31, ---------------------------------------------------
1994 1993 1992(A) 1991 1990 1989 1988
-------- -------- ------- ------- ------ ------- -------
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Net asset value, beginning of period...... $ 23.85 $ 18.52 $ 16.06 $ 11.85 $13.30 $ 11.07 $ 9.86
Income from investment operations:
Net investment income (loss)............. (0.05) (0.02) (0.03) (0.04) 0.08 0.03 0.05
Net gains (losses) on securities (both
realized and unrealized)............... 4.57 5.35 3.41 7.29 (0.95) 2.28 1.21
-------- -------- ------- ------- ------ ------- -------
Total from investment operations......... 4.52 5.33 3.38 7.25 (0.87) 2.31 1.26
-------- -------- ------- ------- ------ ------- -------
Less distributions:
Dividends from net investment income..... -- -- -- -- (0.09) (0.03) (0.05)
Distributions from capital gains......... -- -- (0.92) (3.04) (0.49) (0.05) --
-------- -------- ------- ------- ------ ------- -------
Total distributions...................... -- -- (0.92) (3.04) (0.58) (0.08) (0.05)
-------- -------- ------- ------- ------ ------- -------
Net asset value, end of period............ $ 28.37 $ 23.85 $ 18.52 $ 16.06 $11.85 $ 13.30 $ 11.07
======== ======== ======= ======= ====== ======= =======
Total return(b)........................... 18.96% 28.78% 21.34% 63.90% (6.50)% 20.89% 12.77%
======== ======== ======= ======= ====== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................... $687,238 $217,256 $38,238 $16,218 $9,234 $11,712 $12,793
======== ======== ======= ======= ====== ======= =======
Ratio of expenses to average net
assets(c).............................. 1.07%(e) 1.00%(f) 1.25% 1.25% 1.25% 1.25% 1.22%
======== ======== ======= ======= ====== ======= =======
Ratio of net investment income (loss) to
average net assets(d).................. (0.26)%(e) (0.24)%(f) (0.59)% (0.31)% 0.62% 0.24% 0.38%
======== ======== ======= ======= ====== ======= =======
Portfolio turnover rate.................. 75% 61% 164% 165% 137% 69% 56%
======== ======== ======= ======= ====== ======= =======
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YEAR ENDED DECEMBER 31,
-----------------------------
1987 1986 1985
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Net asset value, beginning of period...... $ 12.10 $ 12.61 $ 10.13
Income from investment operations:
Net investment income (loss)............. -- 0.01 0.10
Net gains (losses) on securities (both
realized and unrealized)............... (1.38) 0.05 2.54
------- ------- -------
Total from investment operations......... (1.38) 0.06 2.64
------- ------- -------
Less distributions:
Dividends from net investment income..... -- (0.08) (0.16)
Distributions from capital gains......... (0.86) (0.49) --
------- ------- -------
Total distributions...................... (0.86) (0.57) (0.16)
------- ------- -------
Net asset value, end of period............ $ 9.86 $ 12.10 $ 12.61
======= ======= =======
Total return(b)........................... (11.52)% 0.37% 26.17%
======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................... $13,991 $18,547 $13,563
======= ======= =======
Ratio of expenses to average net
assets(c).............................. 1.20% 1.19% 1.10%
======= ======= =======
Ratio of net investment income (loss) to
average net assets(d).................. 0.01% 0.11% 1.26%
======= ======= =======
Portfolio turnover rate.................. 118% 106% 66%
======= ======= =======
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(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and, for periods less than one year, total
returns are not annualized.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
and expense reimbursements were 1.09%, 1.17% (annualized), 1.65%, 1.83%,
1.99%, 1.80%, 1.56%, 1.29%, 1.32%, and 1.93% for 1994-85, respectively.
(d) Ratios of net investment income (loss) to average net assets prior to
reduction of advisory fees and expense reimbursements were (0.28)%, (0.41)%
(annualized), (0.99)%, (0.89)%, (0.11)%, (0.31)%, 0.04%, (0.08)%, (0.02)%,
and 0.43% for 1994-85, respectively.
(e) Ratios are based on average net assets of $460,700,057.
(f) Annualized.
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PERFORMANCE
The Fund's performance may be quoted in advertising in terms of yield or total
return. All advertisements of the Fund will disclose the maximum sales charge
imposed on purchases of the Fund's shares. If any advertised performance data
does not reflect the maximum sales charge, if any, such advertisement will
disclose that the sales charge has not been deducted in computing the
performance data, and that, if reflected, the maximum sales charge would reduce
the performance quoted. See the Statement of Additional Information for further
details concerning performance comparisons used in advertisements by the Fund.
Further information regarding the Fund's performance is contained in the annual
report to shareholders which is available upon request and without charge.
Total return shows the overall change in value, including changes in share
price and assuming all the dividends and capital gain distributions are
reinvested and that all charges and expenses are deducted. A cumulative total
return reflects the Fund's performance 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 Fund's performance
had been constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO
EVEN OUT VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH
RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the
components of overall performance, the Fund may separate its cumulative and
average annual returns into income results and capital gain or loss.
Yield is computed in accordance with a standardized formula described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield is a function of the
type and quality of investments, the maturity and the operating expense ratio of
the Fund.
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 the Fund. Such a practice will
have the effect of increasing the Fund's total return. The performance will vary
from time to time and past results are not necessarily indicative of future
results. Performance is a function of its portfolio management in selecting the
type and quality of portfolio securities and is affected by operating expenses
of the Fund and market conditions. A shareholder's investment is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment.
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INVESTMENT PROGRAM
The Company has four series, each of which is a separate investment
portfolio -- CHARTER, WEINGARTEN, AGGRESSIVE GROWTH and CONSTELLATION. CHARTER,
WEINGARTEN and CONSTELLATION are offered to investors pursuant to a separate
prospectus.
The Fund may invest, for temporary or defensive purposes, all or a substantial
portion of its assets in investment grade (high quality) corporate bonds,
commercial paper, or U.S. Government obligations. In addition, a portion of the
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.
The investment objective of the Fund is to achieve long-term growth of capital
by investing primarily in common stocks, convertible bonds, convertible
preferred stocks and warrants of companies which in the opinion of the Fund's
investment advisor are expected to achieve earnings growth over time at a rate
in excess of 15% per year. Many of these companies are in the small to
medium-sized category. 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. The Fund'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" below and "Investment Objectives and Policies" in the Statement of
Additional Information. The Fund's strategy does not preclude investment in
large, seasoned companies which in the judgment of AIM possess superior
potential returns similar to companies with formative growth profiles. The Fund
will also invest in established smaller companies (under $500 million in market
capitalization) which offer exceptional value based upon substantially above
average earnings growth potential relative to market value. Investors should
realize that equity securities of small to medium-sized companies may involve
greater risk than is associated with investing in more established companies.
Small to medium-sized companies often have limited product and market
diversification, fewer financial resources or may be dependent on a few key
managers. Any one of the foregoing may change suddenly and have an immediate
impact on the value of the company's securities. Furthermore, whenever the
securities markets are experiencing rapid price changes due to national economic
trends, secondary growth securities have historically been subject to
exaggerated price changes. The Fund may invest in non-equity securities, such as
corporate bonds or U.S. Government obligations during periods when, in the
opinion of AIM, prevailing market, financial, or economic conditions warrant, as
well as when such holdings are advisable in light of a change in circumstances
of a particular company or within a particular industry.
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There can, of course, be no assurance that the 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 the Fund, as described in this
Prospectus and in the Statement of Additional Information, without shareholder
approval, except in those instances where shareholder approval is expressly
required.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of its objectives and
policies, the Fund may employ one or more of the following strategies in order
to enhance investment results:
REPURCHASE AGREEMENTS. The Fund 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, the Fund could 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 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 AND RELATED OPTIONS. The Fund may purchase and
sell stock index futures contracts and may also purchase options on stock index
futures as a hedge against changes in market conditions. 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 or other currency
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. The Fund will only enter into futures contracts or, purchase options
thereon, as a hedge against changes resulting from market conditions in the
values of the securities held or which the Fund intends to purchase. Generally,
the 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 Fund's investments in futures contracts and options on futures contracts,
including certain related risks. The Fund may purchase or sell futures contracts
or purchase related options if, immediately thereafter, the sum of the amount of
margin deposits and premiums on open positions with respect to futures contracts
and related options would not exceed 5% of the market value of the Fund's total
assets.
WRITING COVERED CALL OPTION CONTRACTS. The Fund may write (sell) covered call
options. The purpose of such transactions is to hedge against changes in the
market value of the 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. The Fund will not engage in such transactions for
speculative purposes.
The Fund may 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 the 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 the 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 the Fund permit the writing of call options on
securities comprising no more than 25% of the value of the Fund's net assets.
The 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. The Fund will not invest more than 15% of its net assets
in illiquid securities, including repurchase agreements with maturities in
excess of seven days.
RULE 144A SECURITIES. The Fund 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 Fund may 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, 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 exceed its applicable
percentage limitation for investments in illiquid securities.
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FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets in
Canadian and other foreign securities which may be payable in U.S. or foreign
currencies and publicly traded in the United States or abroad. For purposes of
computing such limitation, American Depository Receipts, European Depository
Receipts and other securities representing underlying securities of foreign
issues are treated as foreign securities. To the extent the Fund invests in
securities denominated in foreign currencies, the 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 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 exchange or traded
in a foreign over-the-counter market. The Fund 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 Regarding Foreign
Securities" below.
FOREIGN EXCHANGE TRANSACTIONS. The Fund has authority to deal in foreign
exchange between currencies of the different countries in which it will invest
as a hedge against possible variations in the foreign exchange rate between
those currencies. This may be accomplished through direct purchases or sales of
foreign currency, purchases of options on futures contracts with respect to
foreign currency, and contractual agreements to purchase or sell a specified
currency at a specified future date (up to one year) at a price set at the time
of the contract. Such contractual commitments may be forward contracts entered
into directly with another party or exchange-traded futures contracts. The Fund
may purchase and sell options on futures contracts or forward contracts which
are denominated in a particular foreign currency to hedge the risk of
fluctuations in the value of another currency. The Fund's dealings in foreign
exchange will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is the purchase or sale of foreign
currency with respect to specific receivables or payables of the Fund accruing
in connection with the purchase or sale of its portfolio securities, the sale
and redemption of shares of the Fund, or the payment of dividends and
distributions by the Fund. Position hedging is the purchase or sale of foreign
currency with respect to portfolio security positions denominated or quoted in a
foreign currency. The Fund will not speculate in foreign exchange, nor commit
more than 10% of its total assets to foreign exchange hedges.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by the Fund in foreign
securities, whether denominated in U.S. currencies or foreign currencies, may
entail all of the risks set forth below. Investments in ADRs, EDRs or similar
securities also may entail some or all of the risks as set forth below.
Currency Risk. The value of the 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 Fund 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 the Fund's investments.
Regulatory Risk. Foreign companies are not registered with the 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 Fund may be reduced by a withholding tax at the source, which tax would
reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which the Fund
invests 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 the
Fund's investment objectives, regardless of the holding period of that security.
The historical portfolio turnover rates are included in the Financial Highlights
table herein. 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 the Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
8
<PAGE> 9
The investment objectives and policies stated above are not fundamental
policies of the Fund 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 Fund has adopted a number of investment
restrictions, including the following:
BORROWING. The Fund may borrow money to a limited extent from banks (including
the Fund's custodian bank) for temporary or emergency purposes. The Fund may
borrow amounts from banks provided that no borrowing may exceed one-third of the
value of its total assets, including the proceeds of such borrowing, and may
secure such borrowings by pledging up to one-third of the value of its total
assets.
LENDING OF FUND SECURITIES. The Fund may also lend its portfolio securities in
amounts up to one-third of the total assets of the Fund. Such loans could
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 Fund, see the Statement of Additional
Information.
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Fund 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 the Fund, including the Master Advisory Agreement with AIM, the
Master Administrative Services Agreement with AIM, the Master Distribution
Agreement with AIM Distributors as the distributor of the shares of the Fund,
the Custodian Agreement with State Street Bank and Trust Company as custodian
and the Transfer Agency and Service Agreement with AFS as transfer agent. The
day-to-day operations of the 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 the Fund pursuant to the Master
Advisory Agreement. AIM was organized in 1976, and advises or manages 37
investment company portfolios (including the Fund). As of June 1, 1995, the
total assets of the investment company portfolios advised or managed 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 Fund's operations and provides investment advisory services to the Fund.
AIM obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Fund. AIM will not be liable
to the Fund or its 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.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the directors, AIM may
take into account sales of shares of the Fund and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf of the Fund.
ADMINISTRATOR. The Company has entered into a Master Administrative Services
Agreement effective as of October 18, 1993 with AIM, pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Fund, including the services of a principal
financial officer and related staff. As compensation to AIM for its services
under the Master Administrative Services Agreements, the Fund reimburses AIM for
expenses incurred by AIM or its affiliates in connection with such services.
FEE WAIVERS. AIM may in its discretion, from time to time, agree to
voluntarily waive all or any portion of its advisory fee and/or assume certain
expenses of the Fund but will retain its ability to be reimbursed prior to the
end of the fiscal year.
ADVISORY FEES. As compensation for its services AIM is paid an investment
advisory fee. For the fiscal year ended October 31, 1994, AIM received total
advisory fees of $1,903,277 which represented 0.41% of the Fund's average daily
net assets, net of the expense limitation of $133,000.
AIM received reimbursement of administrative services costs for the fiscal
year ended October 31, 1994, which represented 0.10% of the Fund's average net
assets.
AIM reimbursed AFS for providing shareholder servicing for the fiscal year
ended October 31, 1994 which represented 0.09% of the Fund's average daily net
assets.
9
<PAGE> 10
DISTRIBUTOR. The Company has entered into a Master Distribution Agreement,
dated as of October 18, 1993, on behalf of Class A shares of the Retail Class of
the Fund (the "Distribution Agreement") with AIM Distributors, a registered
broker-dealer and a wholly-owned subsidiary of AIM, to act as the distributor of
the shares of the Fund. The address of AIM Distributors is 11 Greenway Plaza,
Suite 1919, Houston, TX 77046-1173. Certain directors and officers of the
Company are affiliated with AIM Distributors.
The Distribution Agreement provides that AIM Distributors has the exclusive
right to distribute shares of the Retail Class of the Fund through affiliated
broker-dealers and through other broker-dealers with whom AIM Distributors has
entered into selected dealer agreements. A Distribution agreement between AFG
and AIM Distributors with substantially identical terms to the Distribution
Agreement, was in effect prior to October 18, 1993.
DISTRIBUTION PLAN. The Company has adopted a Master Distribution Plan
applicable to Class A shares of the Fund (the "Class A Plan") pursuant to Rule
12b-1 under the 1940 Act. Under the Class A Plan, the Company may compensate AIM
Distributors an aggregate amount of 0.25% of the average daily net assets of the
Fund on an annualized basis for the purpose of financing any activity that is
intended to result in the sale of shares of the Fund. The Class A Plan is
designed to compensate AIM Distributors, on a quarterly basis, for certain
promotional and other sales-related costs, and to implement a dealer incentive
program which provides for periodic payments to selected dealers who furnish
continuing personal shareholder services to their customers who purchase and own
shares of the Fund. In addition, certain banks who have entered into a Bank
Shareholder Service Agreement and who sells shares of a Fund on an agency basis,
may receive payments pursuant to the Class A Plan. Administrators of retirement
plans may also be paid fees to offset costs of services. The Company will obtain
a representation from financial institutions that they will be licensed as
dealers as required under applicable state law, or that they will not engage in
activities which would constitute acting as a "dealer" as defined under
applicable state law. Activities appropriate for financing under the Class A
Plan include, but are not limited to, the following: preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; overhead of AIM Distributors; printing
of prospectuses and statements of additional information (and supplements
thereto) and reports for other than existing shareholders; supplemental payments
to dealers under a dealer incentive program; and costs of administering the
Class A Plan. The fees payable to selected dealers, banks and retirement plan
administrators who participate in the program are calculated at the annual rate
of 0.25% of the average daily net asset value of the Fund's shares that are held
in such institution's customers' accounts which were purchased on or after a
prescribed date set forth in the Class A Plan.
The Class A Plan became effective on September 5, 1991, and was most recently
amended on September 27, 1993. The Class A Plan conforms to the amended rules of
the National Association of Securities Dealers, Inc., by providing that, of the
aggregate amount payable under the Class A Plan, payments to dealers and other
financial institutions that provide continuing personal shareholder services to
their customers who purchase and own shares of the Fund, in amounts of up to
0.25% of the average net assets of the Fund attributable to the customers of
such dealers or financial institutions may be characterized as a service fee,
and that payments to dealers and other financial institutions in excess of such
amount and payments to AIM Distributors would be characterized as an asset-based
sales charge pursuant to the Class A Plan. The Class A 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. The Class A Plan does not
obligate the Fund to reimburse AIM Distributors for the actual expenses AIM
Distributors may incur in fulfilling its obligations under the Class A Plan on
behalf of the Fund. Thus, under the Class A Plan, even if AIM Distributors'
actual expenses exceed the fee payable to AIM Distributors thereunder at any
given time, the Fund will not be obligated to pay more than that fee. If AIM
Distributors' expenses are less than the fee it receives, AIM Distributors will
retain the full amount of the fee. Payments pursuant to the Plans are subject to
any applicable limitations imposed by rules of the National Association of
Securities Dealers, Inc.
Under the Class A Plan, AIM Distributors may in its discretion from time to
time agree to waive voluntarily all or any portion of its fee, while retaining
its ability to be reimbursed for such fee prior to the end of each fiscal year.
The Plan may be terminated at any time by a vote of the majority of those
directors who are not interested "interested persons" of the Company or by a
vote of the majority of the outstanding shares.
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.
Robert M. Kippes and Jonathan C. Schoolar are primarily responsible for the
day-to-day management of AGGRESSIVE GROWTH. Mr. Kippes is Vice President of AIM
Capital. He currently serves as co-manager of AGGRESSIVE GROWTH and has been
responsible for the Fund since 1992. Mr. Kippes has been associated with AIM
and/or its affiliates since 1989 and has six years of experience as an
investment professional. 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 1992.
He has been associated with AIM and/or its affiliates since 1986 and has eleven
years of experience as an investment professional.
10
<PAGE> 11
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was organized in 1988 as a Maryland corporation, and is registered
with the 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 the Fund, which has a
Retail Class of Class A shares. Prior to October 15, 1993, the Fund was a
portfolio of AIM Funds Group, a Massachusetts business trust. Pursuant to an
Agreement and Plan of Reorganization between the Company and AIM Funds Group,
the Fund was redomesticated as a portfolio of the Company effective as of
October 15, 1993.
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 CHARTER, WEINGARTEN and
CONSTELLATION, 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 holder of shares of the Fund is entitled to such dividends payable out of
the net assets allocable to the Fund 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 Fund will be entitled to receive pro rata,
subject to the rights of creditors, the net assets of the Company allocable to
the Fund. Fractional shares of the 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.
- --------------------------------------------------------------------------------
CLOSURE OF THE FUND TO NEW INVESTORS
The Fund reached a size in assets under management where, due to the limited
size of the market of common stocks of small capitalized companies, it became
increasingly difficult to satisfy the investment objective and guidelines. For
this reason, the Board of Directors of the Fund determined that it would be
advisable under the then current market conditions to temporarily close
AGGRESSIVE GROWTH to new investors effective as of May 2, 1994.
The Fund will be temporarily open to new investors beginning on July 17, 1995,
as discussed in this Prospectus under "Summary."
Shareholders who maintain open accounts in the Fund will be able to continue
to make additional investments in the Fund. Please note applicable minimum
account balance requirements in the Investor's Guide. Notwithstanding the right
to reinstatement described in the Investor's Guide, no shareholder of AGGRESSIVE
GROWTH who redeems their account in full will have the right of reinstatement.
The Fund may resume sales of shares to new investors at some future date if
the Board of Directors determines that it would be in the best interests of
shareholders.
11
<PAGE> 12
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 13
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 5:30 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS(R)
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS(R)
THE AIM FAMILY OF FUNDS(R) consists of the following mutual funds:
<TABLE>
<S> <C>
AIM AGGRESSIVE GROWTH FUND AIM INCOME FUND
AIM BALANCED FUND AIM INTERNATIONAL EQUITY FUND
AIM CHARTER FUND AIM LIMITED MATURITY TREASURY SHARES
AIM CONSTELLATION FUND AIM MONEY MARKET FUND*
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM MUNICIPAL BOND FUND
AIM GLOBAL GROWTH FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL INCOME FUND AIM TAX-EXEMPT CASH FUND*
AIM GLOBAL UTILITIES FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GOVERNMENT SECURITIES FUND AIM VALUE FUND
AIM GROWTH FUND AIM WEINGARTEN FUND
AIM HIGH YIELD FUND
</TABLE>
* Shares of AIM TAX-EXEMPT CASH FUND, and Class C shares of AIM MONEY MARKET
FUND, are offered to investors at net asset value, without payment of a sales
charge, as described below. Other funds, including the Class A and Class B
shares of AIM MONEY MARKET FUND, are sold with an initial sales charge or
subject to a contingent deferred sales charge upon redemption, as described
below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds(R) ("AIM Funds"), an investor must submit a fully completed New Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by AIM Distributors to sell shares of
the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for a spousal IRA account is $250. There are no minimum initial
investment requirements applicable to money-purchase/profit-sharing plans,
401(k) plans, IRA/SEP, 403(b) plans or 457 (state deferred compensation) plans
(except that the minimum initial investment for salary deferrals for such plans
is $25), or for investment of dividends and distributions of any of the AIM
Funds into any existing AIM Funds account.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of A I M Fund Services, Inc. at one of the following
telephone numbers:
(713) 626-1919 Extension 5224 (in Houston)
(800) 959-4246 (elsewhere)
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (713) 626-1919, Extension 5001 (in Houston) or (800) 347-4246
(elsewhere).
