<PAGE> 1
[COVER PHOTO APPEARS HERE]
AIM CHARTER FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT APRIL 30, 1996
<PAGE> 2
AIM CHARTER FUND
For shareholders who seek growth and income by investing primarily in stocks of
large-cap, well-run companies with a history of stable and improving earnings
and generally increasing dividend payouts.
ABOUT FUND PERFORMANCE DATA THROUGHOUT THIS REPORT:
o AIM Charter Fund performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, Fund results were computed at net asset
value without reflecting sales charges.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of
the seventh year. The performance of the Fund's Class B shares will
differ from that of Class A shares due to differences in sales charge
structure and Fund expenses.
o The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less
than their original cost.
o Past performance cannot guarantee comparable future results.
o The Fund's portfolio composition is subject to change, and there is no
assurance the Fund will continue to hold any one particular security.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper Analytical Services, Inc., is an independent mutual fund
performance monitor. The unmanaged Lipper Growth and Income Fund Index
represents an average of the performance of the 30 largest growth and
income mutual funds.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The
unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is
widely regarded by investors as representative of the stock market in
general.
o The Dow Jones Industrial Average (DJIA) is an unmanaged composite of
the performance of 30 large-company stocks.
o The NASDAQ (National Association of Securities Dealers Automated
Quotation system) Composite Index is a group of more than 4,500
unmanaged over-the-counter securities widely regarded by investors to
be representative of the small- and medium-size company stock
universe.
o Bank certificates of deposit (CDs), which are insured by the FDIC for
up to $100,000, are short-term investments that pay fixed principal
and interest but are subject to fluctuating rollover rates and early
withdrawal penalties. CD income is calculated using the six-month
annualized average monthly CD rate reported by the Federal Reserve
Board. Shares of AIM Charter Fund are not insured, and their value
will vary with market conditions.
o The Consumer Price Index (CPI) is a measure of change in consumer
prices as determined by the U.S. Bureau of Labor Statistics.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not
reflect sales charges.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
A Message from
the Chairman
Dear Shareholder:
"Past performance cannot guarantee comparable
future results."
[PHOTO of As a mutual fund investor, you've seen this
Charles T. Bauer, disclaimer on every piece of mail you've ever
Chairman of received about your fund. You've seen it so often
the Board of that you probably don't even think about it or
the Fund, question what it means. But you should.
APPEARS HERE] That sentence about past performance is true now
more than ever. These days it bluntly means: "Don't
expect the 25% to 35% returns you received last
year." Don't automatically expect the 15% to 20% returns of the past decade,
either. History shows that the average annual return is about 9% to 10%. If
you're investing in mutual funds with expectations of double-digit returns every
year, you will be disappointed. Maybe not today, but sometime in the future.
What is a realistic expectation for 1996? In this uncertain market, it is
easier to discuss what is unrealistic. Last year's performance was an
anomaly--the equivalent of euphoria. To expect a repeat is unrealistic.
I realize I am sounding a warning bell during the mutual fund industry's best
year ever. Investors like you poured $99 billion into stock mutual funds during
the first four months of 1996--the highest inflows on record. At $3 trillion in
assets, the industry has grown 1,500 times over the past 50 years. If we are to
sustain that growth, we must have the public's confidence. Our industry has a
long-standing reputation for honesty and integrity. To maintain that reputation
as our assets swell into the trillions, we must make sure that we don't promise
anything we can't produce.
The industry's concern about investors' expectations goes beyond stamping all
our advertising with a standard disclaimer about performance. Mutual fund
leaders recently met for a conference in New York, and foremost on our minds was
educating investors about market volatility.
A whole generation of investors has seen nothing but a bull market, which
started in 1982. Except for the 1987 market crash, they've enjoyed a heady rise.
They may expect the same throughout this decade. I've been in the mutual fund
industry for more than 25 years, and I have seen a 5% to 10% market correction
about every five years. The last major correction was in 1990. If history is any
kind of teacher, we are overdue.
The challenge for investors is not to panic when the market takes a downturn.
We have another saying in the industry: "Focus on time, not timing." Over time,
the stock market has proven to be the only investment that consistently beats
inflation. But investing in it takes a long-term view. Market--timing trying to
play the market and "rescue" your money in a downturn-- has proven to be an
inefficient strategy for most investors.
The challenge for the mutual fund industry is to keep your trust during a bear
market. The industry has survived and thrived because of its built-in integrity:
By law, we must operate in the best interests of our shareholders.
The mutual fund industry is among the most regulated in the country. The
Investment Company Act of 1940, which governs our industry, protects
shareholders against self-dealing, conflicts of interest, misappropriation of
funds, and other fraudulent activities.
The industry also polices itself. At AIM we have an exhaustive code of ethics
that governs each of our 1,150 employees.
------------------------ (continued)
At $3 trillion
in assets, the industry
has grown 1,500 times
over the past 50 years.
If we are to sustain
that growth,
we must have the
public's confidence.
------------------------
<PAGE> 4
A Message from
the Chairman
On a very basic level, it boils down to this: We are dealing with your money,
and if we lose your trust, we lose our business.
We are vulnerable to even the hint of impropriety. That's why the mutual fund
industry is set up to avoid even the perception of self-dealing. Fund managers
succeed to the extent that they attract and keep investors. If they lose your
faith, managers ultimately will fail.
Mutual funds are highly liquid investments. Any time you choose, you can pull
out of a fund and receive a redemption price reflective of the market that day.
If you become dissatisfied with a fund manager, it's easy to leave and go
elsewhere. With more than 7,000 funds available, it's a buyers' market.
The next time you read "Past performance is no guarantee of future results,"
think about your own expectations as an investor. We cannot promise you another
year like 1995. But we can promise to manage your money with honesty and
integrity.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
On the following pages is a complete discussion of your Fund's performance and
investment strategy. If you have any questions or comments about this report,
please call our Client Services department at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line toll-free at 800-246-5463.
2
<PAGE> 5
Management's
Discussion & Analysis
[Photo Appears Here] CHARTER FUND'S ANSWER TO
MARKET VOLATILITY: DIVERSITY
Uncertainty plagued the performance of the stock markets through most of the
six-month period ended April 30, 1996. The period was one of the most volatile
on record, as sweeping point swings whipsawed the markets.
What caused the roller coaster ride? Investors believed that 1995's prime
stock market conditions--robust corporate earnings, moderate economic growth,
and mild inflation--would not continue. To some extent, they were right. Net
income of many U.S. companies fell in the fourth quarter of 1995. Among the
hardest hit were technology stocks, which had been market favorites. Growth in
the economy slowed in the fourth quarter to an annual rate of 0.5%, according to
The Wall Street Journal.
In late 1995, investors flocked from technology stocks to blue-chip stocks
and waited for the Federal Reserve Bank Board to spur the economy by cutting
interest rates. The Fed did lower rates in December and January, but market
watchers anticipated that further cuts were possible.
In March, everything changed. The Labor Department released the first of two
stunningly strong monthly employment reports, and the Dow Jones Industrial
Average fell 171 points in one day. Fed Chairman Alan Greenspan cautioned about
growing wage pressures. Suddenly, the economy appeared to be overheating, and
analysts voiced concerns that the Fed might have to raise interest rates to slow
it down. That never happened.
In less than two weeks, the markets warmed to the idea of a growing economy,
and major indexes advanced to near record levels. Greenspan testified before
Congress: "The economy has weathered recent sluggishness and is back on track
for steady growth with low inflation."
By April 1996, reports offered a mixed picture of the economy. Job growth
slowed, but consumer income and spending levels rose and factory orders surged.
Corporate earnings in first quarter 1996 were better than expected. I/B/E/S
International, a Wall Street firm that tabulates corporate earnings estimates,
reported that earnings of 54% of the companies it surveyed exceeded analysts'
expectations.
Though the markets remained skittish, stocks resumed their advance toward
record levels. The NASDAQ Composite Index made nine consecutive records in the
final days of April to close at 1190.58, up 14.91% for the reporting period.
The Dow Jones Industrial Average finished the period up 18.46%, and the S&P 500
gained 13.76%.
YOUR INVESTMENT PORTFOLIO
AIM Charter Fund reported a 9.95% total return for Class A shares and 9.56% for
Class B shares during the six-month period ended April 30, 1996. The Fund
attracted approximately 20,000 new investors over the period, and net assets
increased from $2.07 billion to $2.69 billion.
AIM Charter Fund responded to volatile markets by further diversifying its
mix of securities and increasing its number of holdings over the past six
months. The Fund also cut its emphasis in technology stocks in half from 30% to
15% and spread its assets among a variety of industries.
About 50% of the Fund's assets were invested in defensive stocks, which tend
to be less sensitive to changes in the business cycle, and therefore less
volatile. But AIM Charter Fund managers selected these stocks for more than
their relative price stability--these companies performed well because they
capitalized on growth and success in their industries.
As always, the Fund focused on earnings growth. Over the past six months,
that growth came from stocks of major U.S. corporations-- AIM Charter Fund's
core investments.
The Fund's top stock holdings as of April 30, 1996, included
multi-billion-dollar medical companies, insurance companies, oil and gas firms,
and telecommunications companies.
MEDICAL: Health-care stocks, particularly
NET ASSET COMPOSITION
AS 4/30/96
---------------------
Convertible Bonds 14%
Convertible Preferred Stock 5%
Common Stock 74%
Cash 2%
U.S. Government 5%
3
<PAGE> 6
Management's
Discussion & Analysis
of large hospital chains and managed-care companies like United Healthcare,
were buoyed over the past six months by continuing cost-cutting efforts. The
industry is going through major restructuring through consolidations,
networking and increased reliance on managed care.
Pharmaceutical companies like Pfizer Inc. and French conglomerate
Rhone-Poulenc Rorer, Inc. also benefited from cost cutting, price increases, and
the introduction of new drugs.
The burgeoning health insurance industry propelled earnings for major
insurers like CIGNA Corp. and Aetna Life & Casualty Co., which is buying U.S.
Healthcare Inc., another of the Fund's holdings.
ENERGY: Major oil companies like Mobil Corp. turned in robust earnings in the
first quarter of 1996 as a severe winter in the North and low inventory spiked
energy prices. Gasoline prices soared over the period, boosting profits.
Electric utilities saw increased consolidations through takeovers among
regional utilities held by the Fund. Another major development: Public
utilities received federal approval to sell telephone service under the new
telecommunications overhaul law enacted in February.
TELECOMMUNICATIONS: This telecommunications law opens the industry to
increased competition and less regulation. Major changes may benefit many of the
Fund's holdings, including AT&T, its new spin-off company Lucent Technologies
Inc., and "Baby Bells" SBC Communications Inc., Cincinnati Bell Inc., and
BellSouth Corp.
Strong earnings in this sector over the past six months came from increases
in residential and business calls and installations of second phone lines for
faxes and modems.
TECHNOLOGY: High-tech firms were by no means down for the count, but the
euphoria of 1995 subsided. AIM Charter Fund shifted out of some areas and
focused on industry leaders in software and networking. The Fund sold its
holdings in IBM and bought Intel, Microsoft and Motorola stocks, among others.
Fund managers selected stock in this sector based on a major technology
upgrade occurring within U.S. corporations. Chip maker Intel, software giant
Microsoft and cable modem developer Motorola may benefit as U.S. companies buy
more powerful computers, build PC networks, and log onto the Internet.
CONVERTIBLE BONDS: AIM Charter Fund increased its holdings in convertible
corporate bonds to 13.95% from 11.33% of the Fund's portfolio as of October 31,
1995.
Many of the new holdings the Fund added over the past six months have been in
convertible bonds, with the heaviest concentration in medical firms offering
patient services, including Tenet Healthcare Corp., Quintiles Transnational and
Phycor.
Management believes health care will be a growth industry for the next five
years as managed care becomes a reality. Convertible
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS (as of April 30, 1996)
- --------------------------------------------------------------------------------
TOP 10 SECURITIES TOP 10 INDUSTRIES
- ----------------- -----------------
1. Aetna Life & Casualty Co. 1. Medical (Patient Services)
2. Philip Morris Companies, Inc. 2. Medical (Drugs)
3. PepsiCo., Inc. 3. Telecommunications
4. CIGNA Corp. 4. Oil & Gas (Services)
5. A T & T Corp. 5. Insurance (Multi-Line Property)
6. Pfizer Inc. 6. Computer Software/Services
7. Rhone-Poulenc Rorer, Inc. 7. Finance (Consumer Credit)
8. Intel Corp. 8. Electric Power
9. Motorola, Inc. 9. Telephone
10. SCI Financial LLC - Series E 10. Cosmetics and Toiletries
- --------------------------------------------------------------------------------
4
<PAGE> 7
Long-Term
Performance
bonds, with their stock conversion feature, allow the Fund to capitalize on
this potential for earnings appreciation.
As of April 30, 1996, the Fund had 226 holdings. Of course, the Fund's
composition is subject to change and there is no guarantee it will continue to
hold any one particular security.
OUTLOOK
All signs point to continued stock market volatility. Until investors gain a
clearer picture of the momentum of the U.S. economy, financial markets probably
will continue to vacillate.
The outlook for corporate earnings is mixed for the second quarter of 1996.
Growth in specific industries -- particularly health care and
telecommunications -- is expected to continue. One possible dampener: a rise
in interest rates, which would increase the cost of borrowing and erode profits.
What should AIM Charter Fund investors expect from the rest of 1996? With
the markets in a constant state of flux, it is easier to discuss what not
to expect. There is no guarantee the Fund's Class A shares will return 27.03%
as they did in fiscal year 1995. Historically, the stock market has generated
an average total return of about 10%, according to Ibbotson Associates.
AIM Charter Fund portfolio managers deal with market volatility
through diversification and a disciplined investment strategy that focuses on
earnings growth as the foremost criteria for stock selection. It is a
time-tested strategy that has led the Fund's Class A shares to an outstanding
average annual return as shown by the chart below.
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTMENT
- --------------------------------------------------------------------------------
Inception -- 4/30/96
Past performance cannot guarantee comparable future results.
<TABLE>
<CAPTION>
AIM Charter Fund
Class A Shares (with sales charge) S&P 500 6-Month CDs Consumer Price Index
---------------------------------- ------- ----------- --------------------
<S> <C> <C> <C> <C>
11/26/68 $9,446 $10,000 $10,000 $10,000
4/70 7,230 7,985 11,218 10,876
4/71 9,140 10,556 12,010 11,328
4/72 12,871 11,268 12,654 11,723
4/73 11,186 11,515 13,335 12,316
4/74 10,702 10,058 14,482 13,559
4/75 11,601 10,215 15,959 14,944
4/76 13,902 12,374 16,997 15,847
4/77 16,535 12,476 17,884 16,949
4/78 19,521 12,903 18,977 18,051
4/79 25,341 14,287 20,915 19,944
4/80 33,864 15,761 23,404 22,881
4/81 46,299 20,683 26,290 25,170
4/82 44,675 19,171 30,363 26,808
4/83 62,718 28,555 34,061 27,853
4/84 56,584 29,029 37,346 29,124
4/85 64,013 34,146 41,323 30,198
4/86 84,852 46,503 44,555 30,678
4/87 107,058 58,842 47,360 31,836
4/88 95,921 55,053 50,479 33,079
4/89 116,633 67,593 54,592 34,774
4/90 133,780 74,650 59,106 36,412
4/91 173,261 87,764 63,745 38,192
4/92 199,916 100,095 66,898 39,407
4/91 212,799 109,320 69,083 40,678
4/94 221,415 115,142 71,070 41,638
4/95 245,436 135,197 74,911 42,910
4/96 317,362 175,938 78,811 44,153
</TABLE>
- --------------------------------------------------------------------------------
- ----------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of March 31, 1996
(the most recent calendar quarter)
SINCE INCEPTION
---------------
(11/26/68) 13.39%
20 Years 16.29
15 Years 13.05
10 Years 13.09
5 Years 10.90
1 Year 22.82
- ----------------------------------------
Source: Towers Data Systems HYPO(R)
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover.
5
<PAGE> 8
Investor
Awareness
ASSET ALLOCATION HELPS YOU MANAGE
YOUR INVESTMENTS IN CHANGING MARKETS
Every mutual fund investor would like to invest in a market that only goes
up--a tide that floats all ships. The truth is, markets also decline.
But market changes do not affect all investments the same way. Some investments
may benefit from a market trend when others do not.
Market changes are not the only factors an investor must manage. There
are a number of important considerations with every investment including
investment risk, and investment risk takes many forms:
o MARKET RISK. The prices of some investments will fluctuate
according to changes in the market.
o INTEREST RATE RISK. The value of some investments, such as
fixed-income securities, will rise and fall as interest rates
change.
o REINVESTMENT RISK. When interest rates fall, investors face the
possibility that investment income cannot be reinvested at
higher rates previously available.
o INFLATION RISK. Inflation can cause the value of some
investments to erode as the cost of living increases.
o CURRENCY RATE RISK. Investments valued in U.S. dollars will rise
and fall according to the dollar's value against other world
currencies.