MCF 06/95
A-1
<PAGE> 14
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
Texas Commerce Bank
ABA 113000609
Attn: AIM Wire Purchase
DDA 00100366807
Fund Name/Reference Number
Shareholder Name
Shareholder Account Number
If wires are received after 4:15 p.m. Eastern Time or during a bank holiday,
purchases will be confirmed at the price determined on the next business day of
the applicable AIM Fund.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM AGGRESSIVE GROWTH FUND, AIM BALANCED FUND, AIM CHARTER FUND, AIM
CONSTELLATION FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM GOVERNMENT SECURITIES
FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERNATIONAL
EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM VALUE FUND and
AIM WEINGARTEN FUND, (other than AIM AGGRESSIVE GROWTH FUND and AIM
CONSTELLATION FUND, collectively, the "Multiple Class Funds") may be purchased
at their respective net asset value plus a sales charge as indicated below,
except that shares of AIM TAX-EXEMPT CASH FUND and Class C shares (the "Class C
shares") of AIM MONEY MARKET FUND are sold without a sales charge and Class B
shares (the "Class B shares") of the Multiple Class Funds are sold at net asset
value subject to a contingent deferred sales charge payable upon certain
redemptions. These contingent deferred sales charges are described under the
caption "How to Redeem Shares -- Multiple Distribution System." Securities
dealers and other persons entitled to receive compensation for selling or
servicing shares of a Multiple Class Fund may receive different compensation for
selling or servicing one particular class of shares over another class in the
same Multiple Class Fund. Factors an investor should consider prior to
purchasing Class A or Class B shares (or, if applicable, Class C shares) of a
Multiple Class Fund are described below under "Special Information Relating to
Multiple Class Funds." For information on purchasing any of the AIM Funds and to
receive a prospectus, please call (713) 626-1919, Extension 5001 (in Houston) or
(800) 347-4246 (elsewhere). As described below, the sales charge otherwise
applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value." The following tables show the sales charge and dealer concession
at various investment levels for the AIM Funds.
MCF 06/95
A-2
<PAGE> 15
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM AGGRESSIVE GROWTH FUND, AIM
CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH
FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM VALUE FUND and
AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
----------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. Purchases of $1,000,000 or more are at net asset value, subject to
a contingent deferred sales charge of 1% if shares are redeemed prior to 18
months from the end of the calendar month of the date of purchase, as described
under the caption "How to Redeem Shares -- Contingent Deferred Sales Charge
Program for Large Purchases."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: AIM TAX-EXEMPT BOND FUND OF CONNECTICUT; and the Class A
shares of each of AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GOVERNMENT SECURITIES FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
----------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. Purchases of $1,000,000 or more are at net asset value, subject to
a contingent deferred sales charge of 1% if shares are redeemed prior to 18
months from the end of the calendar month of the date of purchase, as described
under the caption "How to Redeem Shares -- Contingent Deferred Sales Charge
Program for Large Purchases."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE
INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
----------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions.
MCF 06/95
A-3
<PAGE> 16
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives will take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.0% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
In June 1992, AIM Management entered into a strategic alliance with CIGNA
Investments, Inc. ("CII"), pursuant to which AIM became the investment advisor
to certain AIM Funds formerly managed by CII, and AIM Distributors became the
principal underwriter of such funds. As part of the strategic alliance, CIGNA
Securities, Inc. ("CSI") entered into a dealer agreement with AIM Distributors
pursuant to which CSI may be entitled to one-half of the sales load retention of
AIM Distributors on the sale of shares of the AIM Funds if CSI meets certain
annual sales goals related to the sale of certain AIM Funds.
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than the Money Market Funds, as described below) received by dealers
prior to 4:15 p.m. Eastern Time on any business day of an AIM Fund and either
received by AIM Distributors in its Houston, Texas office prior to 5:00 p.m.
Central Time on that day or transmitted by dealers to the Transfer Agent through
the facilities of the National Securities Clearing Corporation ("NSCC") by 7:00
p.m. Eastern Time on that day, will be confirmed at the price determined as of
the close of that day. Orders received by dealers after 4:15 p.m. Eastern Time
will be confirmed at the price determined on the next business day of the AIM
Fund. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis to AIM Distributors or to the Transfer Agent
through the facilities of NSCC. Any loss resulting from the dealer's failure to
submit an order within the prescribed time frame will be borne by that dealer.
Please see "How to Purchase Shares -- Purchases by Wire" for information on
obtaining a reference number for wire orders, which will facilitate the handling
of such orders and ensure prompt credit to an investor's account. A "business
day" of an AIM Fund is any day on which the New York Stock Exchange is open for
business, except for AIM LIMITED MATURITY TREASURY SHARES, for which a "business
day" is any day on which either the New York Stock Exchange or such fund's
custodian bank 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.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class
Funds, other than AIM MONEY MARKET FUND, currently offer two classes of shares,
and AIM MONEY MARKET FUND currently offers three classes of shares, through
separate distribution systems (the "Multiple Distribution System"). Although the
Class A and Class B shares (and with respect to AIM MONEY MARKET FUND, Class C
shares) of a particular Multiple Class Fund represent an interest in the same
portfolio of investments, each class is subject to a different distribution
structure and, as a result, differing expenses. This Multiple Distribution
System allows investors to select the class that is best suited to the
investor's needs and objectives. In considering the options afforded by the
Multiple Distribution Sys-
MCF 06/95
A-4
<PAGE> 17
tem, investors should consider both the applicable initial sales charge or
contingent deferred sales charge, as well as the ongoing expenses borne by Class
A or Class B shares and, if applicable, Class C shares, and other relevant
factors, such as whether his or her investment goals are long-term or
short-term.
CLASS A SHARES are sold subject to the initial sales charges described
above and are subject to the other fees and expenses described herein.
Class A shares of AIM MONEY MARKET FUND are designed to meet the needs of
an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares an investor owns may be exchanged at net
asset value for Class A shares of another Multiple Class Fund or shares of
another AIM Fund which is not a Multiple Class Fund.
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Class B Plan payments of 1.00% per
annum on the average daily net assets of a Multiple Class Fund attributable
to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the end of the calendar month in which a purchase was
made are subject to a contingent deferred sales charge ranging from 5% for
redemptions made within the first year to 1% for redemptions made within
the sixth year. No contingent deferred sales charge will be imposed if
Class B shares are redeemed after six years from the end of the calendar
month in which the purchase of Class B shares was made. Redemptions of
Class B shares and associated charges are further described under the
caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Class B Plan payments associated
with Class B shares. See "Management --Distribution Plans."
CLASS C SHARES of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. Such
shares are, however, subject to the other fees and expenses described in
the prospectus for AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO MONEY MARKET FUNDS. Shares of AIM MONEY MARKET
FUND or AIM TAX-EXEMPT CASH FUND (the "Money Market Funds") are purchased or
exchanged at the net asset value next determined after acceptance of an order
for purchase or exchange in proper form, except for Class A shares of AIM MONEY
MARKET FUND, which are sold with a sales charge. Net asset value is normally
determined at 12:00 noon and 4:15 p.m. Eastern Time on each business day of AIM
MONEY MARKET FUND and at 4:15 p.m. Eastern Time on each business day of AIM
TAX-EXEMPT CASH FUND. Because each Money Market Fund uses the amortized cost
method of valuing the securities it holds and rounds its per share net asset
value to the nearest whole cent, it is anticipated that the net asset value of
the shares of such funds will remain constant at $1.00 per share. However, there
is no assurance that either Money Market Fund can maintain a $1.00 net asset
value per share. In order to earn dividends with respect to AIM MONEY MARKET
FUND on the same day that a purchase is made, purchase payments in the form of
federal funds must be received by the Transfer Agent before 12:00 noon Eastern
Time on that day. See "How to Purchase Shares -- Purchases by Wire." Purchases
made by payments in any other form, or payments in the form of federal funds
received after such time, will begin to earn dividends on the next business day
following the date of purchase. The Money Market Funds generally will not issue
share certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position. Class B shares of
AIM MONEY MARKET FUND are designed for temporary investment as part of an
investment program in the Class B shares and, unlike shares of most money market
funds, are subject to a contingent deferred sales charge as well as Rule 12b-1
distribution fees and service fees.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of shares of AIM
TAX-EXEMPT CASH FUND, Class C shares of AIM MONEY MARKET FUND and Class B shares
of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
MCF 06/95
A-5
<PAGE> 18
The term "purchaser" means:
- an individual and his or her spouse and minor children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an Individual Retirement Account (IRA),
a single-participant money-purchase/profit-sharing plan or an individual
participant in a 403(b) Plan (unless such 403(b) plan qualifies as the
purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code, a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension Accounts ("SARSEP")) and 457 plans,
although more than one beneficiary or participant is involved;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. or A I M Capital
Management, Inc.
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) AIM TAX-EXEMPT CASH FUND and Class C shares of AIM MONEY MARKET FUND and
(ii) Class B shares of the Multiple Class Funds) within the following 13
consecutive months. By marking the LOI section on the account application and by
signing the account application, the purchaser indicates that he understands and
agrees to the terms of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attor-
MCF 06/95
A-6
<PAGE> 19
<TABLE>
<S> <C>
[AIM LOGO APPEARS HERE]
ACCOUNT APPLICATION For AIM Use Only ________________ - _________________________________
____________________________________________________________________________________________________________________________________
1 TYPE OF ACCOUNT (PLEASE PRINT)
[ ] INDIVIDUAL [ ] JOINT
Name ____________________________________________________________ Social Security No. ___________ - ____________ - ____________
(Account will not be opened without a Social Security No.)
Joint Registrant (if any)1,2
Name ____________________________________________________________
1 Use only the Social Security number of the first listed joint tenant.
2 For joint registrations, the account registration will be joint tenants with right of survivorship and not tenants in common
unless tenants in common or community property registrations are requested. I understand that I am responsible for consulting
form of ownership.
_________________________________________________________________________________________________________________________________
[ ] UNIFORM GIFT TO MINORS or [ ] UNIFORM TRANSFER TO MINORS (where allowed by law)
Name of Adult Custodian (only one permitted)
Name ________________________________________________________
Minor's Date of Birth __________ - _________ - ______________
Name of Minor (only one permitted)
Name _____________________________________________________ Minor's Social Security No. ___________ - ____________ - ____________
(Account will not be opened without minor's Social Security No.)
under the __________________________________________ Uniform Gifts/Transfers to Minors Act.
State of Residence of Minor
_________________________________________________________________________________________________________________________________
[ ] CORPORATION [ ] PARTNERSHIP Taxpayer I.D. No. ____________ - ___________________________
[ ] TRUST* [ ] OTHER Social Security No. ____________ - __________ - ______________
(Account will not be opened without Taxpayer I.D. No. or Social Security No.)
Name of Corporation, Partnership, Trust or Other ________________________________________________________________________________
_________________________________________________________________________________________________________________________________
Name(s) of Trustee(s) ___________________________________________________________________________________________________________
*If a trust, include date of trust instrument and list
trustees if they are to be named in the registration. Date of the Trust Agreement ___________ - ___________ - _____________
____________________________________________________________________________________________________________________________________
2 MAILING ADDRESS
Street or P.O. Box __________________________________________________ Daytime Telephone ___________ - ___________________________
______________________________________________________________________________________________________________
City ____________________________________________________ State _________ Zip ________________ - __________________
____________________________________________________________________________________________________________________________________
3 FOR DEALER USE ONLY (PLEASE PRINT)
We hereby authorize A I M Distributors, Inc. to act as our agent in connection with transactions authorized by the Application
and agree to notify A I M Distributors, Inc. of any purchases made under a Letter of Intent or Right of Accumulation. If this
Application includes a Telephone Exchange Privilege authorization, a Telephone Redemption Privilege authorization or a Systematic
Withdrawal Plan request, we guarantee the signature(s) in this Application.
Dealer's Name ___________________________________________________________________________________________________________________
Main Office Address _____________________________________________________________________________________________________________
Branch # ______________________ Rep # ______________________________ Representative's Name ______________________________________
Branch Address __________________________________________________________ Telephone No. ___________ - ___________________________
__________________________________________________________________________________________________________________
Authorized Signature of Dealer _________________________________________________ Title __________________________________________
For AIM Use Only
_________________________ - _______________________________ - _______________________________
06/95 MCF
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>
____________________________________________________________________________________________________________________________________
4 INVESTMENT INFORMATION
METHOD OF INVESTMENT
[ ] I have enclosed a check for a minimum of $500 per AIM Fund.
[ ] I have enclosed a check for a minimum of $50 per AIM Fund and completed the Automatic Investment Plan information located
at the end of this Application.
[ ] I purchased _____ shares of _______________________ Fund through my broker on ____ /____ /____. Confirm #________________
[ ] I will wire money from my bank account to AIM. Please call me at (_____)________________ to confirm my new account number.
PLEASE MAKE MY INVESTMENT IN THE AIM FUNDS DESIGNATED BELOW:
Fund Investment Class of Shares (Check one)
[ ] AIM Aggressive Growth Fund $ __________________________________________ [ ] Class A (only)
[ ] AIM Balanced Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Charter Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Constellation Fund __________________________________________ [ ] Class A (only)
[ ] AIM Global Aggressive Growth Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Global Growth Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Global Income Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Global Utilities Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Government Securities Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Growth Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM High Yield Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Income Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM International Equity Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Money Market Fund __________________________________________ [ ] Class A [ ] Class B [ ] Class C
[ ] AIM Municipal Bond Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Value Fund __________________________________________ [ ] Class A [ ] Class B
[ ] AIM Weingarten Fund __________________________________________ [ ] Class A [ ] Class B
Total Investment Amount: __________________________________________
If no class of shares is selected, Class A Shares will be purchased, except in the case of AIM Money Market Fund, where Class C
Shares will be purchased.
PLEASE MAKE YOUR CHECK PAYABLE TO THE AIM FUND IN WHICH YOU ARE INVESTING, OR IF YOU ARE INVESTING IN MORE THAN ONE AIM FUND,
TO AIM FUND SERVICES, INC.
____________________________________________________________________________________________________________________________________
5 REDUCED SALES CHARGES (AVAILABLE FOR CLASS A SHARES ONLY)
RIGHT OF ACCUMULATION.
Are you a shareholder in another AIM Fund? [ ] Yes [ ] No
[ ] I apply for Right of Accumulation reduced sales charges based on the following AIM Fund accounts (excluding Class B and
Class C Shares).
FUND Account No. or Social Security No.
_________________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________________
LETTER OF INTENT.
[ ] I agree to the Letter of Intent provisions in the AIM Fund's current prospectus. During a 13-month period, I plan to invest
in AIM Fund accounts (excluding Class B and Class C Shares) a dollar amount of at least:
[ ] $25,000 [ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
____________________________________________________________________________________________________________________________________
6 DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
Dividends and capital gains will be reinvested in the same AIM Fund if no other option is selected, or if a Systematic
Withdrawal Plan is selected.
DIVIDENDS CAPITAL GAINS
[ ] I wish to reinvest dividends in the same AIM Fund. [ ] I wish to reinvest capital gains in the same AIM Fund.
[ ] I wish to have dividends paid in cash. [ ] I wish to have capital gains paid in cash.
[ ] Please reinvest dividends and capital gains in the following AIM Fund (must be within the same
Class of Shares):* ___________________________________________________________________________
*If reinvesting dividends and capital gains into another AIM Fund, I have read the prospectus for that AIM Fund. Also, I
understand that I must have an existing account in that AIM Fund with a market value of at least $500 or make an initial
investment of at least $10,000 in the distribution-paying AIM Fund. I also understand that if dividends and capital gains
are to be reinvested into another AIM Fund, they must both be reinvested into the same AIM Fund.
06/95 MCF
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C>
OPTIONAL FEATURES
____________________________________________________________________________________________________________________________________
7 SYSTEMATIC WITHDRAWAL PLAN
I have at least $5,000 in shares in my AIM Fund account for which no certificates have been issued and would like to receive
payments:
[ ] Monthly [ ] Quarterly [ ] Annually1 Startup Month ________ Payments should be made on, or near the [ ] 10th or
[ ] 25th of the month.
Payments should be from:
________________________________ Fund in the amount of ________________________________2 [ ] dollars ($50 minimum) [ ] shares
________________________________ Fund in the amount of ________________________________2 [ ] dollars ($50 minimum) [ ] shares
________________________________ Fund in the amount of ________________________________2 [ ] dollars ($50 minimum) [ ] shares
Shares will be liquidated at the then current net asset value price of the AIM Fund.
1 The Systematic Withdrawal Plan is not available on an annual basis for Class B Shares.
2 If no payment option is specified, payment will be made in fixed dollars.
Withdrawals from Class B Shares which exceed on an annual basis 12% of the value of the account balance at the time the plan
commenced may be subject to a contingent deferred sales charge, as set forth in the AIM Fund's current prospectus.
Please mail checks to: [ ] Address of Record (named in Section 2) [ ] Bank of Record (named in Section 10) [ ] Other:
Name ________________________________________________________________________________________________________________________
Address ________________________________________________________________________________________________________________________
City _____________________________________________________________________ State _______ Zip ______________ - ______________
____________________________________________________________________________________________________________________________________
8 DOLLAR-COST AVERAGING PLAN
I have at least $5,000 in shares in my ______________________ Fund account, for which no certificates have been issued, and I
would like to exchange:
$ _______________________________ into the _________________________________________ Fund, Account #________________________
($50 minimum)
$ _______________________________ into the _________________________________________ Fund, Account #________________________
($50 minimum)
$ _______________________________ into the _________________________________________ Fund, Account #________________________
($50 minimum)
on a [ ] monthly [ ] quarterly basis starting in the month of___________________________________________________________
Dollar-cost averaging is only available within the same class of shares.
____________________________________________________________________________________________________________________________________
9 TELEPHONE EXCHANGE PRIVILEGE AND/OR TELEPHONE REDEMPTION PRIVILEGE
Unless indicated below, I authorize the Transfer Agent to accept instructions from any person to exchange or redeem shares
in my account(s) by telephone, in accordance with the procedures and conditions set forth in the AIM Fund's current prospectus
I understand that the exchange privilege is only available for exchanges within the same class of shares.
[ ] I DO NOT WANT THE TELEPHONE EXCHANGE PRIVILEGE. [ ] I DO NOT WANT THE TELEPHONE REDEMPTION PRIVILEGE.
Redemptions by telephone must be for an amount less than $50,000 and will be sent by check via U.S. Mail to the address of
record, or sent to the bank of record, if Section 10 is completed for redemption by wire. Redemptions of Class B Shares may be
subject to a contingent deferred sales charge, as set forth in the AIM Fund's current prospectus.
In the event that the mailing address or bank of record has been changed within 30 days of the redemption request, the
redemption request must be in writing and signature guaranteed. When requesting redemptions in writing, please sign exactly
as the account is registered.
A I M Distributors, Inc. and A I M Fund Services, Inc. will not be liable for any loss, expense or cost arising out of any
telephone exchange or redemption request effected in accordance with the authorization(s) set forth in this Application if they
reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions, requests
for confirmation of the shareholder's Social Security number and current address, and mailings of confirmations promptly after
the transaction.
____________________________________________________________________________________________________________________________________
10 BANK OF RECORD
Please attach a voided check in the space provided in the Automatic Investment Plan section located at the end of this
Application.
Bank Name ________________________________________________________________________________________________________________
Address ________________________________________________________________________________________________________________
City _________________________________________________________________________ State _________ Zip ________________
Bank ABA Number ________________________________________ Bank Account Number _________________________________________________
Account Name ________________________________________________________________________________________________________________
06/95 MCF
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
SIGNATURE AND DEALER INFORMATION
____________________________________________________________________________________________________________________________________
11 SIGNATURE AND TAXPAYER CERTIFICATION
The undersigned warrants that I (we) have full authority and, if a natural person, I (we) am (are) of legal age to purchase
shares pursuant to this Application, and have received a current prospectus for the AIM Fund(s) in which I (we) am (are)
investing. I (we) hereby agree to all terms and conditions set forth in the prospectus(es) for the AIM Fund(s) in which I (we)
am (are) investing, and further agree that this purchase of shares and all future purchases of shares shall be subject to the
terms and conditions set forth in such prospectus(es) as they are in effect from time to time. THE UNDERSIGNED ACKNOWLEDGES THAT
TELEPHONE EXCHANGE PRIVILEGE AND TELEPHONE REDEMPTION PRIVILEGE ARE AUTOMATIC AND THAT I (WE) MAY BEAR THE RISK OF LOSS IN THE
EVENT OF FRAUDULENT USE OF THESE PRIVILEGES. If I (we) do not want the Telephone Exchange Privilege or the Telephone Redemption
Privilege, I (we) have so indicated on this Application.