To manage these changing conditions, investors have learned to diversify
their assets across a wide variety of investments. For most investors, mutual
funds offer convenient and affordable methods to diversify their assets. For as
little as $500, an investor has access to a portfolio of hundreds of
professionally selected securities.
When you invest in more than one fund, you increase the level of
diversification. You also gain another important benefit. Since mutual funds
are managed according to specific investment objectives, such as growth or
income, you can invest in mutual funds with different investment objectives to
create a personalized investment plan which suits your unique financial
objectives. This investment strategy is called asset allocation.
Mutual fund investors tend to seek growth, or current income, or some
combination of both. Generally, investors who choose to assume more investment
risk get the potential for a higher return. With asset allocation, you can
fine-tune your investment plan to be more conservative, or more aggressive,
depending on your personal financial goals and risk tolerance.
Your financial consultant can assist you in developing an asset allocation
strategy and selecting the appropriate investments to help you meet your
long-term investment goals.
--------------------------
Your financial
consultant can assist
you in
developing an
asset allocation strategy
and selecting the
appropriate investments
to help you
meet your
long-term
investment goals.
--------------------------
6
<PAGE> 9
Financials
SCHEDULE OF INVESTMENTS
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS-73.54%
ADVERTISING/BROADCASTING-0.74%
180,000 CKS Group, Inc.(a) $ 5,625,000
- ---------------------------------------------------------------------------------------------
300,000 Eagle River Interactive, Inc.(a) 6,450,000
- ---------------------------------------------------------------------------------------------
300,000 True North Communications, Inc. 7,912,500
- ---------------------------------------------------------------------------------------------
19,987,500
- ---------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-0.98%
100,000 Boeing Co. (The) 8,212,500
- ---------------------------------------------------------------------------------------------
120,000 Rockwell International Corp. 7,020,000
- ---------------------------------------------------------------------------------------------
100,000 United Technologies Corp. 11,050,000
- ---------------------------------------------------------------------------------------------
26,282,500
- ---------------------------------------------------------------------------------------------
AIRLINES-0.27%
80,000 AMR Corp.(a) 7,140,000
- ---------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-1.77%
320,000 Chrysler Corp. 20,080,000
- ---------------------------------------------------------------------------------------------
200,000 Ford Motor Co. 7,175,000
- ---------------------------------------------------------------------------------------------
360,000 General Motors Corp. 20,295,000
- ---------------------------------------------------------------------------------------------
47,550,000
- ---------------------------------------------------------------------------------------------
BANKING-0.81%
400,000 Marshall & Ilsley Corp. 10,800,000
- ---------------------------------------------------------------------------------------------
300,000 National City Corp. 11,062,500
- ---------------------------------------------------------------------------------------------
21,862,500
- ---------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.98%
200,000 Chase Manhattan Corp. 13,775,000
- ---------------------------------------------------------------------------------------------
160,000 Citicorp 12,600,000
- ---------------------------------------------------------------------------------------------
26,375,000
- ---------------------------------------------------------------------------------------------
BEVERAGES-1.67%
140,000 Anheuser-Busch Companies, Inc. 9,397,500
- ---------------------------------------------------------------------------------------------
560,000 PepsiCo., Inc. 35,560,000
- ---------------------------------------------------------------------------------------------
44,957,500
- ---------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.35%
120,000 Georgia Pacific Corp. 9,330,000
- ---------------------------------------------------------------------------------------------
BUSINESS SERVICES-1.88%
260,000 CUC International, Inc.(a) 8,547,500
- ---------------------------------------------------------------------------------------------
300,000 Diebold, Inc. 11,550,000
- ---------------------------------------------------------------------------------------------
200,000 Dun & Bradstreet Corp. 12,175,000
- ---------------------------------------------------------------------------------------------
600,000 Equifax, Inc. 14,700,000
- ---------------------------------------------------------------------------------------------
100,000 H & R Block, Inc. 3,512,500
- ---------------------------------------------------------------------------------------------
50,485,000
- ---------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CHEMICALS-0.66%
140,000 Eastman Chemical Co. $ 9,415,000
- ---------------------------------------------------------------------------------------------
120,000 Great Lakes Chemical Corp. 8,190,000
- ---------------------------------------------------------------------------------------------
17,605,000
- ---------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.40%
160,000 Ferro Corp. 4,440,000
- ---------------------------------------------------------------------------------------------
160,000 Praxair, Inc. 6,180,000
- ---------------------------------------------------------------------------------------------
10,620,000
- ---------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-1.19%
180,000 Digital Equipment Corp.(a) 10,755,000
- ---------------------------------------------------------------------------------------------
140,000 Hewlett Packard Co. 14,822,500
- ---------------------------------------------------------------------------------------------
120,000 Sun Microsystems, Inc.(a) 6,510,000
- ---------------------------------------------------------------------------------------------
32,087,500
- ---------------------------------------------------------------------------------------------
COMPUTER NETWORKING-0.62%
200,000 Cisco Systems, Inc.(a) 10,375,000
- ---------------------------------------------------------------------------------------------
240,000 ECI Telecommunications Ltd. 6,270,000
- ---------------------------------------------------------------------------------------------
16,645,000
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-3.57%
100,000 Autodesk, Inc.(a) 4,075,000
- ---------------------------------------------------------------------------------------------
200,000 Compuserve Corp.(a) 5,700,000
- ---------------------------------------------------------------------------------------------
160,000 Computer Associates International, Inc. 11,740,000
- ---------------------------------------------------------------------------------------------
240,000 Fiserv, Inc.(a) 7,320,000
- ---------------------------------------------------------------------------------------------
100,000 HBO & Co. 11,875,000
- ---------------------------------------------------------------------------------------------
120,000 Microsoft Corp.(a) 13,605,000
- ---------------------------------------------------------------------------------------------
300,000 Oracle Corp.(a) 10,125,000
- ---------------------------------------------------------------------------------------------
140,000 Shared Medical Systems Corp. 9,590,000
- ---------------------------------------------------------------------------------------------
500,000 SoftKey International, Inc.(a) 14,000,000
- ---------------------------------------------------------------------------------------------
100,000 Sterling Software, Inc.(a) 7,775,000
- ---------------------------------------------------------------------------------------------
95,805,000
- ---------------------------------------------------------------------------------------------
CONGLOMERATES-1.18%
240,000 Corning, Inc. 8,340,000
- ---------------------------------------------------------------------------------------------
400,000 Dial Corp. 11,250,000
- ---------------------------------------------------------------------------------------------
160,000 Loews Corp. 12,200,000
- ---------------------------------------------------------------------------------------------
31,790,000
- ---------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-2.94%
160,000 Colgate-Palmolive Co. 12,260,000
- ---------------------------------------------------------------------------------------------
300,000 Gillette Co. (The) 16,200,000
- ---------------------------------------------------------------------------------------------
300,000 Procter & Gamble Co. 25,350,000
- ---------------------------------------------------------------------------------------------
200,000 Tambrands, Inc. 9,575,000
- ---------------------------------------------------------------------------------------------
140,000 Warner-Lambert Co. 15,645,000
- ---------------------------------------------------------------------------------------------
79,030,000
- ---------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
ELECTRIC POWER-3.92%
400,000 Allegheny Power System, Inc. $ 11,700,000
- ---------------------------------------------------------------------------------------------
300,000 American Electric Power Co. 12,187,500
- ---------------------------------------------------------------------------------------------
320,000 Carolina Power & Light Co. 11,520,000
- ---------------------------------------------------------------------------------------------
300,000 Consolidated Edison Co. of New York, Inc. 8,812,500