WITHHOLDING INFORMATION (SUBSTITUTE FORM W-9)
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund(s) is (are) required to have the following certification:
Under the penalties of perjury I certify by signing this Application as provided below that:
(1) The number shown in Section 1 of this Application is my correct Social Security (or Tax Identification) Number, and
(2) I am not subject to backup withholding either because (a) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (b) the
IRS has notified me that I am no longer subject to backup withholding. (This paragraph (2) does not apply to real estate
transactions, mortgage interest paid, the acquisition or abandonment of secured property, contributions to an individual
retirement arrangement and payments other than interest and dividends.)
YOU MUST CROSS OUT PARAGRAPH (2) ABOVE IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
In addition, the Fund hereby incorporates by reference into this section of the Application either the IRS instructions for
Form W-9 or the substance of those instructions whichever is attached to this Application.
SIGNATURE PROVISIONS
I/We, the undersigned Shareholder(s), have read and understand the foregoing Application and the attached material included
herein by reference. In addition, I/we certify that the information which I/we have provided and the information which is
included within the Application and the attached material included herein by reference is accurate including but not limited to
the representations contained in the Withholding Information section of this Application above.
Dated _______________________________, 19 _________
Signature of shareholder X ______________________________________________________________________________________________________
Signature of shareholder X ______________________________________________________________________________________________________
(if more than one shareholder)
Please sign exactly as the account is registered.
____________________________________________________________________________________________________________________________________
SERVICE ASSISTANCE
Our knowledgeable Client Services Representatives are available to assist you between 7:30 a.m and 5:30 p.m. Central Time
at (800) 959-4246.
____________________________________________________________________________________________________________________________________
MAILING INSTRUCTIONS
Mail your completed account application and check to:
The AIM Family of Funds(R)
Attn: Account Processing
P.O. Box 4739
Houston, TX 77210-4739
[AIM LOGO] A I M DISTRIBUTORS, INC.
06/95 MCF
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
[AIM LOGO APPEARS HERE]
AUTOMATIC INVESTMENT PLAN THE AIM FAMILY OF FUNDS(R)
To establish regular, monthly purchases of Fund shares.
The Automatic Investment Plan is a service available to shareholders of The AIM Family of Funds(R), making possible regular, monthly
purchases of AIM Funds to allow dollar-cost averaging. Each month, A I M Fund Services, Inc. can arrange for an amount of money
selected by you ($50 minimum per AIM Fund) to be deducted from your checking or savings account and used to purchase shares of a
specified AIM Fund. You will receive confirmations from A I M Fund Services, Inc., and your bank statement will reflect the amount
of the draft.
____________________________________________________________________________________________________________________________________
1 DRAFT AMOUNT
I authorize you to withdraw a total of $_________________ ($50 minimum) from my checking/savings account at the bank shown below,
beginning in ____________________________________ and invest this amount in shares of the AIM Fund listed below.
(month)
I authorize for you to do this on, or about the * [ ] 10th, [ ] 25th or [ ] 10th and 25th days of each month
*If no option is selected, your account will be drafted on, or near, the 10th of the month.
I agree that if the draft is not honored by my bank upon presentation, A I M Fund Services, Inc. may discontinue this service.
I also authorize A I M Fund Services, Inc. to liquidate sufficient shares of the Fund to make up any deficiency resulting from
a dishonored draft. I understand that this plan may be discontinued at any time by the AIM Fund or by myself by written notice
to A I M Fund Services, Inc. received no later than ten business days prior to the above designated investment date.
____________________________________________________________________________________________________________________________________
2 FUND ACCOUNT INFORMATION (Please enter information exactly as your account is registered.)
Name(s) _________________________________________________________________ AIM Account # _________________________________________
_________________________________________________________________
$ _____________________________ into the _________________________________________________________ Fund
($50 minimum)
$ _____________________________ into the _________________________________________________________ Fund
($50 minimum)
Signature _____________________________________________________ Signature _____________________________________________________
(All registered owners must sign.) (All registered owners must sign.)
*Please note that each draft (per AIM Fund account) will be treated as a separate item by your bank.
If you have shares in more than two AIM Funds please attach a separate sheet with the information requested above for such
additional AIM Funds.
____________________________________________________________________________________________________________________________________
3 BANK AUTHORIZATION
Name of Bank ____________________________________________________________________________________________________________________
Address of Bank _________________________________________________________________________________________________________________
Street City State Zip Code
ABA Routing # _________________________________________________ Bank account # ________________________________________________
[ ] Checking [ ] Savings
Please honor drafts on my account by A I M Fund Services, Inc. ("AFS"). Your authority to do so shall continue until you receive
further notice from me revoking this authority. You may terminate your participation in this arrangement by written notice either
to AFS or me. I agree that your rights with respect to each draft shall be the same as if it were drawn by me. I further agree
that should any draft be dishonored, with or without cause, intentionally or inadvertently, you shall be under no liability
whatsoever.
_______________________________________________________________ _______________________________________________________________
Depositor's Name (Please print) Signature (exactly as appearing on bank records)
....................................................................................................................................
___________________________________________________________
VOIDED CHECK | |
| |
ATTACH YOUR VOIDED CHECK HERE. | ??????? 000 |
| *********** |
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739 | ************** |
| |
Phone: 800-959-4246 | _________ |
| VOID $ _________ |
| |
[AIM LOGO] A I M DISTRIBUTORS, INC. |___________________________________________________________|
06/95 MCF
</TABLE>
<PAGE> 24
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 25
ney to surrender for redemption any or all escrowed shares, to make up such
difference within 60 days of the expiration date. Full shares and any cash
proceeds for a fractional share remaining after such redemption will be released
from escrow.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH
FUND and Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the
Multiple Class Funds) at the time of the proposed purchase. Rights of
Accumulation are also available to holders of the Connecticut General Guaranteed
Account, established for tax-qualified group annuities, for contracts purchased
on or before June 30, 1992. To determine whether or not a reduced initial sales
charge applies to a proposed purchase, AIM Distributors takes into account not
only the money which is invested upon such proposed purchase, but also the value
of all shares of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH FUND and
Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the Multiple
Class Funds) owned by such purchaser, calculated at their then current public
offering price. If a purchaser so qualifies for a reduced sales charge, the
reduced sales charge applies to the total amount of money then being invested by
such purchaser and not just to the portion that exceeds the breakpoint above
which a reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum initial sales charge of 5.50%,
the reduced initial sales charge of 5.25% will apply to the full $20,000
purchase and not just to the $15,000 in excess of the $25,000 breakpoint. To
qualify for obtaining the discount applicable to a particular purchase, the
purchaser or his dealer must furnish AIM Distributors with a list of the account
numbers and the names in which such accounts of the purchaser are registered at
the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) AIM Management and
its affiliated companies; (b) any current or retired officer, director, trustee
or employee, or any member of the immediate family (including spouse, minor
children, parents and parents of spouse) of any such person, of AIM Management
or its affiliates or of certain mutual funds which are advised or managed by
AIM, or any trust established exclusively for the benefit of such persons; (c)
any employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, minor children, parents
and parents of spouse) of any such person, or of CIGNA Corporation or of any of
its affiliated companies, or of The Shareholders Services Group, Inc., a
wholly-owned subsidiary of First Data Corporation; (e) any investment company
sponsored by CIGNA Investments, Inc. or any of its affiliated companies for the
benefit of its directors' deferred compensation plans; (f) discretionary advised
clients of AIM or AIM Capital; (g) registered representatives and employees of
dealers who have entered into agreements with AIM Distributors (or financial
institutions that have arrangements with such dealers with respect to the sale
of shares of the AIM Funds) and any member of the immediate family (including
spouse, minor children, parents and parents of spouse) of any such person,
provided that purchases at net asset value are permitted by the policies of such
person's employer; and (h) certain broker-dealers, investment advisers or bank
trust departments that provide asset allocation or similar specialized
investment services to their customers, that charge a minimum annual fee for
such services, and that have entered into an agreement with AIM Distributors
with respect to their use of the AIM Funds in connection with such services.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the initial amount invested in
the fund(s) is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, or
(3) such shares are purchased by an employer-sponsored plan with at least 100
eligible employees. Section 403(b) plans sponsored by public educational
institutions
MCF 06/95
A-7
<PAGE> 26
will not be eligible for net asset value purchases based on the aggregate
investment made by the plan or number of eligible employees. Participants in
such plans will be eligible for reduced sales charges based solely on the
aggregate value of their individual investments in the applicable AIM Fund.
PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR SUCH
PLANS. AIM Distributors may pay investment dealers or other financial service
firms up to 1.00% of the net asset value of any shares of the Load Funds, up to
0.10% of the net asset value of any shares of AIM LIMITED MATURITY TREASURY
SHARES, and up to 0.25% of the net asset value of any shares of all other AIM
Funds sold at net asset value to an employee benefit plan in accordance with
this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Shares of such funds may also be purchased at net asset value by
other unit investment trusts approved by the Board of Directors of AIM Equity
Funds, Inc. Unit holders of such trusts may elect to invest cash distributions
from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION
FUND at net asset value, including: (a) distributions of any dividend income or
other income received by such trusts; (b) distributions of any net capital gains
received in respect of Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND used to redeem units of such trusts; and (c)
proceeds from the maturity of the Treasury Obligations at the termination dates
of such trusts. Prior to the termination dates of such trusts, a unit holder may
invest the proceeds from the redemption or repurchase of his units in Class A
shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net asset value,
provided: (a) that the investment in Class A shares of AIM WEINGARTEN FUND or
AIM CONSTELLATION FUND is effected within 30 days of such redemption or
repurchase; and (b) that the unit holder or his dealer provides AIM Distributors
with a letter which: (i) identifies the name, address and telephone number of
the dealer who sold to the unit holder the units to be redeemed or repurchased;
and (ii) states that the investment in Class A shares of AIM WEINGARTEN FUND or
AIM CONSTELLATION FUND is being funded exclusively by the proceeds from the
redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AIM Distributors at the address
provided under "How to Purchase Shares," or by calling the Client Services
Department of AIM Distributors at the phone numbers provided under "How to
Purchase Shares." IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns Class A shares of a Multiple Class Fund, Class C shares of AIM Money
Market Fund, or shares of another AIM Fund can arrange for monthly, quarterly or
annual checks in any amount (but not less than $50) to be drawn against the
balance of his account in the designated AIM Fund. Shareholders who own Class B
shares of a Multiple Class Fund can only arrange for monthly or quarterly
withdrawals under a Systematic Withdrawal Plan. Payment of this amount is
normally made on or about the tenth or the twenty-fifth day of each month in
which a payment is to be made. A minimum account balance of $5,000 is required
to establish a Systematic Withdrawal Plan, but there is no requirement
thereafter to maintain any minimum investment. No contingent deferred sales
charge with respect to Class B shares of a Multiple Class Fund will be imposed
on withdrawals made under a Systematic Withdrawal Plan, provided that the
amounts withdrawn under such a plan do not exceed on an annual basis 12% of the
account value at the time the shareholder elects to participate in the
Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to Class B
shares that exceed on an annual basis 12% of such account will be subject to a
contingent deferred sales charge on the amounts exceeding 12% of the initial
account value.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
MCF 06/95
A-8
<PAGE> 27
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B Shares and Class C Shares of the Multiple Class Funds), it
is disadvantageous to effect such purchases while a Systematic Withdrawal Plan
is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly investments
may establish an Automatic Investment Plan. Under this plan, on or about the
tenth and/or twenty-fifth day of each month, a draft is drawn on the
shareholder's bank account in the amount specified by the shareholder (minimum
$50 per investment, per account). The proceeds of the draft are invested in
shares of the designated AIM Fund at the applicable offering price determined on
the date of the draft. An Automatic Investment Plan may be discontinued upon 10
days' prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; and dividends and distributions attributable to
Class C shares of AIM MONEY MARKET FUND may be reinvested in additional shares
of such fund, in Class A shares of another Multiple Class Fund or in shares of
another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $10,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $10,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, provided that Class A shares may only be exchanged for Class A shares
of another Multiple Class Fund or for shares of another AIM Fund which is not a
Multiple Class Fund, Class B shares may only be exchanged for Class B shares of
another Multiple Class Fund, and Class C shares of AIM MONEY MARKET FUND may
only be exchanged for Class A shares of another Multiple Class Fund or for
shares of another AIM Fund. The account from which exchanges are to be made must
have a value of at least $5,000 when a shareholder elects to begin this program,
and the exchange minimum is $50 per transaction. All of the accounts that are
part of this program must have identical registrations. The net asset value of
shares purchased under this program may vary, and may be more or less
advantageous than if shares were not exchanged automatically. There is no charge
for entering the Dollar Cost Averaging program. Sales charges may apply, as
described under the caption "Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; Individual Retirement Account
("IRA") plans; and Simplified Employee Pension ("SEP") plans (collectively,
"retirement accounts"). Information concerning these plans, including the
custodian's fees and the forms necessary to adopt such plans, can be obtained by
calling or writing the AIM Funds or AIM Distributors. Shares of the AIM Funds
are also available for investment through existing 401(k) plans (for both
individuals and employers) adopted under the Code. The plan custodian currently
imposes an annual $10 maintenance fee with respect to each retirement account
for which it serves as the custodian. This fee is generally charged in December.
Each AIM Fund and/or the custodian reserve the right to change this maintenance
fee and to initiate an establishment fee (not to exceed its cost).
MCF 06/95
A-9
<PAGE> 28
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, referred to
herein as the "Load Funds," are sold at a public offering price that includes a
maximum sales charge of 5.50% or 4.75% of the public offering price of such
shares; shares of certain of the AIM Funds, referred to herein as the "Lower
Load Funds," are sold at a public offering price that includes a maximum sales
charge of 1.00% of the public offering price of such shares; and shares of
certain other funds, including the Class C shares of AIM MONEY MARKET FUND,
referred to herein as the "No Load Funds," are sold at net asset value, without
payment of a sales charge. In the event shares of any AIM Fund (other than Class
B shares of the Multiple Class Funds) sold at net asset value are subject to a
contingent deferred sales charge of 1% for 18 months from the end of the
calendar month of the date of purchase, and subsequently are exchanged for
shares of any other AIM Fund, the 18-month period shall be computed from the end
of the calendar month of the date of the first purchase subject to this charge.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
<TABLE>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------
<S> <C> <C>
AIM AGGRESSIVE GROWTH AIM GROWTH FUND -- CLASS A AIM LIMITED MATURITY TREASURY SHARES
FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM TAX-FREE INTERMEDIATE SHARES
AIM BALANCED FUND -- CLASS A AIM INCOME FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM INTERNATIONAL EQUITY NO LOAD FUNDS:
AIM CONSTELLATION FUND -- CLASS A --------------
FUND -- CLASS A AIM MONEY MARKET AIM MONEY MARKET FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND -- CLASS A -- CLASS C
FUND -- CLASS A AIM MUNICIPAL BOND AIM TAX-EXEMPT CASH FUND
AIM GLOBAL GROWTH FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL INCOME OF CONNECTICUT
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL UTILITIES AIM WEINGARTEN FUND -- CLASS A
FUND -- CLASS A
AIM GOVERNMENT SECURITIES
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund,
except that Class A shares and shares of all other AIM Funds may not be
exchanged for Class B shares; Class B shares may be exchanged only for Class B
shares; and Class C shares of AIM MONEY MARKET FUND may not be exchanged for
Class A shares of AIM MONEY MARKET FUND or for Class B shares. DEPENDING UPON
THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE, SHARES BEING
ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR AT THEIR NET
ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE TABLE BELOW
FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
- ----- ----------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C>
Load Funds...... Net Asset Value Net Asset Value Net Asset Value Not
Applicable
Lower Load
Funds......... Net Asset Value if shares were held Net Asset Value Net Asset Value Not
for at least 30 days; or if shares Applicable
were acquired upon exchange of any
Load Fund; or if shares were acquired
upon exchange from any Lower Load
Fund and such shares were held for at
least 30 days. (No exchange privilege
is available for the first 30 days
following the purchase of the Lower
Load Fund shares.)
</TABLE>
(Table continued on following page)
MCF 06/95
A-10
<PAGE> 29
<TABLE>
<CAPTION>
MULTIPLE
CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
- ---------------- ------------------------------------- --------------------- ---------------- -------------
<S> <C> <C> <C> <C>
No Load Funds... Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not
directly purchased. Net Asset Value Load shares were Applicable
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund exchange of shares of
or any Lower Load Fund; Net Asset any Load Fund or any
Value if No Load shares were acquired Lower Load Fund;
upon exchange of Lower Load Fund otherwise,
shares and were held for at least 30 Offering Price.
days following the purchase of the
Lower Load Fund shares. (No exchange
privilege is available for the first
30 days following the acquisition of
the Lower Load Fund shares.)
Multiple Class
Funds:
Class B....... Not Applicable Not Applicable Not Applicable Net Asset
Value
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds...... Net Asset Value Net Asset Value Net Asset Value Not
Applicable
Lower Load
Funds......... Net Asset Value if shares were Net Asset Value Net Asset Value Not
acquired upon exchange of any Load Applicable
Fund. Otherwise, difference in sales
charge will apply.
No Load Funds... Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not
directly purchased. Net Asset Value Load shares were Applicable
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund. exchange of shares of
Difference in sales charge will apply any Load Fund or any
if No Load shares were acquired upon Lower Load Fund;
exchange of Lower Load Fund shares. otherwise, Offering
Price.
Multiple Class
Funds:
Class B....... Not Applicable Not Applicable Not Applicable Net Asset
Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A and Class B shares of a Multiple Class Fund cannot be
exchanged for each other), except that Class C shares of AIM MONEY MARKET FUND
may be exchanged for Class A shares of another Multiple Class Fund; (b) the
dollar amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the fund acquired through such exchange; (c) the
shares of the fund acquired through exchange must be qualified for sale in the
state in which the shareholder resides; (d) the exchange must be made between
accounts having identical registrations and addresses; (e) the full amount of
the purchase price for the shares being exchanged must have already been
received by the fund; (f) the account from which shares have been exchanged must
be coded as having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (g) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten days, and all other shares are held in an account
for at least one day, prior to the exchange; and (h) certificates representing
shares must be returned before shares can be exchanged.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
There is no fee for exchanges among the AIM Funds. A service fee of $5 per
transaction will, however, be charged by AIM Distributors on accounts of market
timing investment firms to help to defray the costs of maintaining an automated
exchange service. This service fee will be charged against the market timing
account from which shares are being exchanged.
Shares to be exchanged are redeemed at their net asset value as determined at
the close of business on the day that an exchange request in proper form
(described below) is received by AFS in its Houston, Texas office, provided that
such request is received prior to 4:15 p.m. Eastern Time. Exchange requests
received after this time will result in the redemption of shares at their net
asset value as determined at the close of business on the next business day.
Normally, shares of an AIM Fund to be acquired by exchange are purchased at
their net asset value or applicable offering price, as the case may be,
determined on the date that such request is received by AIM Distributors, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and
MCF 06/95
A-11
<PAGE> 30
the release of the exchange proceeds is delayed for the foregoing five-day
period, such shareholder will not begin to accrue dividends until the sixth
business day after the exchange. Shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten days
from the date that the check is received. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AIM Distributors. The request should contain the account
registration and account number, the dollar amount or number of shares to be
exchanged, and the names of the funds from which and into which the exchange is
to be made. The request should comply with all of the requirements for
redemption by mail, except those required for redemption of IRAs. See "How to
Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AIM Distributors at the appropriate telephone number
indicated under the caption "How to Purchase Shares." If a shareholder is unable
to reach AIM Distributors by telephone, he may also request exchanges by
telegraph or use overnight courier services to expedite exchanges by mail, which
will be effective on the business day received by the applicable fund(s) as long
as such request is received prior to 4:15 p.m. Eastern Time. The Transfer Agent
and AIM Distributors will not be liable for any loss, expense or cost arising
out of any telephone exchange request that they reasonably believe to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. Procedures for verification of telephone transactions
may include recordings of telephone transactions (maintained for six months),
requests for confirmation of the shareholder's Social Security number and
current address, and mailings of confirmations promptly after the transaction.
EXCHANGES OF CLASS B SHARES. A contingent deferred sales charge will not be
imposed in connection with exchanges among Class B shares of Multiple Class
Funds. For purposes of determining a shareholder's holding period of Class B
shares in the calculation of the applicable contingent deferred sales charge,
the period of time during which Class B shares were held prior to an exchange
will be added to the holding period of Class B shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares purchased under the Multiple
Distribution System may be redeemed on any business day of a Multiple Class Fund
at the net asset value per share next determined following receipt of the
redemption order, as described under the caption "Timing and Pricing of
Redemption Orders," less the applicable contingent deferred sales charge shown
in the table below. No deferred sales charge will be imposed (i) on redemptions
of Class B shares following six years from the end of the calendar month in
which such shares were purchased, (ii) on Class B shares acquired through
reinvestments of dividends and distributions attributable to Class B shares or
(iii) on amounts that represent capital appreciation in the shareholder's
account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- --------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends
MCF 06/95
A-12
<PAGE> 31
and distributions; third, of shares held for more than six years following the
end of the calendar month in which the purchase was made; and fourth, of shares
held less than six years following the end of the calendar month in which the
purchase was made. The applicable sales charge will be applied against the
lesser of the current market value of shares redeemed or their original cost.
Contingent deferred sales charges on Class B shares will be waived on
redemptions (1) following the registered shareholder's (or in the case of joint
accounts, all registered joint owners') death or disability, as defined in
Section 72(m)(7) of the Code (provided AIM Distributors is notified of such
death or disability at the time of the redemption request and is provided with
satisfactory evidence of such death or disability), (2) in connection with
certain distributions from individual retirement accounts, custodial accounts
maintained pursuant to Code Section 403(b), deferred compensation plans
qualified under Code Section 457 and plans qualified under Code Section 401
(collectively, "Retirement Plans"), (3) pursuant to a Systematic Withdrawal
Plan, provided that amounts withdrawn under such plan do not exceed on an annual
basis 12% of the value of the shareholder's investment in Class B shares at the
time the shareholder elects to participate in the Systematic Withdrawal Plan,
(4) effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund and (5) effected by AIM of its investment
in Class B shares. Waiver category (1) above applies only to redemptions: (i)
made within one year following death or initial determination of disability and
(ii) of Class B shares held at the time of death or initial determination of
disability. Waiver category (2) above applies only to redemptions resulting
from: (i) required minimum distributions to plan participants or beneficiaries
who are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value; (ii) in kind transfers of assets where the
participant or beneficiary notifies AIM Distributors of such transfer no later
than the time such transfer occurs; (iii) tax-free rollovers or transfers of
assets to another Retirement Plan invested in Class B shares of one or more
Multiple Class Funds; (iv) tax-free returns of excess contributions or returns
of excess deferral amounts; and (v) distributions upon the death or disability
(as defined in the Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B shares of a Multiple Class Fund and purchases of shares of
the No Load Funds, a contingent deferred sales charge of 1% applies to purchases
of $1,000,000 or more that are redeemed within 18 months of the end of the
calendar month of the date of purchase. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. No such
charge will be imposed upon exchanges unless the shares acquired by exchange are
redeemed within 18 months of the end of the calendar month in which the shares
were purchased. In determining whether a contingent deferred sales charge is
payable, and the amount of any such charge, shares not subject to the contingent
deferred sales charge are redeemed first (including shares purchased by
reinvestment of dividends and capital gains distributions and amounts
representing increases from capital appreciation), and then other shares are
redeemed in the order of purchase. The charge will be waived in the following
circumstances:
(1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under
Section 403(b) of the Code and sponsored by nonprofit organizations as
defined under Section 501(c)(3) of the Code, where (a) the initial amount
invested by a Plan in one or more of the AIM Funds is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least
$1,000,000 in one or more of the AIM Funds, or (c) the shares being
redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section
403(b) of the Code which are sponsored by public educational institutions
shall qualify under (a), (b) or (c) above on the basis of the value of each
Plan participant's aggregate investment in the AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible
employees;
(2) redemptions of shares following the registered shareholder's (or
in the case of joint accounts, all registered joint owners') death or
disability, as defined in Section 72(m)(7) of the Code; and
(3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at
least $1,000,000.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to either
the Transfer Agent or AIM Distributors. Upon receipt of a redemption request in
proper form, payment will be made as soon as practicable, but in any event will
normally be made within seven days after receipt. However, in the event of a
redemption of shares purchased by check, the investor may be required to wait up
to ten days before the redemption proceeds are sent. See "Timing of Purchase
Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
MCF 06/95
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<PAGE> 32
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA-SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth at that item of the account application if they reasonably believe such
request to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions. Procedures for verification of
telephone transactions may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security number and current address, and mailings of confirmations
promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to 4:15 p.m. Eastern Time, the redemption will be made at the net asset
value determined at 4:15 p.m. Eastern Time and payment will generally be
transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and Class C Shares of AIM MONEY
MARKET FUND). After completing the appropriate authorization form, shareholders
may use checks to effect redemptions from AIM TAX-EXEMPT CASH FUND and the Class
C Shares of AIM MONEY MARKET FUND. This privilege does not apply to retirement
accounts or qualified plans. Checks may be drawn in any amount of $250 or more.
Checks drawn against insufficient shares in the account or against shares held
less than ten days, or in amounts of less than the applicable minimum will be
returned to the payee. The payee of the check may cash or deposit it in the same
way as an ordinary bank check. When a check is presented to the Transfer Agent
for payment, the Transfer Agent will cause a sufficient number of shares of such
fund to be redeemed to cover the amount of the check. Shareholders are entitled
to dividends on the shares redeemed through the day on which the check is
presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds are
redeemed at their net asset value next computed after a request for redemption
in proper form (including signature guarantees and other required documentation
for written redemptions) is received by the Transfer Agent or AIM Distributors,
except that Class B shares of the Multiple Class Funds, and Class A shares of
the Multiple Class Funds and shares of the other AIM Funds that are subject to
the contingent deferred sales charge program for large purchases described
above, may be subject to the imposition of deferred sales charges that will be
deducted from the redemption proceeds. See "Multiple Distribution System" and
"Contingent Deferred Sales Charge Program for Large Purchases." Orders for the
redemption of shares received in proper form by dealers prior to 4:15 p.m.
Eastern Time on any business day of an AIM Fund and either received by AIM
Distributors in its Houston, Texas office prior to 5:00 p.m. Central Time on
that day or transmitted by dealers to the Transfer Agent through the facilities
of NSCC by 7:00 p.m. Eastern Time on that day, will be confirmed at the price
determined as of the close of that day. Orders received by dealers after 4:15
p.m. Eastern Time will be confirmed at the price determined on the next business
day of an AIM Fund. It is the responsibility of the dealer to ensure that all
orders are transmitted on a timely basis to AIM Distributors or to the Transfer
Agent through the facilities of NSCC. Any resulting loss from the dealer's
failure to submit a request for redemption within the prescribed time frame will
be borne by that dealer. Telephone redemption requests must be made by 4:15 p.m.
Eastern Time on any business day of an AIM Fund and will be confirmed at the
price determined as of the close of that day. No AIM Fund will accept requests
which specify a particular date for redemption or which specify any special
conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Timing of Purchase
Orders." A charge for special handling (such as wiring of funds or expedited
delivery services) may be made by the Transfer Agent. The right of redemption
may not be suspended or the date of payment upon redemption postponed except
under unusual circumstances such as when trading on the New York Stock Exchange
is restricted or suspended. Payment of the proceeds of redemptions relating to
shares for which checks sent in payment have not yet cleared will be delayed
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when
MCF 06/95
A-14
<PAGE> 33
signature guarantees are required are: (1) redemptions by mail in excess of
$50,000; (2) redemptions by mail if the proceeds are to be paid to someone other
than the name(s) in which the account is registered; (3) written redemptions
requesting proceeds to be sent by wire to other than the bank of record for the
account; (4) redemptions requesting proceeds to be sent to a new address or an
address that has been changed within the past 30 days; (5) requests to transfer
the registration of shares to another owner; (6) telephone exchange and
telephone redemption authorization forms; (7) changes in previously designated
wiring instructions; and (8) written redemptions or exchanges of shares
previously reported as lost, whether or not the redemption amount is under
$50,000 or the proceeds are to be sent to the address of record. These
requirements may be waived or modified upon notice to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission, and further provided that such guarantor institution is
listed in one of the reference guides contained in the Transfer Agent's current
Signature Guarantee Standards and Procedures, such as certain domestic banks,
credit unions, securities dealers, or securities exchanges. The Transfer Agent
will also accept signatures with either: (1) a signature guaranteed with a
medallion stamp of the STAMP Program, or (2) a signature guaranteed with a
medallion stamp of the New York Stock Exchange Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AIM Distributors.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in shares of the
AIM Fund from which the redemption was made at the net asset value next computed
after receipt by AIM Distributors of the funds to be reinvested. The shareholder
must ask AIM Distributors for such privilege at the time of reinvestment. A
realized gain on the redemption is taxable, and reinvestment will not alter any
capital gains payable. If there has been a loss on the redemption, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in (or exchanged for) shares of the same fund
within 90 days of the payment of the sales charge, the shareholder's basis in
the fund shares redeemed may not include the amount of the sales charge paid,
thereby reducing the loss or increasing the gain recognized from the redemption.
Each AIM Fund may amend, suspend or cease offering this privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.
This privilege may only be exercised once each year by a shareholder with
respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares of the Multiple Class Funds or shares of
any other AIM Fund, and who subsequently reinvest a portion or all of the value
of the redeemed shares in shares of the same AIM Fund within 90 days after such
redemption may do so at net asset value if such privilege is claimed at the time
of reinvestment. Such reinvested proceeds will not be subject to either a
front-end sales charge at the time of reinvestment or an additional contingent
deferred sales charge upon subsequent redemption. In order to exercise this
reinvestment privilege, the shareholder must notify AIM Distributors of his or
her intent to do so at the time of reinvestment. This reinvestment privilege
does not apply to Class B shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:15 p.m. Eastern Time (12:00 noon and 4:15 p.m. Eastern Time with respect
to AIM MONEY MARKET FUND), on each "business day" of a fund as previously
defined. 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 an AIM Fund's
share will be determined 15 minutes following the close of the New York Stock
Exchange on such day. The net asset value per share is calculated by subtracting
a fund's liabilities from its assets and dividing the result by the total number
of fund shares outstanding. The determination of each fund's net asset value per
share 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 fund's officers and
in accordance with methods which are specifically authorized by its governing
Board of Directors or Trustees. Short-term obligations with maturities of 60
days or less, and the securities held by the Money Market Funds, are valued at
amortized cost as reflecting fair value. AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT and AIM TAX-FREE INTERMEDIATE SHARES value variable
rate securities that have an unconditional demand or put feature exercisable
within seven days or less at par, which reflects the market value of such
securities.
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 an AIM 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
MCF 06/95
A-15
<PAGE> 34
which will not be reflected in the computation of an AIM 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 or Trustees.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
- ---------------------------------------- ----------------------- --------------- ---------------
<S> <C> <C> <C>
AIM AGGRESSIVE GROWTH FUND.............. declared and paid annually annually
annually
AIM BALANCED FUND....................... declared and paid quarterly annually
quarterly
AIM CHARTER FUND........................ declared and paid annually annually
quarterly
AIM CONSTELLATION FUND.................. declared and paid annually annually
annually
AIM GLOBAL AGGRESSIVE GROWTH FUND....... declared and paid annually annually
annually
AIM GLOBAL GROWTH FUND.................. declared and paid annually annually
annually
AIM GLOBAL INCOME FUND.................. declared daily; paid annually annually
monthly
AIM GLOBAL UTILITIES FUND............... declared daily; paid annually annually
monthly
AIM GOVERNMENT SECURITIES FUND.......... declared daily; paid annually annually
monthly
AIM GROWTH FUND......................... declared and paid annually annually
annually
AIM HIGH YIELD FUND..................... declared daily; paid annually annually
monthly
AIM INCOME FUND......................... declared daily; paid annually annually
monthly
AIM INTERNATIONAL EQUITY FUND........... declared and paid annually annually
annually
AIM LIMITED MATURITY TREASURY SHARES.... declared daily; paid quarterly annually
monthly
AIM MONEY MARKET FUND................... declared daily; paid at least annually
monthly annually
AIM MUNICIPAL BOND FUND................. declared daily; paid annually annually
monthly
AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT........................... declared daily; paid annually annually
monthly
AIM TAX-EXEMPT CASH FUND................ declared daily; paid at least annually
monthly annually
AIM TAX-FREE INTERMEDIATE SHARES........ declared daily; paid annually annually
monthly
AIM VALUE FUND.......................... declared and paid annually annually
annually
AIM WEINGARTEN FUND..................... declared and paid annually annually
annually
</TABLE>
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 an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Class A, Class B or Class C shares
are reinvested in additional shares of such Class, absent an election by a
shareholder to receive cash or to have such dividends and distributions
reinvested in Class A or Class B shares of another Multiple Class Fund, to the
extent permitted. For funds that do not declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date. Shareholders may elect, by written notice to AIM
Distributors, to receive such distributions, or the dividend portion thereof, in
cash, or to invest such dividends and distributions in shares of another fund in
the AIM Funds; provided that (i) dividends and distributions attributable to
Class B shares may only be reinvested in Class B shares, (ii) dividends and
distributions attributable to Class A shares may not be reinvested in Class B
shares, and (iii) dividends and distributions attributable to the Class C shares
of AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that
Fund or in any Class B shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact AIM Distributors
at any time to obtain a form to authorize such reinvestments in another AIM
Fund. Such reinvestments into the AIM Funds are not subject to sales charges,
and shares so purchased are automatically credited to the account of the
shareholder.
Dividends on Class B shares are expected to be lower than those for Class A or
Class C shares because of higher distribution fees paid by Class B shares.
Dividends on Class A, Class B and Class C shares may also be affected by other
class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to AIM Distributors and are effective as to
any subsequent payment if such notice is received by AIM Distributors prior to
the record date of such pay-
MCF 06/95
A-16
<PAGE> 35
ment. Any dividend and distribution election remains in effect until AIM
Distributors receives a revised written election by the shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily 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.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gain net income that are 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.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. 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,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM
GOVERNMENT SECURITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY SHARES, AIM MONEY
MARKET FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT,
AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE INTERMEDIATE SHARES will qualify for
this dividends received deduction. Shortly after the end of each year,
shareholders will receive information regarding the amount and federal income
tax treatment of all distributions paid during the year. No gain or loss will be
recognized by shareholders upon the automatic conversion of Class B shares of a
Multiple Class Fund into Class A shares of such Fund.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on income dividends and distributions (other than
exempt-interest dividends and capital gain dividends). Under applicable treaty
law, residents of treaty countries may qualify for a reduced rate of withholding
or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and other taxable securities. For additional
information concerning the alternative minimum tax and certain collateral tax
consequences of the receipt of exempt-interest dividends, see the Statements of
Additional Information applicable to the Tax-Exempt Funds.
MCF 06/95
A-17
<PAGE> 36
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually and will be applied uniformly to all dividends declared
during the year. This percentage may differ from the actual percentages for any
particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM GOVERNMENT SECURITIES FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND and AIM GLOBAL INCOME FUND -- SPECIAL TAX INFORMATION. For taxable
years in which it is eligible to do so, each of these funds may elect to pass
through to shareholders credits for foreign taxes paid. If the fund makes such
an election, a shareholder who receives a distribution (1) will be required to
include in gross income his proportionate share of foreign taxes allocable to
the distribution and (2) may claim a credit or deduction for such share for his
taxable year in which the distribution is received, subject to the general
limitations imposed on the allowance of foreign tax credits and deductions.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of the fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the fund would not be able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM LIMITED MATURITY
TREASURY SHARES, for which The Bank of New York, 110 Washington Street, New
York, New York 10286, serves as custodian. Texas Commerce Bank National
Association, P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian
for retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a
wholly-owned subsidiary of AIM, serves as each AIM Fund's transfer agent and
dividend payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and has passed
upon the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (713) 626-1919 (extension 5224) (in Houston), or toll-free at (800)
959-4246 (elsewhere). The Transfer Agent may impose certain copying charges for
requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. 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 AIM Distributors. 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.
MCF 06/95
A-18
<PAGE> 37
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
----------- ---------- ------------ ----------
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minors Minor Corporation, Partnership, Corporation, Partnership,
Other Organization Other Organization
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed Internal Revenue Service ("IRS") Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions accompanying Form W-9 (which can be obtained from
the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Internal Revenue Code of 1986,
as amended.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF 06/95
B-1
<PAGE> 38
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years following the date it is received by
the Fund. Such shareholders may, however, be subject to appropriate withholding
as described in the Prospectus under "Dividends, Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the New
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney to surrender for redemption any and all unissued shares held
by the Transfer Agent in the designated account(s), or in any other account with
any of The AIM Family of Funds(R), present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of The AIM Family of
Funds(R), provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. Procedures for verification of telephone transactions
may include recordings of telephone transactions (maintained for six months)
requests for confirmation of the shareholder's Social Security number and
current address, and mailings of confirmations promptly after the transaction.
The Transfer Agent reserves the right to cease to act as agent subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
New Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney to surrender for redemption any and all unissued shares
held by the Transfer Agent in the designated account(s), present or future, with
full power of substitution in the premises. The Transfer Agent and AIM
Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that the Transfer Agent and AIM Distributors may
not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months) requests for
confirmation of the shareholder's Social Security number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as agent subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any exchanges
must be effected in writing by the investor (see the applicable Fund's
prospectus under the caption "Exchange Privilege -- Exchanges by Mail").
MCF 06/95
B-2
<PAGE> 39
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 40
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS(R)
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
Investment Sub-Advisor
A I M Capital Management, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
Principal Underwriter
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
For more complete information about any other Fund in The AIM Family of
Funds(R), including charges and expenses, please call (800) 347-1919, (713)
626-1919 or write to the address shown above and request a free prospectus.
Please read the prospectus carefully before you invest or send money.
<PAGE> 41
STATEMENT OF
ADDITIONAL INFORMATION
RETAIL CLASSES OF
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM AGGRESSIVE GROWTH FUND
AIM CONSTELLATION FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS, INC.)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TX 77046-1173
(713) 626-1919
____________________
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
A I M DISTRIBUTORS, INC., P.O. BOX 4739
HOUSTON, TX 77210-4739
OR BY CALLING (713) 626-1919 (HOUSTON RESIDENTS)
OR (800) 347-1919 (ALL OTHERS).
____________________
STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 15, 1995 (AS REVISED
JULY 3, 1995)
RELATING TO THE AIM AGGRESSIVE GROWTH FUND PROSPECTUS DATED
JUNE 15, 1995 (AS REVISED JULY 3, 1995)
AND THE
AIM CHARTER FUND, AIM WEINGARTEN FUND AND AIM CONSTELLATION
FUND PROSPECTUS DATED JUNE 15, 1995
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Return Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Special Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Writing Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Options on Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Risks as to Futures Contracts and Related Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certain Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Weingarten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Aggressive Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Constellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Additional Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Investment Advisory, Administrative Services and Sub-Advisory Agreements . . . . . . . . . . . . . . . . . . 25
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
i
<PAGE> 43
<TABLE>
<S> <C>
NET ASSET VALUE DETERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Reinvestment of Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Qualification as a Regulated Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Excise Tax on Regulated Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Fund Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Sale or Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Effect of Future Legislation; Local Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Description of Commercial Paper Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Description of Corporate Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 44
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 for AIM Charter Fund ("Charter"), AIM Weingarten
Fund ("Weingarten") and AIM Constellation Fund ("Constellation") is included in
a Prospectus dated June 15, 1995 (the "Prospectus") which relates to the Retail
Classes of the Funds (defined below). The information for the Retail Class of
AIM Aggressive Growth Fund ("Aggressive Growth") is contained in a separate
prospectus also dated June 15, 1995. Additional copies of the Prospectuses and
this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, A I M Distributors,
Inc. ("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739 or by calling
(713) 626-1919. 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 omit certain information contained in the
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
described under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE COMPANY AND ITS SHARES
The Company was organized in 1988 as a Maryland 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,
Weingarten, Aggressive Growth and Constellation (each a "Fund" and
collectively, the "Funds"). Charter and Weingarten each have three separate
classes: Class A and Class B and an Institutional Class. Constellation has
two classes of shares: Class A and an Institutional Class. Aggressive Growth
has Class A only. Class A shares (sold with a front-end load), and Class B
shares (sold with a contingent deferred sales charge) of the Funds are also
referred to as the Retail Classes. 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 AFG and the
Company, Aggressive Growth was redomesticated as a portfolio of the Company.
All historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993 relating to
Aggressive Growth is that of AFG's Aggressive Growth.
This Statement of Additional Information relates solely to the Retail
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 lesser 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.
Shares of the Retail Class and the Institutional Class of each Fund have
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
Company's Board of Directors with respect to the class of such Fund and, upon
liquidation
1
<PAGE> 45
of the Fund, to participate proportionately in the net assets of the Fund
allocable to such class remaining after satisfaction of outstanding liabilities
of the Fund allocable to such class. Fund shares are fully paid,
non-assessable and fully transferable when issued and have no preemptive rights
and have such conversion and exchange rights as set forth in the Prospectus and
this Statement of Additional Information. Fractional shares have
proportionately the same rights, including voting rights, as are provided for a
full share.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
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 directors of the Company.
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.
In addition to average annual returns, the Retail 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. Total returns may be quoted with or without taking the
applicable Fund's maximum applicable Class A or Class B front-end or contingent
deferred sales charge into account. Excluding sales charges from a total
return calculation produces a higher total return figure.
YIELD QUOTATIONS
The standard formula for calculating yield, as described in the Prospectus,
is as follows:
YIELD = 2[((a-b)/(c x d) + 1)6th power -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 = expense 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.
2
<PAGE> 46
The yield for the Retail Class of Charter Class A shares for the 30 day period
ended June 30, 1994 was 2.51%. Yield information is not available for the
Retail Class of Charter Class B shares as the effective date for Class B shares
was June 15, 1995.