- ---------------------------------------------------------------------------------------------
240,000 DQE, Inc. 6,360,000
- ---------------------------------------------------------------------------------------------
260,000 Duke Power Co. 12,220,000
- ---------------------------------------------------------------------------------------------
240,000 General Public Utilities Corp. 7,620,000
- ---------------------------------------------------------------------------------------------
280,000 Houston Industries, Inc. 5,985,000
- ---------------------------------------------------------------------------------------------
120,000 Northern States Power Co. 5,610,000
- ---------------------------------------------------------------------------------------------
500,000 Southern Co. 11,000,000
- ---------------------------------------------------------------------------------------------
300,000 Texas Utilities Co. 12,075,000
- ---------------------------------------------------------------------------------------------
105,090,000
- ---------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.36%
140,000 Emerson Electric Co. 11,707,500
- ---------------------------------------------------------------------------------------------
320,000 General Electric Co. 24,800,000
- ---------------------------------------------------------------------------------------------
36,507,500
- ---------------------------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS-0.51%
260,000 Avnet, Inc. 13,715,000
- ---------------------------------------------------------------------------------------------
ELECTRONIC/DEFENSE-0.49%
360,000 Sundstrand Corp. 13,230,000
- ---------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-1.47%
300,000 Edwards (A.G.), Inc. 7,050,000
- ---------------------------------------------------------------------------------------------
200,000 Merrill Lynch & Co., Inc. 12,075,000
- ---------------------------------------------------------------------------------------------
200,000 Morgan Stanley Group, Inc. 10,050,000
- ---------------------------------------------------------------------------------------------
133,200 PaineWebber Group, Inc. 2,780,550
- ---------------------------------------------------------------------------------------------
160,000 United Assets Management Corp. 7,480,000
- ---------------------------------------------------------------------------------------------
39,435,550
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.06%
200,000 American Express Co. 9,700,000
- ---------------------------------------------------------------------------------------------
240,000 Federal Home Loan Mortgage Association 20,010,000
- ---------------------------------------------------------------------------------------------
840,000 Federal National Mortgage Association 25,725,000
- ---------------------------------------------------------------------------------------------
200,000 Household International, Inc. 13,825,000
- ---------------------------------------------------------------------------------------------
460,000 MBNA Corp. 13,052,500
- ---------------------------------------------------------------------------------------------
82,312,500
- ---------------------------------------------------------------------------------------------
FOOD/PROCESSING-1.28%
180,000 ConAgra, Inc. 6,952,500
- ---------------------------------------------------------------------------------------------
100,000 CPC International, Inc. 6,912,500
- ---------------------------------------------------------------------------------------------
200,000 Interstate Bakeries Corp. 4,750,000
- ---------------------------------------------------------------------------------------------
200,000 Nabisco Holdings Corp. 6,125,000
- ---------------------------------------------------------------------------------------------
280,000 Quaker Oats Co. 9,625,000
- ---------------------------------------------------------------------------------------------
34,365,000
- ---------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
HOTELS/MOTELS-0.30%
600,000 Host Marriott Corp.(a) $ 8,025,000
- ---------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-4.35%
600,000 Aetna Life & Casualty Co. 42,750,000
- ---------------------------------------------------------------------------------------------
500,000 Allstate Financial Corp. 19,437,500
- ---------------------------------------------------------------------------------------------
300,000 CIGNA Corp. 34,012,500
- ---------------------------------------------------------------------------------------------
200,000 Travelers Group, Inc. 12,300,000
- ---------------------------------------------------------------------------------------------
300,000 Travelers/Aetna Property Casualty Corp.(a) 8,287,500
- ---------------------------------------------------------------------------------------------
116,787,500
- ---------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.75%
264,400 Eastman Kodak Co. 20,226,600
- ---------------------------------------------------------------------------------------------
MACHINE TOOLS-0.33%
140,000 Stanley Works 8,785,000
- ---------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.25%
160,000 Cooper Industries, Inc. 6,800,000
- ---------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-7.13%
200,000 American Home Products Corp. 21,100,000
- ---------------------------------------------------------------------------------------------
200,000 Johnson & Johnson 18,500,000
- ---------------------------------------------------------------------------------------------
360,000 Lilly (Eli) & Co. 21,240,000
- ---------------------------------------------------------------------------------------------
120,000 Merck & Co., Inc. 7,260,000
- ---------------------------------------------------------------------------------------------
400,000 Pfizer Inc. 27,550,000
- ---------------------------------------------------------------------------------------------
500,000 Pharmacia & Upjohn, Inc. 19,125,000
- ---------------------------------------------------------------------------------------------
440,000 Rhone-Poulenc Rorer, Inc. 27,280,000
- ---------------------------------------------------------------------------------------------
360,000 Schering-Plough Corp. 20,655,000
- ---------------------------------------------------------------------------------------------
400,000 SmithKline Beecham PLC-ADR 21,600,000
- ---------------------------------------------------------------------------------------------
160,000 Teva Pharmaceuticals Industries Ltd.-ADR 7,180,000
- ---------------------------------------------------------------------------------------------
191,490,000
- ---------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.57%
500,000 Caremark International, Inc. 13,812,500
- ---------------------------------------------------------------------------------------------
300,000 Columbia/HCA Healthcare Corp. 15,937,500
- ---------------------------------------------------------------------------------------------
180,000 Living Centers of America, Inc.(a) 6,660,000
- ---------------------------------------------------------------------------------------------
260,000 OrNda HealthCorp(a) 7,150,000
- ---------------------------------------------------------------------------------------------
160,000 PacifiCare Health System, Inc.(a) 13,420,000
- ---------------------------------------------------------------------------------------------
600,000 Tenet Healthcare Corp.(a) 12,300,000
- ---------------------------------------------------------------------------------------------
240,000 U.S. Healthcare, Inc. 12,510,000
- ---------------------------------------------------------------------------------------------
240,000 United Healthcare Corp. 14,040,000
- ---------------------------------------------------------------------------------------------
95,830,000
- ---------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.75%
300,000 Baxter International, Inc. 13,275,000
- ---------------------------------------------------------------------------------------------
80,000 Becton Dickinson & Co. 6,450,000
- ---------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Medical Instruments/Products-(continued)
300,000 Boston Scientific Corp.(a) $ 12,937,500
- ---------------------------------------------------------------------------------------------
240,000 Omnicare, Inc. 14,400,000
- ---------------------------------------------------------------------------------------------
47,062,500
- ---------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-1.40%
260,000 Panhandle Eastern Pipe Line Co. 8,482,500
- ---------------------------------------------------------------------------------------------
200,000 Sonat, Inc. 8,725,000
- ---------------------------------------------------------------------------------------------
400,000 Williams Companies, Inc. 20,450,000
- ---------------------------------------------------------------------------------------------
37,657,500
- ---------------------------------------------------------------------------------------------
OFFICE PRODUCTS-0.43%
200,000 Alco Standard Corp. 11,575,000
- ---------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-3.90%
3,000,000 British Gas PLC (United Kingdom) 10,657,835
- ---------------------------------------------------------------------------------------------
160,000 Exxon Corp. 13,600,000
- ---------------------------------------------------------------------------------------------
120,000 MAPCO, Inc. 6,990,000
- ---------------------------------------------------------------------------------------------
160,000 Mobil Corp. 18,400,000
- ---------------------------------------------------------------------------------------------
121,800 National Fuel Gas Co. 4,278,225
- ---------------------------------------------------------------------------------------------
654,200 NorAm Energy Corp. 7,196,200
- ---------------------------------------------------------------------------------------------
400,000 Occidental Petroleum Corp. 10,300,000
- ---------------------------------------------------------------------------------------------
100,000 Royal Dutch Petroleum Co. 14,325,000
- ---------------------------------------------------------------------------------------------
320,000 Southwest Gas Corp. 5,320,000
- ---------------------------------------------------------------------------------------------
160,000 Texaco, Inc. 13,680,000
- ---------------------------------------------------------------------------------------------
104,747,260
- ---------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.25%
160,000 Tidewater, Inc. 6,800,000
- ---------------------------------------------------------------------------------------------
PUBLISHING-0.77%
100,000 Gannett Co., Inc. 6,837,500
- ---------------------------------------------------------------------------------------------
200,000 Tribune Co. 13,950,000
- ---------------------------------------------------------------------------------------------
20,787,500
- ---------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.81%
320,000 FelCor Suite Hotels, Inc. 9,320,000
- ---------------------------------------------------------------------------------------------
300,000 National Health Investors, Inc. 9,975,000
- ---------------------------------------------------------------------------------------------
300,000 Patriot American Hospitality, Inc.(a) 8,362,500
- ---------------------------------------------------------------------------------------------
300,000 Spieker Properties, Inc. 7,800,000
- ---------------------------------------------------------------------------------------------
400,000 Starwood Lodging Trust 13,250,000
- ---------------------------------------------------------------------------------------------
48,707,500
- ---------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.75%
600,000 Safeway, Inc.(a) 20,250,000
- ---------------------------------------------------------------------------------------------
RETAIL (STORES)-0.80%
200,000 Circuit City Stores, Inc. 6,350,000
- ---------------------------------------------------------------------------------------------
300,000 Sears, Roebuck & Co. 14,962,500
- ---------------------------------------------------------------------------------------------
21,312,500
- ---------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SCIENTIFIC INSTRUMENTS-0.56%
260,000 Varian Associates, Inc. $ 14,852,500
- ---------------------------------------------------------------------------------------------
SEMICONDUCTORS-2.02%
400,000 Intel Corp. 27,100,000
- ---------------------------------------------------------------------------------------------
440,000 Motorola, Inc. 26,950,000
- ---------------------------------------------------------------------------------------------
54,050,000
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-4.89%
240,000 ADC Telecommunications(a) 10,080,000
- ---------------------------------------------------------------------------------------------
500,000 A T & T Corp. 30,625,000
- ---------------------------------------------------------------------------------------------
240,000 Airtouch Communications, Inc.(a) 7,500,000
- ---------------------------------------------------------------------------------------------
500,000 American Portable Telecom, Inc.(a) 7,500,000
- ---------------------------------------------------------------------------------------------
240,000 Andrew Corp.(a) 11,520,000
- ---------------------------------------------------------------------------------------------
640,000 Frontier Corp. 20,240,000
- ---------------------------------------------------------------------------------------------
160,000 Lucent Technologies, Inc.(a) 5,620,000
- ---------------------------------------------------------------------------------------------
140,000 NYNEX Corp. 6,877,500
- ---------------------------------------------------------------------------------------------
380,000 Pacific Telesis Group 13,015,000
- ---------------------------------------------------------------------------------------------
160,000 Tellabs, Inc.(a) 8,840,000
- ---------------------------------------------------------------------------------------------
240,000 Vodafone Group PLC-ADR 9,630,000
- ---------------------------------------------------------------------------------------------
131,447,500
- ---------------------------------------------------------------------------------------------
TELEPHONE-3.61%
280,000 Ameritech Corp. 16,345,000
- ---------------------------------------------------------------------------------------------
600,000 BellSouth Corp. 24,000,000
- ---------------------------------------------------------------------------------------------
400,000 Cincinnati Bell, Inc. 19,700,000
- ---------------------------------------------------------------------------------------------
400,000 GTE Corp. 17,350,000
- ---------------------------------------------------------------------------------------------
260,000 SBC Communications, Inc. 13,000,000
- ---------------------------------------------------------------------------------------------
200,000 US West Communications Group 6,550,000
- ---------------------------------------------------------------------------------------------
96,945,000
- ---------------------------------------------------------------------------------------------
TEXTILES-0.27%
200,000 Liz Claiborne, Inc. 7,275,000
- ---------------------------------------------------------------------------------------------
TOBACCO-1.55%
460,000 Philip Morris Companies, Inc. 41,457,500
- ---------------------------------------------------------------------------------------------
Total Common Stocks 1,975,079,410
- ---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS-13.95%
AIRLINES-0.25%
$ 6,000,000 Continental Airlines, Inc., Conv. Deb., 6.75%, 04/15/06(b)
(acquired 02/27/96; cost $5,997,775) 6,660,000
- ---------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.19%
5,000,000 Medusa Corp., Conv. Sub. Notes, 6.00%, 11/15/03 5,156,250
- ---------------------------------------------------------------------------------------------
BUSINESS SERVICES-0.64%
5,000,000 Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02(b)
(acquired 10/16/95-11/27/95; cost $5,051,250) 10,575,000
- ---------------------------------------------------------------------------------------------
5,000,000 Olsten Corp., Conv. Sub. Deb., 4.875%, 05/15/03 6,496,500
- ---------------------------------------------------------------------------------------------
17,071,500
- ---------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
CHEMICALS-0.73%
$ 18,000,000 Sandoz Capital BVI Ltd., Sr. Conv. Deb., 2.00%, 10/06/02(b)
(acquired 01/09/96-03/12/96; cost $17,799,500) $ 19,507,500
- ---------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-0.21%
5,000,000 Unisys Corp., Conv. Sub. Notes, 8.25%, 03/15/06 5,537,500
- ---------------------------------------------------------------------------------------------
COMPUTER NETWORKING-0.23%
4,000,000 3Com Corp., Conv. Sub. Notes, 10.25%, 11/01/01(b)
(acquired 11/07/95-11/20/95; cost $6,488,930) 6,220,000
- ---------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-0.60%
8,000,000 EMC Corp., Conv. Sub. Notes, 4.25%, 01/01/01 9,280,000
- ---------------------------------------------------------------------------------------------
5,000,000 Sanmina Corp., Conv. Sub. Notes, 5.50%, 08/15/02(b)
(acquired 08/10/95-09/22/95; cost $5,064,375) 6,887,500
- ---------------------------------------------------------------------------------------------
16,167,500
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.42%
12,000,000 Automatic Data Processing, Conv. Deb., 4.69%, 02/20/12(c) 6,165,000
- ---------------------------------------------------------------------------------------------
5,000,000 Network Equipment Technologies, Inc., Conv. Deb., 7.25%,
05/15/14 4,990,500
- ---------------------------------------------------------------------------------------------
11,155,500
- ---------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.23%
6,000,000 Metro Pacific Corp., Conv. Deb., 2.50%, 04/11/03(b)
(acquired 04/02/96; cost $6,000,000) 6,262,500
- ---------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.12%
20,000,000 ADT Operations, Conv. Sub. Notes, 4.32%, 07/06/10(c) 10,250,000
- ---------------------------------------------------------------------------------------------
4,000,000 Checkpoint Systems Inc., Conv. Sub. Deb., 5.25%, 11/01/05(b)
(acquired 10/17/95-11/15/95; cost $4,013,125) 6,880,000
- ---------------------------------------------------------------------------------------------
6,000,000 Dovatron International, Inc., Conv. Sub. Notes, 6.00%, 10/15/02(b)
(acquired 10/06/95-04/18/96; cost $6,156,250) 6,667,500
- ---------------------------------------------------------------------------------------------
6,000,000 Telxon Corp., Conv. Sub. Notes, 5.75%, 01/01/03(b)
(acquired 12/07/95; cost $6,012,000) 6,390,000
- ---------------------------------------------------------------------------------------------
30,187,500
- ---------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.54%
8,000,000 First Financial Management, Sr. Conv. Deb., 5.00%, 12/15/99 14,440,000
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.41%
5,000,000 Aames Financial Corp., Conv. Sub. Deb., 5.50%, 03/15/06(b)
(acquired 02/16/96-04/23/96; cost $5,216,250) 5,925,000
- ---------------------------------------------------------------------------------------------
5,000,000 Cityscape Financial Corp., Conv. Sub. Deb., 6.00%, 05/01/06(b)
(acquired 04/26/96; cost $5,013,750) 5,025,000
- ---------------------------------------------------------------------------------------------
10,950,000
- ---------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.38%
10,000,000 IMAX Corp., Conv. Deb., 5.75%, 04/01/03(b)
(acquired 04/02/96; cost $10,000,000) 10,075,000
- ---------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.82%
18,000,000 Thermo Electron Corp., Conv. Sub. Deb., 4.25%, 01/01/03(b)
(acquired 11/29/95-04/01/96; cost $19,928,075) 22,005,000
- ---------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