HISTORICAL PORTFOLIO RESULTS
Charter, Weingarten, Aggressive Growth and Constellation's total returns
for Class A shares for the following periods ended October 31, 1994 (which
include the maximum sales charge of 5.50% and reinvestment of all dividends and
distributions) were as follows:
CLASS A AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
ONE FIVE TEN FIFTEEN TWENTY
YEAR YEARS YEARS YEARS YEARS
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CHARTER -7.90% 9.89% 13.81% 14.72% 16.74%
WEINGARTEN -1.97% 9.11% 15.53% 18.19% 19.08%
AGGRESSIVE GROWTH 12.41% 22.68% 15.25% NA NA
CONSTELLATION 1.55% 17.45% 19.44% 18.99% NA
</TABLE>
CLASS A CUMULATIVE RETURNS
<TABLE>
<CAPTION>
ONE FIVE TEN FIFTEEN TWENTY
YEAR YEARS YEARS YEARS YEARS
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CHARTER -7.90% 60.24% 264.58% 684.14% 2,110.59%
WEINGARTEN -1.97% 54.64% 323.77% 1,127.35% 3,188.39%
AGGRESSIVE GROWTH 12.41% 177.86% 313.51%* NA NA
CONSTELLATION 1.55% 123.47% 491.07% 1,256.70% NA
</TABLE>
______________
*The inception date for Aggressive Growth was May 1, 1984.
Total return is not available for Class B shares of Charter and Weingarten
as the effective date of Class B shares was June 15, 1995.
During the 10 year period ended October 31, 1994, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter,
Weingarten, Constellation and Aggressive Growth would have been worth
$3,645.75, $4,237.69, $5,910.67 and $4,135.13, respectively, assuming all
distributions were reinvested.
During the 15 year period ended October 31, 1994, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter,
Weingarten and Constellation would have been worth $7,841.42, $12,273.51 and
$13,566.96, respectively assuming all dividends were reinvested.
During the 20 year period ended October 31, 1994 a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter and
Weingarten would have been worth $22,105.87 and $32,883.90, respectively,
assuming all distributions were reinvested. This was a period of widely
fluctuating stock and bond prices and interest rates, and should not
necessarily be considered a representation of the income or capital gain or
loss that may be realized from an investment in any of the Funds today.
Each Fund's performance may be compared in advertising to the performance
of other mutual funds in general, or of particular types of mutual funds,
especially those with similar objectives. Such performance
3
<PAGE> 47
data may be prepared by Lipper Analytical Services, Inc. and other independent
services which monitor the performance of mutual funds. The Funds may also
advertise mutual fund performance rankings which have been assigned to each
respective Fund by such monitoring services.
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the Consumer Price Index ("CPI"),
the Standard & Poor's ("S&P") 500 Stock Index, and fixed-price investments such
as bank certificates of deposit and/or savings accounts.
In addition, each Fund's long-term performance may be described in
advertising in relation to historical, political and/or economic events. For
instance, Charter's Class A shares performance since its inception has been
accomplished through various years in which there have been recessions, a
presidential assassination attempt, a 20% prime rate, an 18% annual inflation
rate, and significant stock market declines. The performance of Class A shares
of Weingarten, Aggressive Growth and Constellation has been achieved through
years in which similar events occurred.
Each Fund's advertising may from time to time include discussions of
general economic conditions and interest rates. Each Fund's advertising may
also include references to the use of the Fund as part of an individual's
overall retirement investment program.
From time to time, Fund sales literature and/or advertisements may disclose
top holdings included in the Fund's portfolio.
From time to time, the Funds' sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. These topics
include, but are not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning and inflation.
The following charts show the cumulative total return of Class A shares of
Charter, Weingarten and Constellation (and their predecessors) compared to the
percentage change in the CPI, the S&P 500 Stock Index and a hypothetical 8.00%
fixed-price investment for each specified 10-year period ended December 31.
4
<PAGE> 48
RELATIVE TOTAL RETURN PERFORMANCE FOR CLASS A SHARES OF
CHARTER (AND ITS PREDECESSOR), CPI, S&P 500
STOCK INDEX & 8.00% FIXED-PRICE INVESTMENT
FOR ALL 10-YEAR INVESTMENT PERIODS BEGINNING WITH 1969 - 1985
<TABLE>
<CAPTION>
10 YEAR AIM CHARTER 8.00% FIXED PRICE
PERIOD FUND* CPI** S&P 500*** INVESTMENT****
<S> <C> <C> <C> <C>
1969-1978 135.33% 90.70% 36.51% 115.90%
1970-1979 249.95% 103.45% 76.53% 115.90%
1971-1980 462.17% 116.84% 125.00% 115.90%
1972-1981 316.59% 128.71% 87.42% 115.90%
1973-1982 251.54% 129.64% 91.45% 115.90%
1974-1983 384.68% 119.26% 174.67% 115.90%
1975-1984 526.07% 102.89% 295.86% 115.90%
1976-1985 494.52% 96.94% 280.01% 115.90%
1977-1986 391.37% 89.86% 264.08% 115.90%
1978-1987 415.89% 85.83% 312.67% 115.90%
1979-1988 305.19% 77.99% 351.35% 115.90%
1980-1989 288.53% 64.41% 401.33% 115.90%
1981-1990 214.74% 55.03% 266.97% 115.90%
1982-1991 328.08% 46.59% 402.55% 115.90%
1983-1992 274.52% 45.49% 345.17% 115.90%
1984-1993 243.15% 43.93% 299.84% 115.90%
1985-1994 248.63% 42.17% 281.56% 115.90%
</TABLE>
RELATIVE TOTAL RETURN PERFORMANCE FOR CLASS A SHARES OF WEINGARTEN
(AND ITS PREDECESSOR),
CPI, S&P 500 STOCK INDEX & 8.00% FIXED-PRICE INVESTMENT
FOR ALL 10-YEAR INVESTMENT PERIODS BEGINNING WITH 1970 - 1985
<TABLE>
<CAPTION>
10 YEAR AIM WEINGARTEN 8.00% FIXED PRICE
PERIOD FUND* CPI** S&P 500*** INVESTMENT****
<S> <C> <C> <C> <C>
1970-1979 183.68% 103.45% 76.53% 115.90%
1971-1980 362.14% 116.84% 125.00% 115.90%
1972-1981 192.63% 128.71% 87.42% 115.90%
1973-1982 225.23% 129.64% 91.45% 115.90%
1974-1983 439.58% 119.26% 174.67% 115.90%
1975-1984 658.94% 102.89% 295.86% 115.90%
1976-1985 677.90% 96.94% 280.01% 115.90%
1977-1986 735.19% 89.86% 264.08% 115.90%
1978-1987 670.91% 85.83% 312.67% 115.90%
1979-1988 577.58% 77.99% 351.35% 115.90%
1980-1989 510.87% 64.41% 401.33% 115.90%
1981-1990 289.25% 55.03% 266.97% 115.90%
1982-1991 550.92% 46.59% 402.55% 115.90%
1983-1992 394.71% 45.49% 345.17% 115.90%
1984-1993 289.86% 43.93% 299.84% 115.90%
1985-1994 313.29% 42.17% 281.56% 115.90%
</TABLE>
5
<PAGE> 49
RELATIVE TOTAL RETURN PERFORMANCE FOR CLASS A SHARES OF CONSTELLATION
(AND ITS PREDECESSOR),
CPI, S&P 500 STOCK INDEX & 8.00% FIXED-PRICE INVESTMENT
FOR ALL 10-YEAR INVESTMENT PERIODS BEGINNING WITH 1977 - 1985
<TABLE>
<CAPTION>
10 YEAR CPI** 8.00% FIXED-PRICE
PERIOD AIM CONSTELLATION FUND* S&P 500*** INVESTMENT****
<S> <C> <C> <C> <C>
1977-1986 462.49% 89.86% 264.08% 115.90%
1978-1987 500.80% 85.83% 312.67% 115.90%
1979-1988 476.45% 77.99% 351.35% 115.90%
1980-1989 350.02% 64.41% 401.33% 115.90%
1981-1990 147.55% 55.03% 266.97% 115.90%
1982-1991 410.95% 46.59% 402.55% 115.90%
1983-1992 412.18% 45.49% 345.17% 115.90%
1984-1993 381.97% 43.93% 299.84% 115.90%
1985-1994 476.07% 42.17% 281.56% 115.90%
</TABLE>
* Includes the effect of the Class A shares maximum sales charge of 5.50%
and assumes all dividends and capital gains are reinvested. Excluding
the effect of any sales charge, Charter appreciated 268.94%, Weingarten
appreciated 337.57% and Constellation appreciated 509.37% for the ten
year period ended December 31, 1994.
** The CPI, published by the U.S. Bureau of Labor Statistics, is a
statistical measure of changes, over time, in the prices of goods and
services.
*** S&P's 500 Stock Index is a group of unmanaged securities widely
regarded by investors as representative of the stock market in general.
The results shown assume the reinvestment of dividends.
**** Fixed Price Investments, such as bank certificates of deposits and
savings accounts, are generally backed by federal agencies for up to
$100,000.00. Class A shares of Charter, Weingarten and Constellation
are not insured and their value will vary with market conditions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Directors of the Company,
A I M Advisors, Inc. ("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.
6
<PAGE> 50
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 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 A I M Capital Management, Inc.
("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 best price and execution for the Funds, AIM may also consider sales
of shares of the Funds 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 Funds. 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 Funds. 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.
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 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 and 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.
7
<PAGE> 51
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 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 providing 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
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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 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 year ended October 31, 1994, the ten month period ended
October 31, 1993 and for the fiscal year ended December 31, 1992, Aggressive
Growth paid brokerage commissions of $1,180,323, $364,786 and $91,400,
respectively. For the six month period ended June 30, 1992, CIGNA Investments,
Inc. ("CII"), Aggressive Growth's former investment advisor, directed certain
of Aggressive Growth's brokerage transactions to certain broker-dealers that
provided CII with certain research, statistical and other information. The
related brokerage commissions were $9,600. For the fiscal year ended October
31, 1994, AIM directed certain of Aggressive Growth's brokerage transactions to
certain broker-dealers that provided AIM with certain research, statistical and
other information. Such transactions amounted to $41,206,621 and the related
brokerage commissions were $110,719.
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.
PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial
Highlights" in the applicable Prospectus. Higher portfolio turnover increases
transaction costs to the Fund.
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INVESTMENT OBJECTIVES AND POLICIES
The following discussion of investment policies supplements the discussion
of the investment objectives and policies set forth in the Prospectus under the
heading "Investment Program(s)."
Each of the Funds may invest, for temporary or defensive purposes, 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
Funds may invest, see the Appendix to this Statement of Additional Information.
FOREIGN SECURITIES
Aggressive Growth may invest up to 25% of its total assets in foreign
securities. Charter, Weingarten and Constellation may 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 securities could have the effect of increasing the amount of the Fund's
investments in illiquid securities if qualified institutional buyers
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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
reasonably 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 companies. Investments in unseasoned
companies and special situations often involve much greater risk than is
inherent in ordinary
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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, Constellation and Aggressive Growth 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 the respective 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 their 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
Each of Weingarten, Aggressive Growth and Constellation is 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 a Fund 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, the Fund receives 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, the Fund would seek to mitigate the effects of a price decline.
By writing covered call options, however, the Fund gives 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 Fund's
ability to sell the underlying security will be limited while the option is in
effect unless the Fund effects 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 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.
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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 various types 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 (or, in the case of Aggressive Growth, other currency)
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.
Foreign Currency Futures Contracts
With respect to Aggressive Growth only, futures contracts may also be used
to hedge the risk of changes in the exchange rate of foreign currencies.
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OPTIONS ON FUTURES CONTRACTS
Aggressive Growth may purchase options on futures contracts. An option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if the option
is a call and a short position if the option is a put) at a specified exercise
price at any time during the option exercise period. The writer of the option
is required upon exercise to assume an offsetting futures position (a short
position if the option is a call and a long position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the assumption of offsetting futures positions by the
writer and holder of the option will be accompanied by delivery of the
accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract. If an option on
a futures contract is exercised on the last trading date prior to the
expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
Aggressive Growth will purchase put options on futures contracts to hedge
against the risk of falling prices for its portfolio securities. Aggressive
Growth will purchase call options on futures contracts as a hedge against a
rise in the price of securities which it intends to purchase. Options on
futures contracts may also be used to hedge the risks of changes in the
exchange rate of foreign currencies. The purchase of a put option on a futures
contract is similar to the purchase of protective put options on a portfolio
security or a foreign currency. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security or a foreign currency. Depending on the pricing of the
option compared to either the price of the futures contract upon which it based
or the price of the underlying securities or currency, it may or may not be
less risky than ownership of the futures contract or underlying securities or
currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks in connection with the use of futures contracts and
related options 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 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.
The use of options futures contracts involves the additional risk that changes
in the value of the underlying futures contract will not be fully reflected in
the value of the option.
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 or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or, in the case of Aggressive
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Growth, purchase options only on exchanges or boards of trade where there
appears to be an active market, 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 or purchase an option 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 or, in
the case of Aggressive Growth, related options 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.
CERTAIN INVESTMENTS
Aggressive Growth does not intend (a) to invest for the purposes of
influencing management or exercising control; (b) to purchase interests in oil,
gas or other mineral exploration or development programs; (c) to purchase
securities which are subject to restrictions on disposition under the
Securities Act of 1933; (d) to buy or sell mortgages; (e) to purchase
securities of any company with a record of less than three years' continuous
operations (including that of predecessors) if such purchase would cause the
Fund's aggregate investments in all such companies taken at cost to exceed 5%
of the Fund's total assets taken at market value; and (f) to purchase or retain
the securities of any issuer if the officers or directors of the Company and
its investment advisor who own beneficially more than 1/2 of 1% of the
securities of such issuer together own more than 5% of the securities of such
issuer. Aggressive Growth may purchase securities directly from an issuer for
its own portfolio and may dispose of such securities.
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 Investment Company Act of 1940, as
amended (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;
(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
16
<PAGE> 60
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.
AGGRESSIVE GROWTH
Aggressive Growth may not:
(a) with respect to 75% of the total assets of the Fund, purchase the
securities of any issuer if such purchase would cause more than 5% of the value
of its assets to be invested in the securities of such issuer (except U.S.
Government securities including securities issued by its agencies and
instrumentalities);
(b) concentrate more than 25% of its investments in a particular
industry;
17
<PAGE> 61
(c) make short sales of securities (unless at all times when a short
position is open it either owns an amount of such securities or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short, and unless not more than 10% of the Fund's total assets
(taken at current value) is held for such sales at any one time) or purchase
securities on margin, but it may obtain such short-term credit as is necessary
for the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures contracts and
options thereon;
(d) act as a securities underwriter under the Securities Act of 1933;
(e) make loans, except (i) through the purchase of a portion of an issue
of bonds or other obligations of types commonly offered publicly and purchased
by financial institutions, and (ii) through the purchase of short-term
obligations (maturing within a year), including repurchase agreements, 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;
(f) borrow, except that the Fund may enter into stock index futures
contracts and that the right is reserved to borrow from banks, provided that no
borrowing may exceed one-third of the value of its total assets (including the
proceeds of such borrowing) and may secure such borrowings by pledging up to
one-third of the value of its total assets. (For the purposes of this
restriction, neither collateral arrangements with respect to margin for a stock
index futures contracts nor the segregation of securities in connection with
short sales are deemed to be a pledge of assets);
(g) purchase the securities of any other investment company, except that
it may make such a purchase as part of a merger, consolidation or acquisition
of assets and except for the investment in such securities of funds
representing compensation otherwise payable to the directors of the Company
pursuant to any deferred compensation plan existing at any time between the
Company and one or more of its directors; or
(h) buy or sell commodities, commodity contracts or real estate.
To permit the sale of shares of Aggressive Growth in Texas, Aggressive
Growth 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) invest more than 15% of its average net assets at the time
of purchase of investments which are not readily marketable. These
restrictions are not fundamental policies and may be changed by the directors
without shareholder approval.
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.
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;
18
<PAGE> 62
(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.
19
<PAGE> 63
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.
**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).
__________________________________
* A director who is an "interested person," of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
** A director who is an "interested person" of the Company as defined in
the 1940 Act.
20
<PAGE> 64
*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.
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).
__________________________________
* A director who is an "interested person," of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
21
<PAGE> 65
***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.
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
__________________________________
*** Mr. Arthur and Ms. Relihan are married.
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<PAGE> 66
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 Investment Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution 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.
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
COMPENSATION ACCRUED TOTAL
FROM THE BY ALL AIM COMPENSATION
Director COMPANY(1) FUNDS(2) FROM ALL 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
- -----------------------------------------------------------------------------------------------------------
Lewis F. Pennock 10,973.92 5,093.00 45,843.75
- -----------------------------------------------------------------------------------------------------------
Ian 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.
23
<PAGE> 67
(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 serve as 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 25 regarding fees earned by Mr. Frishcling'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.
Annual Compensation Paid By All AIM Funds
<TABLE>
<CAPTION>
$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 Funds 8 $16,000 $18,000 $20,000 $22,000
-------------------------------------------------------------------------------
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
24
<PAGE> 68
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, $8,556 and
$21,356 in legal fees for services provided to Charter, Weingarten, Aggressive
Growth 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 ADVISORY, ADMINISTRATIVE SERVICES AND SUB-ADVISORY AGREEMENTS
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". 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 advises or manages 37 investment company
portfolios. As of June 1, 1995, the total assets of the investment company
portfolios advised or managed by AIM and 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.
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. In addition, AIM has entered
into a Master Sub-Advisory Agreement dated as of October 18, 1993 (the "Master
Sub-Advisory Agreement") with AIM Capital with respect to Charter, Weingarten
and Constellation. Prior investment advisory agreements (the "Prior Investment
Advisory Agreements"), administrative services agreements (the "Prior
Administrative Services Agreements") and sub-advisory agreements (the "Prior
Sub-Advisory Agreements"), with substantially identical terms (including the
fee schedules) to the Master Advisory Agreement, the Master Administrative
Services Agreement and the Master Sub-Advisory Agreement, respectively, were
previously in effect. Prior to June 30, 1992, Aggressive Growth's investment
advisor was CIGNA Investments, Inc. ("CII") (such agreement hereinafter
referred to as the "CII Agreement").
25
<PAGE> 69
Both the Master Advisory Agreement and the Master Sub-Advisory Agreement
provide that the Fund will pay or cause to be paid all expenses of the 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 Fund 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 each
Fund, 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 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. Each
agreement provides 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 agreement 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 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 to and including $350
million, plus 0.625% of the Fund's average daily net assets in excess of $350
million. With respect to Aggressive Growth, AIM's fee is calculated at an
annual rate of 0.80% of the first $150 million of the Fund's average daily net
assets, plus 0.625% of the Fund's average daily net assets in excess of $150
million. As compensation for its services, AIM pays 50% of the advisory fees
it receives pursuant to the Master Advisory Agreement with respect to Charter,
Weingarten and Constellation to AIM Capital.
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
to AIM Capital as subadviser with respect to Charter, Weingarten and
Constellation. 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 to AIM Capital as subadviser with respect to
Charter, Weingarten and Constellation. 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,
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<PAGE> 70
respectively. For the fiscal year ended October 31, 1992, AIM in turn paid
$2,914,910, $12,507,401 and $6,199,481, respectively, to AIM Capital as
subadviser with respect to Charter, Weingarten and Constellation. For the
fiscal year ended October 31, 1994, AIM received advisory fees from Aggressive
Growth of $1,903,277 net of expense limitation of $133,000. For the ten month
period ended October 31, 1993, AIM received advisory fees from Aggressive
Growth of $413,370, net of expense limitation of $143,500. The management fee
before the reduction of the expense limitation would have been $269,870 for
such period. Aggressive Growth paid AIM a management fee, net of the expense
limitation of $143,500, in the amount of $413,370 for the six month period
ended December 31, 1992 under the Prior Investment Advisory Agreements. The
management fee before reduction of the expense limitation would have been
$269,870 for such period. For the fiscal year ended December 31, 1992,
Aggressive Growth paid CII, pursuant to the CII Agreement, fees net of the
expense limitation of $30,905 in the amount of $17,206. Management fees before
reduction of the expense limitation would have been $48,111 for such period.
The Master Administrative Services Agreement provides that AIM may perform
or arrange for the performance of certain accounting and, shareholder services
and other administrative services to each Fund which are not required to be
performed by AIM 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.
In addition, the Transfer Agency and Service agreement for the Fund
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent
and wholly-owned subsidiary of AIM, will perfrom certain shareholder services
for the Fund for a fee per account serviced. The Transfer Agency and Service
Agreement provides that AFS will receive a per account fee plus out-of-pocket
expenses to process orders for purchases, redemptions and exchanges of shares,
prepare and transmit payments for dividends and distributions declared by the
fund, maintain shareholder accounts and provide shareholders with information
regarding the Fund and their accounts. The Transfer Agency and Service
Agreement became effective on November 1, 1994.
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, under the Prior Administrative Services Agreements.
For the fiscal year ended October 31, 1994, AIM received administrative
services fees from Aggressive Growth of $472,140. For the ten month period
ended October 31, 1993, AIM received administrative services fees from
Aggressive Growth of $65,561. For the six month period ended June 30, 1992,
the reimbursed costs payable to CII pursuant to its former agreement with
respect to Aggressive Growth, for the Office of the Treasurer and the Office of
the Secretary were $11,825. For the six month period ended December 31, 1992,
AIM received administrative services fees from Aggressive Growth of $12,353
under the Prior Administrative Services Agreements.
For the period from November 1, 1993 through October 31, 1994, AFS received
shareholder services fees from AIM with respect to Class A shares of Charter,
Weingarten, Aggressive Growth and Constellation in the amount of $890,434,
$3,015,921, $424,814 and $2,080,638, respectively.