MEDICAL (DRUGS)-0.44%
$ 10,000,000 ICN Pharmaceuticals Inc., Conv. Sub. Notes, 8.50%, 11/15/99 $ 11,705,000
- -----------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.94%
4,000,000 American Medical Response, Conv. Sub. Notes, 5.25%, 02/01/01(b)
(acquired 01/03/96; cost $4,001,250) 4,590,000
- -----------------------------------------------------------------------------------------------
4,000,000 ARV Assisted Living, Inc, Conv. Sub. Notes, 6.75%, 04/01/06 4,300,000
- -----------------------------------------------------------------------------------------------
4,000,000 Genesis Health Ventures, Sr. Conv. Sub. Deb., 6.00%, 11/30/03 8,001,800
- -----------------------------------------------------------------------------------------------
12,000,000 Healthsource, Inc., Conv. Sub. Notes, 5.00%, 03/01/03(b)
(acquired 03/01/96; cost $12,000,000) 11,760,000
- -----------------------------------------------------------------------------------------------
6,000,000 HEALTHSOUTH Rehabilitation Corp., Conv. Sub. Deb., 5.00%, 04/01/01 11,994,000
- -----------------------------------------------------------------------------------------------
6,000,000 Multicare Companies, Conv. Sub. Deb., 7.00%, 03/15/03(b)
(acquired 11/30/95; cost $6,210,000) 7,411,200
- -----------------------------------------------------------------------------------------------
6,000,000 NABI, Inc., Conv. Sub. Notes, 6.50%, 02/01/03(b)
(acquired 02/02/96-04/24/96; cost $6,271,768) 6,570,000
- -----------------------------------------------------------------------------------------------
12,000,000 Phycor, Inc., Conv. Sub. Deb., 4.50%, 02/15/03 12,540,000
- -----------------------------------------------------------------------------------------------
5,000,000 Prime Hospitality Corp., Conv. Sub. Notes, 7.00%, 04/15/02 7,050,000
- -----------------------------------------------------------------------------------------------
12,000,000 Quintiles Transnational, Conv. Sub. Notes, 4.25%, 05/31/00(b)
(acquired 04/23/96; cost $12,027,000) 13,080,000
- -----------------------------------------------------------------------------------------------
12,000,000 Tenet Healthcare Corp., Conv. Sub. Notes, 6.00%, 12/01/05 12,960,000
- -----------------------------------------------------------------------------------------------
5,400,000 Veterinary Centers of America, Conv. Sub. Deb., 5.25%, 05/01/06(b)
(acquired 04/03/96; cost $5,400,000) 5,535,000
- -----------------------------------------------------------------------------------------------
105,792,000
- -----------------------------------------------------------------------------------------------
OFFICE AUTOMATION-0.52%
8,000,000 Danka Business Systems, Conv. Sub. Deb., 6.75%, 04/01/02(b)
(acquired 03/06/95-11/30/95; cost $9,371,720) 13,970,000
- -----------------------------------------------------------------------------------------------
OFFICE PRODUCTS-0.26%
5,000,000 U.S. Office Products Co., Conv. Sub. Notes, 5.50%, 02/01/01 6,875,000
- -----------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.27%
5,000,000 Pride Petroleum Services, Inc., Conv. Sub. Deb., 6.25%, 02/15/06 7,450,000
- -----------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.52%
6,000,000 Sanifill, Inc., Conv. Sub. Deb., 5.00%, 03/01/06 6,540,000
- -----------------------------------------------------------------------------------------------
6,000,000 U.S. Filter Corp., Conv. Sub. Notes, 6.00%, 09/15/05(b)
(acquired 02/01/96; cost $7,110,960) 7,605,000
- -----------------------------------------------------------------------------------------------
14,145,000
- -----------------------------------------------------------------------------------------------
RETAIL (STORES)-0.33%
8,000,000 Federated Department Stores, Conv. Notes., 5.00%, 10/01/03 9,080,000
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.90%
12,000,000 General Instrument Corp., Jr. Conv. Sub. Notes, 5.00%, 06/15/00 16,695,000
- -----------------------------------------------------------------------------------------------
6,000,000 World Communication Corp., Conv. Sub. Notes, 5.00%, 08/15/03 7,590,000
- -----------------------------------------------------------------------------------------------
24,285,000
- -----------------------------------------------------------------------------------------------
Total Convertible Corporate Bonds 374,697,750
- -----------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-5.47%
AIRLINES-0.50%
200,000 Continental Airlines-$4.39 Conv. Pfd.(b)
(acquired 11/21/95-11/22/95; cost $10,007,000) $ 13,450,000
- ---------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.16%
74,500 Greenfield Capital Trust-$3.00 Conv. Pfd.(b)
(acquired 04/18/96-04/19/96; cost $3,736,000) 4,283,750
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.48%
120,000 Ceridian Corp.-$2.75 Conv. Pfd. 12,840,000
- ---------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-0.33%
160,000 Wang Laboratories Inc.-Series B, $3.25 Dep. Conv. Pfd.(b)
(acquired 02/21/96-04/24/96; cost $8,270,386) 8,760,000
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.71%
100,000 Penncorp Financial Group-$3.37 Conv. Pfd. 7,450,000
- ---------------------------------------------------------------------------------------------
160,000 SunAmerica Inc.-Series E, $3.10 Dep. Conv. Pfd. 11,640,000
- ---------------------------------------------------------------------------------------------
19,090,000
- ---------------------------------------------------------------------------------------------
FUNERAL SERVICES-0.99%
300,000 SCI Financial LLC-Series A, $3.125 Conv. Pfd. 26,550,000
- ---------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.27%
100,000 Conseco, Inc.-$4.278 Conv. Pfd. PRIDES 7,187,500
- ---------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.22%
160,000 PMI Group, Inc.-$2.30 Exch. Conv. Pfd. 6,160,000
- ---------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.27%
260,000 FHP International Corp.-Series A, $1.25 Conv. Pfd. 7,117,500
- ---------------------------------------------------------------------------------------------
OIL & GAS SERVICES-0.74%
340,000 Atlantic Richfield Co.-$2.228 Exch. Conv. Pfd. 9,605,000
- ---------------------------------------------------------------------------------------------
400,000 Enron Corp.-$1.359 Conv. Pfd. ACES 10,250,000
- ---------------------------------------------------------------------------------------------
19,855,000
- ---------------------------------------------------------------------------------------------
RETAIL (STORES)-0.30%
160,000 Ann Taylor Finance Trust-$4.25 Conv. Pfd.(b)
(acquired 04/18/96; cost $8,000,000) 8,060,000
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.31%
120,000 LCI International, Inc.-$1.25 Exch. Conv. Pfd. 8,250,000
- ---------------------------------------------------------------------------------------------
UTILITIES (MISCELLANEOUS)-0.19%
200,000 MCN Corp.-$2.013 Conv. Pfd. PRIDES(b)
(acquired 04/22/96-04/23/96; cost $4,753,564) 5,275,000
- ---------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks 146,878,750
- ---------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
U. S. TREASURY NOTES-5.34%
$ 12,000,000 6.125%, 05/31/97 12,047,520
- ---------------------------------------------------------------------------------------------
12,000,000 5.625%, 06/30/97 11,980,800
- ---------------------------------------------------------------------------------------------
12,000,000 5.875%, 07/31/97 12,008,640
- ---------------------------------------------------------------------------------------------
12,000,000 6.00%, 08/31/97 12,019,680
- ---------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
U. S. TREASURY NOTES (continued)
$ 12,000,000 5.75%, 09/30/97 $ 11,979,240
- ---------------------------------------------------------------------------------------------
12,000,000 5.625%, 10/31/97 11,953,080
- ---------------------------------------------------------------------------------------------
12,000,000 5.375%, 11/30/97 11,896,320
- ---------------------------------------------------------------------------------------------
12,000,000 5.25%, 12/31/97 11,867,400
- ---------------------------------------------------------------------------------------------
12,000,000 5.00%, 01/31/98 11,802,000
- ---------------------------------------------------------------------------------------------
12,000,000 5.125%, 02/28/98 11,815,920
- ---------------------------------------------------------------------------------------------
12,000,000 6.125%, 03/31/98 12,023,040
- ---------------------------------------------------------------------------------------------
12,000,000 5.875%, 04/30/98 11,968,200
- ---------------------------------------------------------------------------------------------
Total U. S. Treasury Notes 143,361,840
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT-1.83%(d)
49,111,306 Daiwa Securities America Inc., 5.34%, 05/01/96(e) 49,111,306
- ---------------------------------------------------------------------------------------------
Total Repurchase Agreement 49,111,306
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.13% 2,689,129,056
- ---------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.13%) (3,488,512)
- ---------------------------------------------------------------------------------------------
NET ASSETS-100.00% $2,685,640,544
=============================================================================================
</TABLE>
Abbreviations:
ACES - Automatic Convertible Exchange Security
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debenture
Dep. - Depository
Exch. - Exchangeable
Jr. - Junior
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sr. - Senior
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-Income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at April 30, 1996 was
$229,429,950, which represented 8.54% of the net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 04/30/96 with a maturity value of
$767,124,680. Collateralized by $737,151,000 U.S. Treasury obligations, 0%
to 11.25% due 05/15/96 to 02/15/21.
See Notes to Financial Statements.