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<PAGE> 71
THE DISTRIBUTION PLANS
THE CLASS A PLAN. The Company has adopted a Master Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act relating to the Class A shares of the
Funds (the "Class A Plan"). The Class A Plan provides that the Class A shares
pay 0.30% per annum of their average daily net assets in the case of Charter,
Weingarten and Constellation and 0.25% per annum of the average net assets of
Aggressive Growth as compensation to AIM Distributors for the purpose of
financing any activity which is primarily intended to result in the sale of
Class A shares. Activities appropriate for financing under the Class A Plan
include, but are not limited to, the following: printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material
and sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class A Plan.
THE CLASS B PLAN. The Company has also adopted a Master Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of Charter
and Weingarten (the "Class B Plan", and collectively with the Class A Plan, the
"Plans"). Under the Class B Plan, Charter and Weingarten pay compensation to
AIM Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class B shares. Of such amount, Charter and Weingarten pay a
service fee of 0.25% of the average daily net assets attributable to Class B
shares to selected dealers and other institutions which furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares. Amounts paid in accordance with the Class B Plan may be used to finance
any activity primarily intended to result in the sale of Class B shares,
including but not limited to printing of prospectuses and statements of
additional information and reports for other than existing shareholders;
overhead; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs
of administering the Class B Plan. AIM Distributors may transfer and sell its
right under the Class B Plan in order to finance distribution expenditures in
respect of Class B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter
into agreements ("Shareholder Service Agreements") with investment dealers
selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Funds' shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Funds. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Funds; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Fund's shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Fund's
shares; and providing such other information and services as the Funds or the
customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds
and the Company; performing sub-accounting; establishing and maintaining
shareholder accounts and records; processing customer purchase and redemption
transactions; providing periodic statements showing a shareholder's account
balance and the integration of such statements with those of other transactions
and balances in the shareholder's other accounts serviced by the bank;
forwarding applicable prospectuses, proxy statements, reports and notices to
bank clients who hold
28
<PAGE> 72
shares of the Funds; and such other administrative services as the Funds
reasonably may request, to the extent permitted by applicable statute, rule or
regulation. Similar agreements may be permitted under the Plans for
institutions which provide recordkeeping for and administrative services to
401(k) plans.
The Company may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of Charter,
Weingarten and Constellation authorizing payments to selected insurance
companies offering variable annuity contracts to employers as funding vehicles
for retirement plans qualified under Section 401(a) of the Internal Revenue
Code. Services provided pursuant to such Variable Contract Agreements may
include some or all of the following: answering inquiries regarding the Fund
and the Company; performing sub-accounting; establishing and maintaining
Contractholder accounts and records; processing and bunching purchase and
redemption transactions; providing periodic statements of contract account
balances; forwarding such reports and notices to Contractholders relative to
the Fund as deemed necessary; generally, facilitating communications with
Contractholders concerning investments in a Fund on behalf of Plan
participants; and performing such other administrative services as deemed to be
necessary or desirable, to the extent permitted by applicable statute, rule or
regulation to provide such services.
Financial intermediaries and any other person entitled to receive
compensation for selling shares of the Funds may receive different compensation
for selling shares of one particular class over another.
Under a Shareholder Service Agreement, the Funds agree to pay periodically
fees to selected dealers and other institutions who render the foregoing
services to their customers. The fees payable under a Shareholder Service
Agreement generally will be calculated at the end of each payment period for
each business day of the Funds during such period at the annual rate of 0.25%
of the average daily net asset value of the Funds' shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which the Funds' shares are held.
The Plans are subject to any applicable limitations imposed from time to
time by rules of the National Association of Securities Dealers, Inc.
AIM Distributors does not act as principal, but rather as agent for the
Funds, in making dealer incentive and shareholder servicing payments under the
Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
For the fiscal year ended October 31, 1994, Charter, Weingarten, Aggressive
Growth and Constellation paid AIM Distributors under the Plan $4,822,450,
$12,812,644, $1,150,978 and $9,579,443, respectively, or an amount equal to
0.30%, 0.30%, 0.25% and 0.30%, respectively, of each Fund's average daily net
assets.
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<PAGE> 73
The fees paid by the Funds under the Plan during the year ended October 31,
1994 were allocated as follows:
<TABLE>
<CAPTION>
AGGRESSIVE
CHARTER WEINGARTEN GROWTH CONSTELLATION
------- ---------- ------ -------------
<S> <C> <C> <C> <C>
Advertising . . . . . . . . . . . . . . . $ 236,644 $ 481,336 $ 31,019 $ 518,018
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to
current shareholders) . . . . . . . . . $ 752,959 $ 1,773,345 $ 136,852 $ 1,624,695
Seminars . . . . . . . . . . . . . . . . $ 86,052 $ 278,669 $ 14,598 $ 211,917
Compensation to Underwriters . . . . . . $ 0 $ 0 $ 0 $ 0
Compensation to Dealers . . . . . . . . . $ 3,746,795 $ 10,279,294 $ 968,509 $ 7,224,813
Compensation to Sales Personnel . . . . . $ 0 $ 0 $ 0 $ 0
</TABLE>
The Plans require AIM Distributors to provide the Board of Directors at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Qualified Directors"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the directors considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Fund and its respective shareholders.
The Plans do not obligate the Fund to reimburse AIM Distributors for the
actual expenses AIM Distributors may incur in fulfilling its obligations under
the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less
than the fee it receives, AIM Distributors will retain the full amount of the
fee.
Unless the Plans are terminated earlier in accordance with their terms, the
Class B Plan continues in effect until June 30, 1996, and thereafter, both
Plans continue as long as such continuance is specifically approved at least
annually by the Board of Directors, including a majority of the Qualified
Directors.
The Plans may be terminated by the vote of a majority of the Qualified
Directors, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the directors, including a majority of the Qualified
Directors, by votes cast in person at a meeting called for the purpose of
voting upon such amendment. As long as the Plans are in effect, the selection
or nomination of the Qualified Directors is committed to the discretion of the
Qualified Directors. In the event the Class A Plan is amended in a manner
which the Board of Directors determines would materially increase the charges
paid under the Class A Plan,
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<PAGE> 74
the Class B shares of the Fund will no longer convert into Class A shares of
the Fund unless the Class B shares, voting separately, approve such amendment.
If the Class B shareholders do not approve such amendment, the Board of
Directors will (i) create a new class of shares of the Fund which is identical
in all material respects to the Class A shares as they existed prior to the
implementation of the amendment and (ii) ensure that the existing Class B
shares of the Fund will be exchanged or converted into such new class of shares
no later than the date the Class B shares were scheduled to convert into Class
A shares.
The principal differences between the Class A Plan and the Class B Plan
are: (i) the Class A Plan allows payment to AIM Distributors or to dealers or
financial institutions of up to .30% of average daily net assets of Charter,
Weingarten and Constellation's Class A shares and up to .25% of average daily
net assets of Aggressive Growth's Class A shares as compared to 1.00% of such
assets of Charter and Weingarten's Class B shares; (ii) the Class B Plan
obligates the Class B shares to continue to make payments to AIM Distributors
following termination of the Class B shares Distribution Agreement with respect
to Class B shares sold by or attributable to the distribution efforts of AIM
Distributors unless there has been a complete termination of the Class B Plan
(as defined in such Plan); and (iii) the Class B Plan expressly authorizes AIM
Distributors to assign, transfer or pledge its rights to payments pursuant to
the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of the
Funds' shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement with AIM Distributors relating to the Class A
shares of the Funds was approved by the Board of Directors on July 19, 1993. A
Master Distribution Agreement with AIM Distributors relating to the Class B
shares of Charter and Weingarten was also approved by the Board of Directors on
May 9, 1995. Both such Master Distribution Agreements are hereinafter
collectively referred to as the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to public offerings
made by AIM Distributors pursuant to the Distribution Agreements (other than
those prospectuses and statements of additional information distributed to
existing shareholders of the Funds), and any promotional or sales literature
used by AIM Distributors or furnished by AIM Distributors to dealers in
connection with the public offering of the Funds' shares, including expenses of
advertising in connection with such public offerings. AIM Distributors has not
undertaken to sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B shares of Charter and Weingarten at
the time of such sales. Payments with respect to Class B shares will equal
4.0% of the purchase price of the Class B shares sold by the dealer or
institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portion of the payments
to AIM Distributors under the Class B Plan which constitutes an asset-based
sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it will require a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares.
In the future, if multiple distributors serve CHARTER or WEINGARTEN, each
such distributor (or its assignee or transferee) would receive a share of the
payments under the Class B Plan based on the portion of such Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
The Company (on behalf of any class of the Funds) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate
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<PAGE> 75
automatically in the event of their assignment. In the event the Class B
shares Distribution Agreement is terminated, AIM Distributors would continue to
receive payments of asset based distribution fees in respect of the outstanding
Class B shares attributable to the distribution efforts of AIM Distributors;
provided, however, that a complete termination of the Class B Plan (as defined
in such Plan) would terminate all payments to AIM Distributors. Termination of
the Class B Plan or Distribution Agreement does not effect the obligations of
Class B shareholders to pay Contingent Deferred Sales Charges.
Since November 18, 1986, Class A shares of Charter have been sold at a
public offering price which includes a sales charge. For the fiscal years
ended October 31, 1994, 1993 and 1992, the total sales charges on the sale of
Class A shares of Charter were $10,252,200, $13,707,760 and $40,567,100,
respectively, of which AIM Distributors retained $1,386,255, $2,444,337 and
$6,301,021, respectively.
Since September 9, 1986, Class A shares of Weingarten have been sold at a
public offering price which includes a sales charge. For the fiscal years
ended October 31, 1994, 1993 and 1992, the total sales charges paid in
connection with the sale of Class A shares of Weingarten were $10,398,176,
$40,790,427 and $143,262,530, respectively, of which AIM Distributors retained
$1,494,020, $7,477,924 and $21,814,743.
For the fiscal year ended October 31, 1994, the ten month period ended
October 31, 1993 and for the six month period ended December 31, 1992, the
total sales charges paid in connection with the sale of Class A shares of
Aggressive Growth were $11,846,706, $4,184,518 and $398,889, respectively, of
which AIM Distributors retained $1,975,968, $576,011 and $62,704, respectively.
During the six month period ended June 30, 1992, the total sales charges paid
in connection with the sale of Class A shares of Aggressive Growth were
$55,374, of which CCB retained $6,514.
Since September 9, 1986, Class A shares of Constellation have been sold at
a public offering price which includes a sales charge. For the fiscal years
ended October 31, 1994, 1993 and 1992, the total sales charges paid in
connection with the sale of Class A shares of Constellation were $42,593,206,
$51,092,042, $28,072,176 and $8,846,513, respectively, of which AIM
Distributors retained $6,482,169, $7,847,614 and $4,299,141.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may be
purchased appears in the Prospectus under the caption "How to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of the
Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed
directly with AIM Distributors by persons, who because of their relationship
with the Funds or with AIM and its affiliates, are familiar with the Funds, or
whose programs for purchase involve little expense (e.g., because of the size
of the transaction and shareholder records required), AIM Distributors believes
that it is appropriate and in the Funds' best interests that such persons be
permitted to purchase Class A shares of the Funds through AIM Distributors
without payment of a sales charge. The persons who may purchase Class A shares
of the Funds without a sales charge are shown in the Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in the Prospectus under the caption "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in the
Prospectus under the caption "How to Redeem Shares." In addition to the Funds'
obligation to redeem shares, AIM Distributors may also repurchase shares as an
accommodation to shareholders. To effect a repurchase, those dealers who have
32
<PAGE> 76
executed Selected Dealer Agreements with AIM Distributors must phone orders to
the order desk of the Fund telephone: (713) 626-1919 (Houston) or (800)
347-1919 (all others) and guarantee delivery of all required documents in good
order. A repurchase is effected at the net asset value of the Fund next
determined after such order is received. Such arrangement is subject to timely
receipt by A I M Fund Services, Inc. of all required documents in good order.
If such documents are not received within a reasonable time after the order is
placed, the order is subject to cancellation. While there is no charge imposed
by the Funds or by AIM Distributors (other than any applicable CDSC) when
shares are redeemed or repurchased, dealers may charge a fair service fee for
handling the transaction.
The right of redemption may be suspended or the date of payment 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 and 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.
NET ASSET VALUE DETERMINATION
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 share is determined 15 minutes following the
close of the New York Stock Exchange on such day. The net asset values per
share of the Retail Classes and the Institutional Class will differ because
different expenses are attributable to each class. The income or loss and the
expenses common to all 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 all 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 accepted 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.
Exchange listed convertible bonds are valued based at the mean between the
closing bid and asked prices obtained from a broker-dealer. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market system) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date; 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 a 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
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<PAGE> 77
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.
Fund securities primarily traded in foreign markets may be traded in such
markets on days which are not business days of the Fund. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the net asset value per share of a Fund may be significantly affected on days
when an investor can not exchange or redeem shares of 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 same class of each Fund unless the
shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund,
subject to the terms and conditions set forth in the Prospectus under the
caption "Special Plans - Automatic Dividend Investment Plan." 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
34
<PAGE> 78
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 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) 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 gains 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.
35
<PAGE> 79
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 securities of other issuers (as to which
the 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 one 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 carry forwards) at the 35%
36
<PAGE> 80
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 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 (a) if the corporate shareholder fails to satisfy
the foregoing requirements with respect to its shares of the Fund or (b) 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 dividend 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 AMTI 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 Funds 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.
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<PAGE> 81
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 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 properly; 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.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund, (b)
disposes of such shares less then 91 days after they are acquired and (c)
subsequently acquires shares of the Fund or another Fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of, but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
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
38
<PAGE> 82
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.
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.
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
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.
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<PAGE> 83
LEGAL MATTERS
Legal matters for the Company have been passed upon by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 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. A I M Fund Services, Inc. (the
"Transfer Agent"), acts as transfer and dividend disbursing agent for the
Funds. These services do not include any supervisory function over 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.
Texas Commerce Bank National Association, P. O. Box 2558, Houston, Texas
77252-8084, serves as Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has entered
into an agreement with the Company (and certain other AIM Funds), the Transfer
Agent and Financial Data Services, Inc., pursuant to which MLPF&S has agreed to
perform certain shareholder sub-accounting services for its customers who
beneficially own shares of the Fund(s).
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 Class A shares of the Retail class of
Charter as of April 3, 1995, and of 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 CLASS OWNED
OF RECORD OWNER RECORD ONLY* (RETAIL CLASS ONLY)
- --------------- ----------- -------------------
<S> <C> <C>
RETAIL CLASS
- ------------
Merrill Lynch Pierce Fenner & Smith 15.8% Class A
AIDS/Street Account
Mutual Fund Operations
ATTN: Private Client Group
P.O. Box 45286
Jacksonville, FL 32232-5286
Great West Life & Annuity
Insurance Co. 7.6% Class A
Financial Control
401(K) 6T1
8505 E. Orchard
Englewood, CO 80111
</TABLE>
40
<PAGE> 84
<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>
It is expected that the continuous offering of shares of the Institutional
Class of Charter to the public will reduce the Commonwealth of Massachusetts'
percentage of ownership in the near future; however, a shareholder who owns 25%
or more of the outstanding shares of the Institutional Class of Charter may be
presumed to be in "control" of such class, as defined in the 1940 Act.
WEINGARTEN
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding Class A shares of the Retail class of
Weingarten as of April 3, 1995 and 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 CLASS OWNED
OF RECORD OWNER RECORD ONLY* (RETAIL CLASS ONLY)
- --------------- ----------- -------------------
<S> <C> <C>
RETAIL CLASS
- ------------
Merrill Lynch Pierce Fenner & Smith 21.3% Class A
AIDS/Street Account
Mutual Fund Operations
ATTN: Private Client Group
P.O. Box 45286
Jacksonville, FL 32232-5286
</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.
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<PAGE> 85
<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
Crawford, 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.
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<PAGE> 86
AGGRESSIVE GROWTH
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding Class A shares of Aggressive Growth 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>
Merrill Lynch Pierce Fenner & Smith 23.3%
AIDS/Street Account
Mutual Fund Operations
ATTN: Private Client Group
P.O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
_________________________________
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
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<PAGE> 87
CONSTELLATION
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding Class A shares of the Retail class of
Constellation as of April 3, 1995, and of 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 Deferred 56.39%**
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 Class A 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.
44
<PAGE> 88
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.
45
<PAGE> 89
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.
46
<PAGE> 90
FINANCIAL STATEMENTS
FS
<PAGE> 91
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> 92
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> 93
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> 94
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> 95
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> 96
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> 97
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> 98
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> 99
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> 100
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> 101
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> 102
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> 103
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> 104
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> 105
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> 106
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> 107
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> 108
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> 109
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> 110
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> 111
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> 112
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> 113
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> 114
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> 115
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> 116
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> 117
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> 118
<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> 119
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> 120
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> 121
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> 122
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> 123
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> 124
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> 125
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> 126
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> 127
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> 128
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> 129
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> 130
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> 131
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> 132
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> 133
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> 134
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> 135
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> 136
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> 137
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> 138
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> 139
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> 140
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> 141
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> 142
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> 143
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> 144
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> 145
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> 146
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> 147
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> 148
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> 149
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> 150
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> 151
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> 152
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> 153
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> 154
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> 155
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> 156
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
<PAGE> 157
- --------------------------------------------------------------------------------
AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Aggressive Growth Fund (a portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1994, the related statement of
operations for the year then ended, and the changes in net assets and financial
highlights for the year then ended and the ten month period ended October 31,
1993. 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
Aggressive Growth Fund as of October 31, 1994, the results of its operations for
the year then ended, the changes in its net assets and financial highlights for
the year then ended and the ten month period ended October 31, 1993, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
December 9, 1994
F-67
<PAGE> 158
- --------------------------------------------------------------------------------
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-94.52%
BASIC INDUSTRIES-2.21%
CHEMICALS-1.29%
79,300 Cytec Industries Inc.(a) $ 3,251,300
-----------------------------------------------------------------------------------------
45,000 Lilly Industries, Inc.-Class A 618,750
-----------------------------------------------------------------------------------------
83,000 Sybron Chemicals, Inc.(a) 1,680,750
-----------------------------------------------------------------------------------------
100,000 Wellman Inc. 3,287,500
-----------------------------------------------------------------------------------------
8,838,300
-----------------------------------------------------------------------------------------
METALS (NONFERROUS)-0.24%
100,000 Brush Wellman Inc. 1,675,000
-----------------------------------------------------------------------------------------
STEEL-0.68%
100,000 AK Steel Holdings Corp.(a) 3,275,000
-----------------------------------------------------------------------------------------
60,000 Steel of West Virginia, Inc.(a) 712,500
-----------------------------------------------------------------------------------------
45,000 WHX Corporation(a) 675,000
-----------------------------------------------------------------------------------------
4,662,500
-----------------------------------------------------------------------------------------
Total Basic Industries 15,175,800
-----------------------------------------------------------------------------------------
BUSINESS SERVICES-15.49%
COMPUTER SOFTWARE & SERVICES-11.52%
75,000 Alias Research Inc.(a) 1,865,625
-----------------------------------------------------------------------------------------
79,000 Alliance Semiconductor Corp.(a) 2,034,250
-----------------------------------------------------------------------------------------
30,000 Broderbund Software, Inc.(a) 1,920,000
-----------------------------------------------------------------------------------------
200,000 Cadence Design Systems, Inc.(a) 4,000,000
-----------------------------------------------------------------------------------------
150,000 Caere Corp.-Class A(a) 2,493,750
-----------------------------------------------------------------------------------------
43,800 Cerner Inc.(a) 1,784,850
-----------------------------------------------------------------------------------------
85,000 CliniCom, Inc.(a) 1,275,000
-----------------------------------------------------------------------------------------
225,000 Corel Corp.(a) 3,487,500
-----------------------------------------------------------------------------------------
100,000 Danka Business Systems PLC-ADR 1,950,000
-----------------------------------------------------------------------------------------
50,000 DSP Group Inc.(a) 1,200,000
-----------------------------------------------------------------------------------------
106,900 Electronics for Imaging, Inc.(a) 2,806,125
-----------------------------------------------------------------------------------------
100,000 Filenet Corp.(a) 2,550,000
-----------------------------------------------------------------------------------------
225,000 Frame Technology Corp.(a) 3,262,500
-----------------------------------------------------------------------------------------
100,000 HBO & Co. 3,250,000
-----------------------------------------------------------------------------------------
50,000 IMRS Inc.(a) 1,987,500
-----------------------------------------------------------------------------------------
40,000 In Focus Systems, Inc.(a) 1,040,000
-----------------------------------------------------------------------------------------
75,000 Integrated Silicon Systems(a) 1,945,313
-----------------------------------------------------------------------------------------
100,000 Intersolv Inc.(a) 1,675,000
-----------------------------------------------------------------------------------------
100,000 Macromedia Inc.(a) 2,100,000
-----------------------------------------------------------------------------------------
85,000 Madge N.V.(a) 924,375
-----------------------------------------------------------------------------------------
65,000 Medic Computer Systems, Inc.(a) 1,470,625
-----------------------------------------------------------------------------------------
</TABLE>
F-68
<PAGE> 159
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
Computer Software & Services-(continued)
100,000 Midisoft Corp.(a) $ 1,750,000
-----------------------------------------------------------------------------------------
150,000 NetManage, Inc.(a) 4,312,500
-----------------------------------------------------------------------------------------
175,000 Network General Corp.(a) 3,784,375
-----------------------------------------------------------------------------------------
100,000 Norand Corp.(a) 3,925,000
-----------------------------------------------------------------------------------------
175,000 ParcPlace Systems, Inc.(a) 3,500,000
-----------------------------------------------------------------------------------------
150,000 Platinum Technology Inc.(a) 3,318,750
-----------------------------------------------------------------------------------------
30,000 Pyxis Corp.(a) 577,500
-----------------------------------------------------------------------------------------
175,000 Softdesk, Inc.(a) 3,478,125
-----------------------------------------------------------------------------------------
131,500 Softkey International, Inc.(a) 2,457,406
-----------------------------------------------------------------------------------------
50,000 Sterling Software Inc.(a) 1,562,500
-----------------------------------------------------------------------------------------
150,000 Symantec Corp.(a) 2,662,500
-----------------------------------------------------------------------------------------
175,000 VMARK Software, Inc.(a) 2,843,750
-----------------------------------------------------------------------------------------
79,194,819
-----------------------------------------------------------------------------------------
POLLUTION CONTROL SERVICES-0.84%
500,000 Allwaste, Inc.(a) 3,187,500
-----------------------------------------------------------------------------------------
115,000 Sanifill, Inc.(a) 2,616,250
-----------------------------------------------------------------------------------------
5,803,750
-----------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES-1.36%
100,000 ALC Communications Corp.(a) 3,787,500
-----------------------------------------------------------------------------------------
100,000 Black Box Corp.(a) 1,375,000
-----------------------------------------------------------------------------------------
40,600 IPC Information Systems, Inc.(a) 609,000
-----------------------------------------------------------------------------------------
200,000 Microtest Inc.(a) 3,550,000
-----------------------------------------------------------------------------------------
9,321,500
-----------------------------------------------------------------------------------------
MISCELLANEOUS-1.73%
150,000 American Management Systems, Inc.(a) 2,381,250
-----------------------------------------------------------------------------------------
125,000 CDI Corp.(a) 2,125,000
-----------------------------------------------------------------------------------------
51,100 Coventry Corp.(a) 1,277,500
-----------------------------------------------------------------------------------------
65,000 Devon Group, Inc.(a) 1,616,875
-----------------------------------------------------------------------------------------
40,000 Franklin Quest Co.(a) 1,415,000
-----------------------------------------------------------------------------------------
40,000 Olsten Corp. 1,435,000
-----------------------------------------------------------------------------------------
76,000 Robert Half International Inc.(a) 1,634,000
-----------------------------------------------------------------------------------------
11,884,625
-----------------------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.04%
21,000 U.S. Xpress Enterprises, Inc.-Class A(a) 309,750
-----------------------------------------------------------------------------------------
Total Business Services 106,514,444
-----------------------------------------------------------------------------------------
CAPITAL GOODS-40.47%
AEROSPACE/DEFENSE-0.79%
75,000 OEA, Inc. 1,846,875
-----------------------------------------------------------------------------------------
100,000 Watkins-Johnson Co. 3,587,500
-----------------------------------------------------------------------------------------
5,434,375
-----------------------------------------------------------------------------------------
</TABLE>
F-69
<PAGE> 160
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BUILDING MATERIALS-0.81%
150,000 BMC West Corp.(a) $ 2,531,250
-----------------------------------------------------------------------------------------
23,200 Butler Manufacturing Co. 800,400
-----------------------------------------------------------------------------------------
14,900 Medusa Corp. 338,975
-----------------------------------------------------------------------------------------
75,000 Ply-Gem Industries, Inc. 1,612,500
-----------------------------------------------------------------------------------------
23,000 Triangle Pacific Corp.(a) 313,375
-----------------------------------------------------------------------------------------
5,596,500
-----------------------------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT-8.63%
60,000 American Power Conversion Corp.(a) 1,110,000
-----------------------------------------------------------------------------------------
250,000 Boston Technology, Inc.(a) 4,125,000
-----------------------------------------------------------------------------------------
75,000 Chipcom Corp.(a) 4,518,750
-----------------------------------------------------------------------------------------
90,000 Cyrix Corp.(a) 3,735,000
-----------------------------------------------------------------------------------------
125,000 Digital Microwave Corp.(a) 1,843,750
-----------------------------------------------------------------------------------------
115,000 EMC Corp.(a) 2,472,500
-----------------------------------------------------------------------------------------
119,400 Exabyte Corp.(a) 2,626,800
-----------------------------------------------------------------------------------------
100,000 Komag, Inc.(a) 2,484,375
-----------------------------------------------------------------------------------------
220,000 LaserMaster Technologies, Inc.(a) 3,465,000
-----------------------------------------------------------------------------------------
32,500 MicroTouch Systems, Inc.(a) 1,820,000
-----------------------------------------------------------------------------------------
100,000 Network Equipment Technologies, Inc.(a) 2,175,000
-----------------------------------------------------------------------------------------
175,000 Optical Data Systems, Inc.(a) 3,587,500
-----------------------------------------------------------------------------------------
200,000 Proteon, Inc.(a) 1,275,000
-----------------------------------------------------------------------------------------
50,000 Proxima Corp.(a) 1,525,000
-----------------------------------------------------------------------------------------
180,000 Read-Rite Corp.(a) 3,127,500
-----------------------------------------------------------------------------------------
200,000 Sequent Computer Systems, Inc.(a) 3,800,000
-----------------------------------------------------------------------------------------
65,000 Stratus Computer, Inc.(a) 2,421,250
-----------------------------------------------------------------------------------------
100,000 Symbol Technologies, Inc.(a) 3,375,000
-----------------------------------------------------------------------------------------
200,000 Telxon Corp. 2,600,000
-----------------------------------------------------------------------------------------
75,000 U.S. Robotics, Inc.(a) 3,018,750
-----------------------------------------------------------------------------------------
80,600 Western Digital Corp.(a) 1,370,200
-----------------------------------------------------------------------------------------
50,000 Xircom, Inc.(a) 875,000
-----------------------------------------------------------------------------------------
65,000 Xylogics, Inc.(a) 1,925,625
-----------------------------------------------------------------------------------------
59,277,000
-----------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.62%
50,000 AFC Cable Systems, Inc.(a) 837,500
-----------------------------------------------------------------------------------------
200,000 Ametek, Inc. 3,625,000
-----------------------------------------------------------------------------------------
50,000 C-Cor Electronics, Inc.(a) 2,662,500
-----------------------------------------------------------------------------------------
100,000 Harman International Industries, Inc. 3,575,000
-----------------------------------------------------------------------------------------
150,000 KEMET Corp.(a) 3,262,500
-----------------------------------------------------------------------------------------
165,000 Merix Corp.(a) 2,227,500
-----------------------------------------------------------------------------------------
100,000 SCI Systems, Inc.(a) 1,825,000
-----------------------------------------------------------------------------------------
18,015,000
-----------------------------------------------------------------------------------------
</TABLE>
F-70
<PAGE> 161
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (INSTRUMENTATION)-4.08%
200,000 Cypress Semiconductor Corp.(a) $ 4,175,000
-----------------------------------------------------------------------------------------
75,000 Dynatech Corp.(a) 2,156,250
-----------------------------------------------------------------------------------------
20,000 Helix Technology Corp. 630,000
-----------------------------------------------------------------------------------------
75,000 KLA Instruments Corp.(a) 3,956,250
-----------------------------------------------------------------------------------------
130,000 Rainbow Technologies, Inc.(a) 2,047,500
-----------------------------------------------------------------------------------------
100,000 Tektronix Inc. 3,800,000
-----------------------------------------------------------------------------------------
120,000 Teradyne Inc.(a) 3,945,000
-----------------------------------------------------------------------------------------
110,000 Three-Five Systems, Inc.(a) 3,423,750
-----------------------------------------------------------------------------------------
100,000 Ultratech Stepper, Inc.(a) 3,925,000
-----------------------------------------------------------------------------------------
28,058,750
-----------------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS/COMPONENTS)-11.28%
100,000 Altera Corp.(a) 3,943,750
-----------------------------------------------------------------------------------------
150,000 Amphenol Corp.(a) 3,281,250
-----------------------------------------------------------------------------------------
120,000 Atmel Corp.(a) 4,425,000
-----------------------------------------------------------------------------------------
175,000 Augat Inc. 3,478,125
-----------------------------------------------------------------------------------------
100,000 Belden, Inc. 2,000,000
-----------------------------------------------------------------------------------------
70,000 BMC Industries, Inc. 1,137,500
-----------------------------------------------------------------------------------------
150,000 Credence Systems Corp.(a) 3,825,000
-----------------------------------------------------------------------------------------
130,000 Electro Scientific Industries, Inc.(a) 2,193,750
-----------------------------------------------------------------------------------------
63,400 Electroglas Inc.(a) 2,520,150
-----------------------------------------------------------------------------------------
90,000 Exar Corp.(a) 1,890,000
-----------------------------------------------------------------------------------------
325,000 Genus, Inc.(a) 2,153,125
-----------------------------------------------------------------------------------------
175,000 International Rectifier Corp.(a) 4,068,750
-----------------------------------------------------------------------------------------
100,000 LAM Research Corp.(a) 4,500,000
-----------------------------------------------------------------------------------------
100,000 Lattice Semiconductor Corp.(a) 1,687,500
-----------------------------------------------------------------------------------------
20,000 Linear Technology Corp. 960,000
-----------------------------------------------------------------------------------------
115,000 LSI Logic Corp.(a) 4,887,500
-----------------------------------------------------------------------------------------
175,000 Methode Electronics, Inc.-Class A 3,325,000
-----------------------------------------------------------------------------------------
33,500 Microchip Technology, Inc.(a) 1,570,313
-----------------------------------------------------------------------------------------
30,000 Molex, Inc. 1,335,000
-----------------------------------------------------------------------------------------
60,000 Novellus Systems, Inc.(a) 3,270,000
-----------------------------------------------------------------------------------------
145,000 Oak Industries Inc.(a) 3,733,750
-----------------------------------------------------------------------------------------
250,000 OPTI, Inc.(a) 3,625,000
-----------------------------------------------------------------------------------------
75,000 Photronics, Inc.(a) 2,025,000
-----------------------------------------------------------------------------------------
142,500 Recoton Corp.(a) 2,707,500
-----------------------------------------------------------------------------------------
100,000 Sierra Semiconductor Corp.(a) 1,537,500
-----------------------------------------------------------------------------------------
200,000 Silicon Valley Group, Inc.(a) 3,925,000
-----------------------------------------------------------------------------------------
80,000 Tencor Instruments(a) 3,520,000
-----------------------------------------------------------------------------------------
77,525,463
-----------------------------------------------------------------------------------------
</TABLE>
F-71
<PAGE> 162
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MACHINE TOOLS & RELATED PRODUCTS-0.72%
120,000 Cincinnati Milacron, Inc. $ 3,285,000
-----------------------------------------------------------------------------------------
60,000 Kennametal Inc. 1,687,500
-----------------------------------------------------------------------------------------
4,972,500
-----------------------------------------------------------------------------------------
MACHINERY-2.03%
65,000 AGCO Corp. 3,575,000
-----------------------------------------------------------------------------------------
130,000 Applied Power, Inc.-Class A 3,201,250
-----------------------------------------------------------------------------------------
30,000 Clark Equipment Co.(a) 2,103,750
-----------------------------------------------------------------------------------------
25,000 IDEX Corp.(a) 1,087,500
-----------------------------------------------------------------------------------------
37,500 Osmonics, Inc.(a) 543,750
-----------------------------------------------------------------------------------------
225,000 Quickturn Design System, Inc.(a) 2,531,250
-----------------------------------------------------------------------------------------
55,000 Smith International, Inc.(a) 921,250
-----------------------------------------------------------------------------------------
13,963,750
-----------------------------------------------------------------------------------------
METAL FABRICATION-0.42%
55,000 Rouge Steel Company-Class A 1,423,125
-----------------------------------------------------------------------------------------
75,000 Synalloy Corp. 1,462,500
-----------------------------------------------------------------------------------------
2,885,625
-----------------------------------------------------------------------------------------
METAL PRODUCTS & SERVICES-0.37%
100,000 Wolverine Tube, Inc.(a) 2,512,500
-----------------------------------------------------------------------------------------
PAPERBOARD CONTAINERS/OTHER PRODUCTS-0.50%
100,000 Sealed Air Corp.(a) 3,412,500
-----------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-5.26%
85,000 ADC Telecommunications, Inc.(a) 4,005,625
-----------------------------------------------------------------------------------------
50,000 Andrew Corp.(a) 2,587,500
-----------------------------------------------------------------------------------------
150,000 Applied Digital Access, Inc.(a) 3,712,500
-----------------------------------------------------------------------------------------
75,000 Aspect Telecommunications Corp.(a) 2,587,500
-----------------------------------------------------------------------------------------
125,000 California Microwave, Inc.(a) 3,875,000
-----------------------------------------------------------------------------------------
125,000 DSC Communications Corp.(a) 3,843,750
-----------------------------------------------------------------------------------------
150,000 Digital Systems International, Inc.(a) 1,406,250
-----------------------------------------------------------------------------------------
37,000 Plantronics, Inc.(a) 1,137,750
-----------------------------------------------------------------------------------------
50,000 StrataCom, Inc.(a) 2,831,250
-----------------------------------------------------------------------------------------
200,000 Summa Four, Inc.(a) 4,125,000
-----------------------------------------------------------------------------------------
150,000 Telco Systems, Inc.(a) 2,625,000
-----------------------------------------------------------------------------------------
70,000 Tellabs, Inc.(a) 3,412,500
-----------------------------------------------------------------------------------------
36,149,625
-----------------------------------------------------------------------------------------
TEXTILE MILL PRODUCTS-0.49%
115,000 Nautica Enterprises Inc.(a) 3,335,000
-----------------------------------------------------------------------------------------
TRANSPORTATION EQUIPMENT-0.31%
60,000 Champion Enterprises, Inc.(a) 2,130,000
-----------------------------------------------------------------------------------------
MISCELLANEOUS-1.81%
70,000 Danaher Corp. 3,438,750
-----------------------------------------------------------------------------------------
100,000 Day Runner Inc.(a) 1,731,250
-----------------------------------------------------------------------------------------
</TABLE>
F-72
<PAGE> 163
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
Miscellaneous-(continued)
55,000 Juno Lighting, Inc. $ 1,031,250
-----------------------------------------------------------------------------------------
50,000 NCI Building Systems, Inc.(a) 937,500
-----------------------------------------------------------------------------------------
100,000 Planar Systems, Inc.(a) 1,562,500
-----------------------------------------------------------------------------------------
47,000 Titan Wheel International, Inc. 1,351,250
-----------------------------------------------------------------------------------------
65,000 X-Rite, Inc. 2,364,375
-----------------------------------------------------------------------------------------
12,416,875
-----------------------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.35%
100,000 Smith (A.O.) Corp. 2,437,500
-----------------------------------------------------------------------------------------
Total Capital Goods 278,122,963
-----------------------------------------------------------------------------------------
CONSUMER DURABLES-5.21%
AUTO PARTS-0.48%
12,400 Edelbrock Corp.(a) 158,100
-----------------------------------------------------------------------------------------
100,000 Hi-Lo Automotive, Inc.(a) 1,125,000
-----------------------------------------------------------------------------------------
120,000 Simpson Industries Inc. 1,560,000
-----------------------------------------------------------------------------------------
15,000 Superior Industries International Inc. 442,500
-----------------------------------------------------------------------------------------
3,285,600
-----------------------------------------------------------------------------------------
AUTOMOBILE-0.17%
50,000 Automotive Industries Holdings, Inc.-Class A(a) 1,212,500
-----------------------------------------------------------------------------------------
HOUSEHOLD APPLIANCES/FURNISHINGS-0.16%
60,000 Helen of Troy Ltd.(a) 1,117,500
-----------------------------------------------------------------------------------------
MEDICAL EQUIPMENT & SUPPLIES-2.23%
75,000 Acuson Corp.(a) 1,378,125
-----------------------------------------------------------------------------------------
50,000 Allied Healthcare Products, Inc. 825,000
-----------------------------------------------------------------------------------------
50,000 Cabot Medical Corp.(a) 262,500
-----------------------------------------------------------------------------------------
55,000 Conmed Corp.(a) 1,189,375
-----------------------------------------------------------------------------------------
65,000 Cordis Corp.(a) 3,745,625
-----------------------------------------------------------------------------------------
110,000 Heart Technology Inc.(a) 2,626,250
-----------------------------------------------------------------------------------------
19,300 Isolyser Co., Inc.(a) 371,525
-----------------------------------------------------------------------------------------
35,000 Nellcor Inc.(a) 1,085,000
-----------------------------------------------------------------------------------------
100,000 Pharmacy Management Services, Inc.(a) 1,593,750
-----------------------------------------------------------------------------------------
70,000 Target Therapeutics, Inc.(a) 2,222,500
-----------------------------------------------------------------------------------------
15,299,650
-----------------------------------------------------------------------------------------
PERSONAL ITEMS-0.33%
112,500 Arctco, Inc. 2,278,125
-----------------------------------------------------------------------------------------
</TABLE>
F-73
<PAGE> 164
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RESIDENTIAL CONSTRUCTION-0.26%
50,000 Oakwood Homes Corp. $ 1,187,500
-----------------------------------------------------------------------------------------
40,000 Southern Energy Homes, Inc.(a) 580,000
-----------------------------------------------------------------------------------------
1,767,500
-----------------------------------------------------------------------------------------
TOYS & SPORTING GOODS-0.91%
75,000 Cobra Golf, Inc.(a) 2,793,750
-----------------------------------------------------------------------------------------
100,000 Coleman Co., Inc. (The)(a) 3,462,500
-----------------------------------------------------------------------------------------
6,256,250
-----------------------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.67%
100,000 First Alert, Inc.(a) 2,125,000
-----------------------------------------------------------------------------------------
90,000 Fossil, Inc.(a) 2,475,000
-----------------------------------------------------------------------------------------
4,600,000
-----------------------------------------------------------------------------------------
Total Consumer Durables 35,817,125
-----------------------------------------------------------------------------------------
CONSUMER NONDURABLES-5.92%
BEVERAGES-0.24%
50,000 Canandaigua Wine Co., Inc.-Class A(a) 1,643,750
-----------------------------------------------------------------------------------------
COSMETICS-0.26%
50,000 Helene Curtis Industries., Inc. 1,768,750