16
<PAGE> 19
Financials
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $2,367,680,650) $2,689,129,056
- -----------------------------------------------------------------------------------------
Receivable for:
Investments sold 711,503
- -----------------------------------------------------------------------------------------
Capital stock sold 11,807,670
- -----------------------------------------------------------------------------------------
Dividends and interest 9,027,081
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 22,973
- -----------------------------------------------------------------------------------------
Other assets 63,473
- -----------------------------------------------------------------------------------------
Total assets 2,710,761,756
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 17,811,700
- -----------------------------------------------------------------------------------------
Capital stock reacquired 4,384,129
- -----------------------------------------------------------------------------------------
Deferred compensation 22,973
- -----------------------------------------------------------------------------------------
Accrued advisory fees 1,351,823
- -----------------------------------------------------------------------------------------
Accrued administrative services fees 7,677
- -----------------------------------------------------------------------------------------
Accrued distribution fees 993,388
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 329,217
- -----------------------------------------------------------------------------------------
Accrued operating expenses 220,305
- -----------------------------------------------------------------------------------------
Total liabilities 25,121,212
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,685,640,544
=========================================================================================
NET ASSETS:
Class A $2,362,151,296
=========================================================================================
Class B $ 296,376,958
=========================================================================================
Institutional Class $ 27,112,290
=========================================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- -----------------------------------------------------------------------------------------
Outstanding 222,398,410
=========================================================================================
Class B:
Authorized 750,000,000
- -----------------------------------------------------------------------------------------
Outstanding 27,923,120
=========================================================================================
Institutional Class:
Authorized 200,000,000
- -----------------------------------------------------------------------------------------
Outstanding 2,543,865
=========================================================================================
Class A:
Net asset value and redemption price per share $ 10.62
=========================================================================================
Offering price per share:
(Net asset value of $10.62 divided by 94.50%) $ 11.24
=========================================================================================
Class B:
Net asset value and offering price per share $ 10.61
=========================================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $ 10.66
=========================================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 20
Financials
STATEMENT OF OPERATIONS
For the six months ended April 30, 1996
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 23,748,378
- ----------------------------------------------------------------------------------------
Interest 11,871,945
- ----------------------------------------------------------------------------------------
Total investment income 35,620,323
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 7,411,372
- ----------------------------------------------------------------------------------------
Administrative services fees 52,944
- ----------------------------------------------------------------------------------------
Custodian fees 104,560
- ----------------------------------------------------------------------------------------
Directors' fees 9,717
- ----------------------------------------------------------------------------------------
Distribution fees-Class A 3,206,727
- ----------------------------------------------------------------------------------------
Distribution fees-Class B 830,340
- ----------------------------------------------------------------------------------------
Transfer agent fees-Class A 1,604,052
- ----------------------------------------------------------------------------------------
Transfer agent fees-Class B 154,662
- ----------------------------------------------------------------------------------------
Transfer agent fees-Institutional Class 2,811
- ----------------------------------------------------------------------------------------
Other 315,926
- ----------------------------------------------------------------------------------------
Total expenses 13,693,111
- ----------------------------------------------------------------------------------------
Less fees waived by advisor (43,303)
- ----------------------------------------------------------------------------------------
Net expenses 13,649,808
- ----------------------------------------------------------------------------------------
Net investment income 21,970,515
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 167,373,663
- ----------------------------------------------------------------------------------------
Foreign currencies 51,978
- ----------------------------------------------------------------------------------------
Futures contracts (153,728)
- ----------------------------------------------------------------------------------------
167,271,913
- ----------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 37,124,823
- ----------------------------------------------------------------------------------------
Foreign currencies (8,759)
- ----------------------------------------------------------------------------------------
37,116,064
- ----------------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and futures
contracts 204,387,977
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $226,358,492
========================================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 21
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1996
and the year ended October 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 21,970,515 $ 26,980,252
- ---------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and futures contracts 167,271,913 179,125,169
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 37,116,064 200,981,202
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 226,358,492 407,086,623
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (16,319,515) (34,589,802)
- ---------------------------------------------------------------------------------------------
Class B (680,020) (55,355)
- ---------------------------------------------------------------------------------------------
Institutional Class (246,819) (536,096)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investments:
Class A (170,497,889) (57,274,888)
- ---------------------------------------------------------------------------------------------
Class B (8,672,692) (12,593)
- ---------------------------------------------------------------------------------------------
Institutional Class (2,168,635) (759,222)
- ---------------------------------------------------------------------------------------------
Net equalization credits (charges):
Class A 223,280 (284,916)
- ---------------------------------------------------------------------------------------------
Class B 58,770 24,584
- ---------------------------------------------------------------------------------------------
Institutional Class (777) (13,270)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 367,314,869 86,486,354
- ---------------------------------------------------------------------------------------------
Class B 221,331,639 66,768,426
- ---------------------------------------------------------------------------------------------
Institutional Class 1,393,003 (206,795)
- ---------------------------------------------------------------------------------------------
Net increase in net assets 618,093,706 466,633,050
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,067,546,838 1,600,913,788
- ---------------------------------------------------------------------------------------------
End of period $2,685,640,544 $2,067,546,838
=============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,196,697,851 $1,606,658,340
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 5,107,997 102,563
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies and futures contracts 162,395,048 176,462,351
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 321,439,648 284,323,584
- ---------------------------------------------------------------------------------------------
$2,685,640,544 $2,067,546,838
=============================================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 22
Financials
NOTES TO FINANCIAL STATEMENTS
April 30, 1996
(Unaudited)
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 operating diversified
portfolios: The Fund, AIM Weingarten Fund, AIM Constellation Fund and AIM
Aggressive Growth Fund. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and the Institutional Class. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is to provide growth of capital, with current income as a secondary objective.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations-Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible bonds are valued at
the mean between the closing bid and asked prices obtained from a
broker-dealer. Each security traded in the over-the counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations that are issued or guaranteed by the U.S. Treasury
are valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as yield,
type of issue, coupon rate and maturity date. Securities for which market
prices are not provided by any of the above methods are valued at the mean
between last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision
of the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
also generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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.
20
<PAGE> 23
Financials
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES-continued
D. Expenses-Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
E. Equalization-The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and costs of repurchases of
Fund shares, equivalent on a per share basis to the amount of undistributed
net investment income, is credited or charged to undistributed net income
when the transaction is recorded so that the undistributed net investment
income per share is unaffected by sales or redemptions of Fund shares.
F. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
G. Foreign Currency Contracts-A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
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 AIM
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. The approval of Board of
Directors would be necessary before AIM can discontinue this waiver. During the
six months ended April 30, 1996, AIM waived fees of $43,303. Under the terms of
a master sub-advisory agreement between AIM and A I M Capital Management, Inc.
("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to
AIM. These agreements require AIM to reduce its fees or, if necessary, make
payments to the Fund to the extent required to satisfy any expense limitations
imposed by the securities laws or regulations thereunder of any state in which
the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1996, AIM
was reimbursed $52,944 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A and Class B shares. During the six
months ended April 30, 1996, AFS was paid $916,804 for such services. During the
six months ended April 30, 1996, the Fund paid A I M Institutional Fund
Services, Inc. ("AIFS") $2,811 for shareholder and transfer agency services with
respect to the Institutional Class.
21
<PAGE> 24
Financials
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-continued
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs and provides periodic payments
to selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund. The Fund, pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of this amount, the Fund may pay a service
fee of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer or pledge to
one or more designees, its rights to all or a designed portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan), and (b) any contingent deferred sales charges received by AIM
Distributors related to the Class B shares. During the six months ended April
30, 1996, the Class A and Class B shares paid AIM Distributors $3,206,727 and
$830,340, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,459,458 from sales of shares of
the Class A shares of the Fund during the six months ended April 30, 1996. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of Class A shares. During the six months
ended April 30, 1996, AIM Distributors received commissions of $5,320 in
contingent deferred sales charges imposed on redemptions of Class A and Class B
shares. Certain officers and directors of the Company are officers and directors
of AIM, AIM Capital, AIM Distributors, AFS, AIFS and FMC.
During the six months ended April 30, 1996, the Fund paid legal fees of $4,853
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund has a $28,500,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the six months ended April 30, 1996, the Fund did not borrow under
the line of credit agreement. The Fund is charged a commitment fee, payable
quarterly, at the rate of 1/10 of 1% per annum on the unused balance of the
Fund's commitment.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1996 was
$2,749,941,199 and $2,343,141,921, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1996, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $337,678,540
- -----------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (16,670,134)
- -----------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $321,008,406
===================================================================================
Cost of investments for tax purposes is $2,368,120,650.