-----------------------------------------------------------------------------------------
DRUGS-0.96%
108,425 Revco D.S., Inc.(a) 2,426,009
-----------------------------------------------------------------------------------------
160,000 Watson Pharmaceuticals Inc.(a) 4,210,000
-----------------------------------------------------------------------------------------
6,636,009
-----------------------------------------------------------------------------------------
FOOD PROCESSING-0.07%
50,000 Michael Foods, Inc. 493,750
-----------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.99%
60,000 Department 56, Inc.(a) 2,197,500
-----------------------------------------------------------------------------------------
100,000 Guest Supply, Inc.(a) 1,800,000
-----------------------------------------------------------------------------------------
100,000 Toro Co. (The) 2,775,000
-----------------------------------------------------------------------------------------
6,772,500
-----------------------------------------------------------------------------------------
PUBLISHING-0.17%
25,000 Scholastic Corp.(a) 1,140,625
-----------------------------------------------------------------------------------------
SHOES-0.79%
200,000 Maxwell Shoe Co., Inc.-Class A(a) 2,150,000
-----------------------------------------------------------------------------------------
135,000 Wolverine World Wide, Inc. 3,307,500
-----------------------------------------------------------------------------------------
5,457,500
-----------------------------------------------------------------------------------------
TEXTILES-2.44%
100,000 Donnekenny, Inc.(a) 2,075,000
-----------------------------------------------------------------------------------------
70,000 Fieldcrest Cannon, Inc.(a) 1,785,000
-----------------------------------------------------------------------------------------
150,000 Galey & Lord, Inc.(a) 2,334,375
-----------------------------------------------------------------------------------------
200,000 Quiksilver, Inc.(a) 3,500,000
-----------------------------------------------------------------------------------------
125,000 St. John Knits, Inc. 3,812,500
-----------------------------------------------------------------------------------------
73,300 Tommy Hilfiger Corp.(a) 3,234,362
-----------------------------------------------------------------------------------------
16,741,237
-----------------------------------------------------------------------------------------
Total Consumer Nondurables 40,654,121
-----------------------------------------------------------------------------------------
</TABLE>
F-74
<PAGE> 165
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER SERVICES-12.73%
BROADCAST MEDIA-1.65%
50,000 Clear Channel Communications, Inc.(a) $ 2,518,750
-----------------------------------------------------------------------------------------
150,000 Heritage Media Corp.-Class A(a) 3,637,500
-----------------------------------------------------------------------------------------
100,000 Media General, Inc.-Class A 2,837,500
-----------------------------------------------------------------------------------------
35,000 Meredith Corp. 1,715,000
-----------------------------------------------------------------------------------------
50,000 Spelling Entertainment Group, Inc. 600,000
-----------------------------------------------------------------------------------------
11,308,750
-----------------------------------------------------------------------------------------
ENTERTAINMENT-1.02%
50,000 Aldila, Inc.(a) 650,000
-----------------------------------------------------------------------------------------
50,000 Autotote Corp.-Class A 875,000
-----------------------------------------------------------------------------------------
75,000 Avid Technology, Inc.(a) 2,821,875
-----------------------------------------------------------------------------------------
21,800 Players International, Inc.(a) 490,500
-----------------------------------------------------------------------------------------
50,000 Scientific Games Holdings Corp.(a) 2,200,000
-----------------------------------------------------------------------------------------
7,037,375
-----------------------------------------------------------------------------------------
HEALTH CARE-5.01%
22,000 Express Scripts, Inc.-Class A(a) 742,500
-----------------------------------------------------------------------------------------
50,000 FHP International Corp.(a) 1,450,000
-----------------------------------------------------------------------------------------
100,000 Health Care & Retirement Corp.(a) 2,687,500
-----------------------------------------------------------------------------------------
125,000 Health Systems International Inc.(a) 3,359,375
-----------------------------------------------------------------------------------------
100,000 Healthcare Compare Corp(a) 2,787,500
-----------------------------------------------------------------------------------------
105,000 Healthsouth Rehabilitation Corp.(a) 3,990,000
-----------------------------------------------------------------------------------------
125,000 Interim Services, Inc.(a) 3,093,750
-----------------------------------------------------------------------------------------
100,000 Living Centers of America, Inc.(a) 3,012,500
-----------------------------------------------------------------------------------------
150,000 Mariner Health Group, Inc.(a) 3,393,750
-----------------------------------------------------------------------------------------
75,300 Mid Atlantic Medical Services, Inc.(a) 1,741,313
-----------------------------------------------------------------------------------------
25,000 Oxford Health Plans, Inc.(a) 2,050,000
-----------------------------------------------------------------------------------------
120,000 Sierra Health Services Inc.(a) 3,900,000
-----------------------------------------------------------------------------------------
32,300 Sun Healthcare Group, Inc.(a) 742,900
-----------------------------------------------------------------------------------------
52,500 Vivra Inc.(a) 1,483,125
-----------------------------------------------------------------------------------------
34,434,213
-----------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT-4.03%
100,000 Charter Medical Corp.(a) 2,475,000
-----------------------------------------------------------------------------------------
125,000 Community Health Systems, Inc.(a) 3,281,250
-----------------------------------------------------------------------------------------
64,600 Genesis Health Ventures, Inc.(a) 1,905,700
-----------------------------------------------------------------------------------------
51,750 Health Management Associates, Inc.-Class A(a) 1,345,500
-----------------------------------------------------------------------------------------
100,000 Healthsource, Inc.(a) 3,875,000
-----------------------------------------------------------------------------------------
75,000 Horizon Healthcare Corp.(a) 2,071,875
-----------------------------------------------------------------------------------------
100,000 Integrated Health Services, Inc.(a) 4,075,000
-----------------------------------------------------------------------------------------
135,000 Lincare Holdings, Inc.(a) 3,678,750
-----------------------------------------------------------------------------------------
50,000 ReLife, Inc.-Class A(a) 1,175,000
-----------------------------------------------------------------------------------------
127,500 Vencor, Inc.(a) 3,809,062
-----------------------------------------------------------------------------------------
27,692,137
-----------------------------------------------------------------------------------------
</TABLE>
F-75
<PAGE> 166
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LODGING-0.53%
54,000 La Quinta Motor Inns, Inc. $ 1,356,750
-----------------------------------------------------------------------------------------
101,666 ShoLodge, Inc.(a) 2,287,485
-----------------------------------------------------------------------------------------
3,644,235
-----------------------------------------------------------------------------------------
MISCELLANEOUS-0.49%
50,000 Regis Corp.(a) 825,000
-----------------------------------------------------------------------------------------
105,000 United Waste Systems, Inc.(a) 2,546,250
-----------------------------------------------------------------------------------------
3,371,250
-----------------------------------------------------------------------------------------
Total Consumer Services 87,487,960
-----------------------------------------------------------------------------------------
ENERGY-0.09%
OIL & GAS-0.09%
30,000 Input/Output, Inc.(a) 645,000
-----------------------------------------------------------------------------------------
Total Energy 645,000
-----------------------------------------------------------------------------------------
FINANCIAL-2.91%
BUSINESS CREDIT-0.11%
50,000 Foothill Group, Inc. (The) 750,000
-----------------------------------------------------------------------------------------
INSURANCE (LIFE)-0.46%
100,000 American Travellers Corp.(a) 1,737,500
-----------------------------------------------------------------------------------------
50,000 United American Healthcare Corp.(a) 1,437,500
-----------------------------------------------------------------------------------------
3,175,000
-----------------------------------------------------------------------------------------
INSURANCE (PROPERTY & CASUALTY)-0.26%
60,000 Allied Group, Inc. 1,755,000
-----------------------------------------------------------------------------------------
INSURANCE (OTHER)-0.51%
100,000 Crop Growers Corp.(a) 1,725,000
-----------------------------------------------------------------------------------------
50,000 HealthWise of America, Inc.(a) 1,750,000
-----------------------------------------------------------------------------------------
3,475,000
-----------------------------------------------------------------------------------------
PERSONAL CREDIT-0.24%
15,750 ADVANTA Corp.-Class A 448,875
-----------------------------------------------------------------------------------------
35,000 First U.S.A. Inc. 1,233,750
-----------------------------------------------------------------------------------------
1,682,625
-----------------------------------------------------------------------------------------
SAVINGS & LOAN-0.76%
36,000 Roosevelt Financial Group, Inc. 544,500
-----------------------------------------------------------------------------------------
192,500 Sovereign Bancorp, Inc. 1,732,500
-----------------------------------------------------------------------------------------
75,000 TCF Financial Corp. 2,925,000
-----------------------------------------------------------------------------------------
5,202,000
-----------------------------------------------------------------------------------------
MISCELLANEOUS-0.57%
150,000 Money Store Inc. (The) 3,056,250
-----------------------------------------------------------------------------------------
32,000 Mutual Risk Management Ltd. 876,000
-----------------------------------------------------------------------------------------
3,932,250
-----------------------------------------------------------------------------------------
Total Financial 19,971,875
-----------------------------------------------------------------------------------------
</TABLE>
F-76
<PAGE> 167
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL-5.03%
DEPARTMENT STORES-0.71%
145,000 Bon-Ton Stores, Inc. (The)(a) $ 1,812,500
-----------------------------------------------------------------------------------------
150,000 Carson Pirie Scott & Co.(a) 2,887,500
-----------------------------------------------------------------------------------------
4,600 Kohl's Corp.(a) 194,350
-----------------------------------------------------------------------------------------
4,894,350
-----------------------------------------------------------------------------------------
GENERAL MERCHANDISE, EXCLUDING DEPARTMENT, STORES-0.82%
70,000 Caldor Corp. (The)(a) 2,003,750
-----------------------------------------------------------------------------------------
75,000 Casey's General Stores, Inc. 989,063
-----------------------------------------------------------------------------------------
150,000 Waban Inc.(a) 2,662,500
-----------------------------------------------------------------------------------------
5,655,313
-----------------------------------------------------------------------------------------
RESTAURANTS-1.00%
149,062 Apple South, Inc. 2,422,257
-----------------------------------------------------------------------------------------
115,000 IHOP Corp.(a) 3,191,250
-----------------------------------------------------------------------------------------
60,000 O'Charley's Inc.(a) 690,000
-----------------------------------------------------------------------------------------
40,000 Uno Restaurant Corp.(a) 540,000
-----------------------------------------------------------------------------------------
6,843,507
-----------------------------------------------------------------------------------------
SPECIALTY STORES-2.15%
52,400 Ann Taylor Stores Corp.(a) 2,174,600
-----------------------------------------------------------------------------------------
75,000 Baker (J.), Inc. 1,265,625
-----------------------------------------------------------------------------------------
100,000 Finish Line, Inc.(a) 725,000
-----------------------------------------------------------------------------------------
120,000 Intelligent Electronics Inc. 1,860,000
-----------------------------------------------------------------------------------------
100,000 Sportmart, Inc.(a) 1,525,000
-----------------------------------------------------------------------------------------
22,500 Sunglass Hut International(a) 937,969
-----------------------------------------------------------------------------------------
45,000 Urban Outfitters, Inc.(a) 1,361,250
-----------------------------------------------------------------------------------------
115,000 West Marine Corp.(a) 2,530,000
-----------------------------------------------------------------------------------------
69,975 Williams-Sonoma, Inc.(a) 2,414,137
-----------------------------------------------------------------------------------------
14,793,581
-----------------------------------------------------------------------------------------
MULTIPLE INDUSTRY-0.35%
100,000 Haggar Corp. 2,400,000
-----------------------------------------------------------------------------------------
Total Retail 34,586,751
-----------------------------------------------------------------------------------------
TRANSPORTATION-2.08%
AIR TRANSPORT/FREIGHT-0.60%
99,900 SkyWest, Inc. 2,047,950
-----------------------------------------------------------------------------------------
100,000 ValuJet Airlines, Inc.(a) 2,075,000
-----------------------------------------------------------------------------------------
4,122,950
-----------------------------------------------------------------------------------------
</TABLE>
F-77
<PAGE> 168
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRUCKING-1.48%
175,000 Arkansas Best Corp. $ 2,264,063
-----------------------------------------------------------------------------------------
9,900 Covenant Transport, Inc.-Class A(a) 188,100
-----------------------------------------------------------------------------------------
150,000 M.S. Carriers, Inc.(a) 3,525,000
-----------------------------------------------------------------------------------------
37,500 Swift Transportation Co., Inc.(a) 1,621,875
-----------------------------------------------------------------------------------------
100,000 TNT Freightways Corp. 2,550,000
-----------------------------------------------------------------------------------------
10,149,038
-----------------------------------------------------------------------------------------
Total Transportation 14,271,988
-----------------------------------------------------------------------------------------
UTILITIES-0.61%
TELEPHONE-0.61%
175,000 LCI International, Inc.(a) 4,200,000
-----------------------------------------------------------------------------------------
Total Utilities 4,200,000
-----------------------------------------------------------------------------------------
WHOLESALE-0.61%
DURABLE GOODS-0.61%
50,000 Airgas Inc.(a) 1,450,000
-----------------------------------------------------------------------------------------
35,000 Arrow Electronics Inc.(a) 1,321,250
-----------------------------------------------------------------------------------------
71,500 Tech Data Corp.(a) 1,412,125
-----------------------------------------------------------------------------------------
Total Wholesale 4,183,375
-----------------------------------------------------------------------------------------
OTHER-1.16%
DIVERSIFIED-0.57%
100,000 CYRK International, Inc.(a) 3,900,000
-----------------------------------------------------------------------------------------
NONRESIDENTIAL CONSTRUCTION-0.16%
50,000 Granite Construction Inc. 1,093,750
-----------------------------------------------------------------------------------------
MISCELLANEOUS-0.43%
100,000 Kelly Services Inc.-Class A 2,975,000
-----------------------------------------------------------------------------------------
Total Other 7,968,750
-----------------------------------------------------------------------------------------
Total Common Stocks 649,600,152
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 94.52% 649,600,152
-----------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -- 5.48% 37,637,575
-----------------------------------------------------------------------------------------
NET ASSETS -- 100.00% $687,237,727
-----------------------------------------------------------------------------------------
Notes to Schedule of Investments:
(a) Non-income producing security.
See Notes to Financial Statements.
</TABLE>
F-78
<PAGE> 169
- --------------------------------------------------------------------------------
FINANCIALS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $516,590,602) $649,600,152
- --------------------------------------------------------------------------------------
Cash 18,667,873
- --------------------------------------------------------------------------------------
Receivables for:
Investments sold 31,117,638
- --------------------------------------------------------------------------------------
Capital stock sold 2,870,199
- --------------------------------------------------------------------------------------
Dividends and interest 49,805
- --------------------------------------------------------------------------------------
Investment for deferred compensation plan 4,654
- --------------------------------------------------------------------------------------
Other assets 34,534
- --------------------------------------------------------------------------------------
Total assets 702,344,855
- --------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 12,291,787
- --------------------------------------------------------------------------------------
Capital stock reacquired 2,103,634
- --------------------------------------------------------------------------------------
Deferred compensation 4,654
- --------------------------------------------------------------------------------------
Accrued advisory fees 232,514
- --------------------------------------------------------------------------------------
Accrued administrative service fees 50,322
- --------------------------------------------------------------------------------------
Accrued distribution fees 138,782
- --------------------------------------------------------------------------------------
Accrued directors' fees 2,230
- --------------------------------------------------------------------------------------
Accrued operating expenses 283,205
- --------------------------------------------------------------------------------------
Total liabilities 15,107,128
- --------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $687,237,727
- --------------------------------------------------------------------------------------
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Authorized 750,000,000
- --------------------------------------------------------------------------------------
Outstanding 24,220,446
- --------------------------------------------------------------------------------------
Net asset value and redemption price per share $ 28.37
- --------------------------------------------------------------------------------------
Offering price per share:
(Net asset value of $28.37 divided by 94.50%) $ 30.02
- --------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-79
<PAGE> 170
- --------------------------------------------------------------------------------
FINANCIALS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $1,036,658
- --------------------------------------------------------------------------------------
Interest 2,691,077
- --------------------------------------------------------------------------------------
Total investment income 3,727,735
- --------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,036,277
- --------------------------------------------------------------------------------------
Custodian fees 83,340
- --------------------------------------------------------------------------------------
Directors' fees 7,567
- --------------------------------------------------------------------------------------
Distribution fees 1,150,978
- --------------------------------------------------------------------------------------
Administrative service fees 472,140
- --------------------------------------------------------------------------------------
Transfer agent fees 828,816
- --------------------------------------------------------------------------------------
Other 460,585
- --------------------------------------------------------------------------------------
Total expenses 5,039,703
- --------------------------------------------------------------------------------------
Less reimbursement of expenses (133,000)
- --------------------------------------------------------------------------------------
Net expenses 4,906,703
- --------------------------------------------------------------------------------------
Net investment income (loss) (1,178,968)
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of investment securities and futures
contracts (2,796,834)
- --------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 95,272,310
- --------------------------------------------------------------------------------------
Net gain on investment securities and futures contracts 92,475,476
- --------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $91,296,508
- --------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-80
<PAGE> 171
- --------------------------------------------------------------------------------
FINANCIALS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 1994 and the ten months
ended October 31, 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $(1,178,968) $ (196,882)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities
and futures contracts (2,796,834) (483,613)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 95,272,310 30,750,070
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 91,296,508 30,069,575
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities (25,209) --
- -----------------------------------------------------------------------------------------
Net increase from capital stock transactions 378,710,145 148,948,981
- -----------------------------------------------------------------------------------------
Net increase in net assets 469,981,444 179,018,556
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 217,256,283 38,237,727
- -----------------------------------------------------------------------------------------
End of period $687,237,727 $217,256,283
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $557,511,098 $179,981,392
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) -- (1,471)
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and
futures contracts (3,282,921) (460,878)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 133,009,550 37,737,240
- -----------------------------------------------------------------------------------------
$687,237,727 $217,256,283
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
F-81
<PAGE> 172
- --------------------------------------------------------------------------------
FINANCIALS
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Growth 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 Aggressive Growth Fund, AIM Weingarten Fund, AIM Charter Fund
and AIM Constellation Fund. AIM Weingarten Fund, AIM Charter Fund and AIM
Constellation Fund currently offer two different classes of shares: the Retail
Class and the Institutional Class. The Fund currently offers only one class of
shares. As of the close of business on May 2, 1994, the Fund temporarily
discontinued public sales of its shares to new investors. 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. 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 October 31, 1994,
$1,180,439 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. The Fund has a capital loss
carryforward of $3,178,755 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2002.
D. Expenses -- 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. 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 that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
F-82
<PAGE> 173
- --------------------------------------------------------------------------------
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 0.50% of
the first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion. This agreement requires 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. During the year
ended October 31, 1994, AIM reimbursed expenses of $133,000 pursuant to a
contractual agreement with the Fund which expired June 30, 1994.
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 $472,140 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
Fund. The Company has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act
(the "Plan"), whereby the Fund will pay AIM Distributors an annual rate of 0.25%
of the Fund's average daily net assets as compensation for services related to
the sales and distribution of the Fund's 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 Fund,
in amounts of up to 0.25% of the average net assets of the Fund 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 shares.
During the year ended October 31, 1994, the Fund paid AIM Distributors
$1,150,978 as compensation under the Plan.
AIM Distributors received commissions of $1,975,968 from sales of shares of
the Fund's 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 and AIM Distributors.
During the year ended October 31, 1994, the Fund paid legal fees of $8,556 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
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 4-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
$671,249,593 and $302,606,712, 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 $141,488,880
- --------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,581,021)
- --------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $132,907,859
- --------------------------------------------------------------------------------------
</TABLE>
Cost of investments for tax purposes is $516,692,293.
F-83
<PAGE> 174
- --------------------------------------------------------------------------------
FINANCIALS
NOTE 5-CAPITAL STOCK
Changes in the Fund's capital stock outstanding for the year ended October
31, 1994 and the ten months ended October 31, 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 37,245,080 $938,440,033 10,634,897 $225,387,375
-------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends 759 16,782 -- --
-------------------------------------------------------------------------------------------------------------------------
Reacquired (22,135,293) (559,746,670) (3,589,765) (76,438,394)
-------------------------------------------------------------------------------------------------------------------------
15,110,546 $378,710,145 7,045,132 $148,948,981
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Fund
outstanding during the year ended October 31, 1994, the ten month period
ended October 31, 1993 and each of the years in the eight-year period ended
December 31, 1992.
<TABLE>
<CAPTION>
October 31, December 31,
---------------------- -----------------------------------------------------------------------
1994 1993 1992(a) 1991 1990 1989 1988 1987
-------- -------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 23.85 $ 18.52 $ 16.06 $ 11.85 $13.30 $ 11.07 $ 9.86 $ 12.10
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.02) (0.03) (0.04) 0.08 0.03 0.05 --
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 4.57 5.35 3.41 7.29 (0.95) 2.28 1.21 (1.38)
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Total from
investment
operations 4.52 5.33 3.38 7.25 (0.87) 2.31 1.26 (1.38)
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Less distributions:
Dividends from net
investment income -- -- -- -- (0.09) (0.03) (0.05) --
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Distributions from
capital gains -- -- (0.92) (3.04) (0.49) (0.05) -- (0.86)
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Total distributions -- -- (0.92) (3.04) (0.58) (0.08) (0.05) (0.86)
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Net asset value, end of
period $ 28.37 $ 23.85 $ 18.52 $ 16.06 $11.85 $ 13.30 $ 11.07 $ 9.86
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Total return(b) 18.96% 28.78% 21.34% 63.90% (6.50)% 20.89% 12.77% (11.52)%
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $687,238 $217,256 $38,238 $16,218 $9,234 $11,712 $12,793 $13,991
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Ratio of expenses to
average net assets(c) 1.07%(e) 1.00%(f) 1.25% 1.25% 1.25% 1.25% 1.22% 1.20%
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Ratio of net investment
income (loss) to average
net assets(d) (0.26)%(e) (0.24)%(f) (0.59)% (0.31)% 0.62% 0.24% 0.38% 0.01%
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
Portfolio turnover rate 75% 61% 164% 165% 137% 69% 56% 118%
--------------------------- -------- -------- ------- ------- ------ ------- ------- -------
<CAPTION>
December 31,
--------------------
1986 1985
------- -------
<S> <C> <C>
Net asset value, beginning
of period $ 12.61 $ 10.13
--------------------------- ------- -------
Income from investment
operations:
Net investment income
(loss) 0.01 0.10
--------------------------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 0.05 2.54
--------------------------- ------- -------
Total from
investment
operations 0.06 2.64
--------------------------- ------- -------
Less distributions:
Dividends from net
investment income (0.08) (0.16)
--------------------------- ------- -------
Distributions from
capital gains (0.49) --
--------------------------- ------- -------
Total distributions (0.57) (0.16)
--------------------------- ------- -------
Net asset value, end of
period $ 12.10 $ 12.61
--------------------------- ------- -------
Total return(b) 0.37% 26.17%
--------------------------- ------- -------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $18,547 $13,563
--------------------------- ------- -------
Ratio of expenses to
average net assets(c) 1.19% 1.10%
--------------------------- ------- -------
Ratio of net investment
income (loss) to average
net assets(d) 0.11% 1.26%
--------------------------- ------- -------
Portfolio turnover rate 106% 66%
--------------------------- ------- -------
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not include sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios of expenses to average net assets prior to reduction of advisory
fees and expense reimbursements were 1.09%, 1.17% (annualized), 1.65%,
1.83%, 1.99%, 1.80%, 1.56%, 1.29%, 1.32% and 1.93% for 1994-85,
respectively.
(d) Ratios of net investment income (loss) to average net assets prior to
reduction of advisory fees and expense reimbursements were (0.28)%,
(0.41)% (annualized), (0.99)%, (0.89)%, (0.11)%, (0.31)%, 0.04%, (0.08)%,
(0.02)% and 0.43%, for 1994-85, respectively.
(e) Ratios are based on average net assets of $460,700,057.
(f) Annualized.
NOTE 7-SUBSEQUENT EVENT
On November 14, 1994, the shareholders of the Fund approved an amendment to
the master investment advisory agreement with respect to the Fund. Under the
terms of the amended agreement, the Fund pays an advisory fee to AIM at the
annual rate of 0.80% of the first $150 million of the Fund's average daily
net assets plus 0.625% of the Fund's average daily net assets in excess of
$150 million.
F-84