</TABLE>
22
<PAGE> 25
Financials
NOTE 6-CAPITAL STOCK
Changes in the capital stock outstanding for the six months ended April 30, 1996
and the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1996 OCTOBER 31, 1995
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold
- -------------------------------------------------------------------------------------------------------------------------
Class A 40,954,152 $422,011,757 40,727,782 $396,439,839
- -------------------------------------------------------------------------------------------------------------------------
Class B* 21,494,419 221,190,414 6,409,868 67,237,422
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 179,225 1,865,273 335,121 3,269,772
- -------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
- -------------------------------------------------------------------------------------------------------------------------
Class A 17,944,669 175,875,357 10,283,705 77,653,310
- -------------------------------------------------------------------------------------------------------------------------
Class B* 904,899 8,867,000 5,996 64,162
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 229,412 2,256,048 134,103 1,130,381
- -------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (22,304,016) (230,572,245) (42,561,203) (387,606,795)
- -------------------------------------------------------------------------------------------------------------------------
Class B* (841,810) (8,725,776) (50,252) (533,158)
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (261,115) (2,728,317) (519,822) (4,606,948)
- -------------------------------------------------------------------------------------------------------------------------
58,299,835 $590,039,511 14,765,298 $153,047,985
=========================================================================================================================
</TABLE>
* Class B shares commenced sales on June 26, 1995.
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during the six months ended April 30, 1996 and each of the years in
the nine-year period ended October 31, 1995 and for a Class B share outstanding
during the six months ended April 30, 1996 and the period June 26, 1995 (date
sales commenced) through October 31, 1995.
CLASS A:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
---------- ----------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55 $ 6.97
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Income from investment operations:
Net investment income 0.11 0.15 0.21 0.17 0.18 0.18 0.18
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.86 2.11 (0.45) 1.22 0.16 2.15 0.08
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total from investment
operations 0.97 2.26 (0.24) 1.39 0.34 2.33 0.26
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Less distributions:
Dividends from net investment
income (0.08) (0.20) (0.16) (0.29) (0.17) (0.15) (0.26)
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Distributions from capital gains (0.90) (0.33) (0.16) -- (0.23) (0.31) (0.42)
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total distributions (0.98) (0.53) (0.32) (0.29) (0.40) (0.46) (0.68)
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net asset value, end of period $ 10.62 $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55
=================================== ========== ========== ========== ========== ========== ======== ========
Total return(a) 9.95% 27.03% (2.55)% 16.92% 4.17% 37.65% 3.86%
=================================== ========== ========== ========== ========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,362,151 $1,974,417 $1,579,074 $1,690,482 $1,256,151 $443,546 $102,499
=================================== ========== ========== ========== ========== ========== ======== ========
Ratio of expenses to average net
assets 1.12%(b) 1.17% 1.17% 1.17% 1.17% 1.29% 1.35%
=================================== ========== ========== ========== ========== ========== ======== ========
Ratio of net investment income to
average net assets 1.92%(b) 1.55% 2.32% 1.89% 2.14% 2.14% 2.51%
=================================== ========== ========== ========== ========== ========== ======== ========
Portfolio turnover rate 100% 161% 126% 144% 95% 144% 215%
=================================== ========== ========== ========== ========== ========== ======== ========
<CAPTION>
October 31,
-----------------------------
1989 1988 1987
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 5.40 $ 6.61 $ 8.18
- ----------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.21 0.15 0.09
- ----------------------------------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 1.55 0.16 0.35
- ----------------------------------- ------- ------- -------
Total from investment
operations 1.76 0.31 0.44
- ----------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.19) (0.12) (0.14)
- ----------------------------------- ------- ------- -------
Distributions from capital gains -- (1.40) (1.87)
- ----------------------------------- ------- ------- -------
Total distributions (0.19) (1.52) (2.01)
- ----------------------------------- ------- ------- -------
Net asset value, end of period $ 6.97 $ 5.40 $ 6.61
=================================== ======= ======= =======
Total return(a) 33.68% 5.90% 6.72%
=================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $70,997 $65,799 $82,756
=================================== ======= ======= =======
Ratio of expenses to average net
assets 1.35% 1.46% 1.15%
=================================== ======= ======= =======
Ratio of net investment income to
average net assets 3.73% 2.83% 1.57%
=================================== ======= ======= =======
Portfolio turnover rate 131% 247% 225%
=================================== ======= ======= =======
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are annualized and based on average net assets of $2,155,535,010.
23
<PAGE> 26
Financials
NOTE 7-FINANCIAL HIGHLIGHTS-continued
CLASS B:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1995
---------- ------------
<S> <C> <C>
Net asset value, beginning of period $ 10.62 $ 9.81
- --------------------------------------------------------------------------------------- --------- ----------
Income from investment operations:
Net investment income 0.05 0.03
- --------------------------------------------------------------------------------------- --------- ----------
Net gains (losses) on securities (both realized
and unrealized 0.88 0.80
- --------------------------------------------------------------------------------------- --------- ----------
Total from investment operations 0.93 0.83
- --------------------------------------------------------------------------------------- --------- ----------
Less distributions:
Dividends from net investment income (0.04) (0.02)
- --------------------------------------------------------------------------------------- --------- ----------
Distributions from capital gains (0.90) --
- --------------------------------------------------------------------------------------- --------- ----------
Total distributions (0.94) (0.02)
- --------------------------------------------------------------------------------------- --------- ----------
Net asset value, end of period $ 10.61 $ 10.62
======================================================================================= ========= ==========
Total return(a) 9.56% 8.48%
======================================================================================= ========= ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $296,377 $ 67,592
======================================================================================= ========= ==========
Ratio of expenses to average net assets 1.82%(b) 1.98%(c)
======================================================================================= ========= ==========
Ratio of net investment income to average net assets 1.22%(b) 0.74%(c)
======================================================================================= ========= ==========
Portfolio turnover rate 100% 161%
======================================================================================= ========= ==========
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $167,444,081.
(c) Annualized.
24
<PAGE> 27
Directors
& Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Chairman Suite 1919
Officer Houston, TX 77046
A I M Management Group Inc. Robert H. Graham
President INVESTMENT ADVISOR
Bruce L. Crockett A I M Advisors, Inc.
Director, President, and Chief John J. Arthur 11 Greenway Plaza
Executive Officer Senior Vice President and Suite 1919
COMSAT Corporation Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Fund Services, Inc.
Cortland Trust Inc. P.O. Box 4739
Scott G. Lucas Houston, TX 77210-4739
Carl Frischling Senior Vice President
Partner CUSTODIAN
Kramer, Levin, Naftalis, Nessen, Carol F. Relihan State Street Bank and
Kamin & Frankel Senior Vice President and Trust Company
Secretary 225 Franklin Street
Robert H. Graham Boston, MA 02110
President and Chief Operating Jonathan C. Schoolar
Officer Senior Vice President COUNSEL TO THE FUND
A I M Management Group Inc. Ballard Spahr
Melville B. Cox Andrews & Ingersoll
John F. Kroeger Vice President 1735 Market Street
Formerly, Consultant Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Dana R. Sutton
Vice President and Assistant COUNSEL TO THE DIRECTORS
Lewis F. Pennock Treasurer Kramer, Levin, Naftalis,
Attorney Nessen, Kamin & Frankel
P. Michelle Grace 919 Third Avenue
Ian W. Robinson Assistant Secretary New York, NY 10022
Consultant; Formerly Executive
Vice President and David L. Kite DISTRIBUTOR
Chief Financial Officer Assistant Secretary A I M Distributors, Inc.
Bell Atlantic Management 11 Greenway Plaza
Services, Inc. Nancy L. Martin Suite 1919
Assistant Secretary Houston, TX 77046
Louis S. Sklar
Executive Vice President Ofelia M. Mayo
Hines Interests Assistant Secretary
Limited Partnership
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS(R)
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
[PHOTO OF 11 GREENWAY PLAZA APPEARS HERE] GROWTH
AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE
OF SAFETY
AIM Intermediate Government Fund**
HIGH DEGREE OF SAFETY AND
CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND
CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND
CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
AIM Management Group has provided leadership in the
mutual fund industry since 1976 and currently manages *AIM Aggressive Growth Fund was closed to new investors
approximately $54 billion in assets for more than 2.3 on July 18, 1995. **On September 25, 1995, AIM
million shareholders, including individual investors, Government Securities Fund became AIM Intermediate
corporate clients, and financial institutions. The AIM Government Fund. For more complete information about
Family of Funds is distributed nationwide, and AIM any AIM Fund(s), including sales charges and expenses,
today ranks among the nation's top 15 mutual fund ask your financial consultant or securities dealer for
companies in assets under management, according to a free prospectus(es). Please read the prospectus(es)
Lipper Analytical Services, Inc. carefully before you invest or send money.
[AIM LOGO APPEARS HERE] ----------------
BULK RATE
U.S. POSTAGE
A I M Distributors, Inc. PAID
11 Greenway Plaza, Suite 1919 HOUSTON, TX
Houston, TX 77046 Permit No. 1919
----------------
</TABLE>
