<PAGE> 1
[COVER PHOTO APPEARS HERE]
AIM BLUE CHIP FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT 1996
<PAGE> 2
[PHOTO APPEARS HERE]
AIM BLUE CHIP FUND
For shareholders
who seek
a relatively conservative
investment portfolio that
contains the stocks of
top-performing companies
within designated
business sectors.
ABOUT FUND PERFORMANCE DATA THROUGHOUT THIS REPORT:
o AIM Blue Chip Fund performance figures are historical and reflect
reinvestments of all distributions and changes in net asset value. Unless
otherwise indicated, Fund results are for Class A shares and calculated at
net asset value without reflecting sales charges. The Fund's Class B shares
commenced operations October 1, 1996.
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% 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 particular security.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's 500 (S&P 500) is a group of unmanaged securities
widely regarded by investors to be representative of the stock market in
general.
o Lipper Analytical Services, Inc., is an independent mutual fund performance
monitor. The unmanaged Lipper Growth Fund Index represents an average of
the performance of the 30 largest growth mutual funds.
o The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
large-company stocks.
o The Russell 1000 Index measures the performance of 1000 large-company
stocks.
o An Investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT
INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE
NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to
persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Shareholder:
We are happy to welcome you to The AIM Family of
[Photo of Funds--Registered Trademark--, and are pleased to bring
CHARLES T. BAUER, you the first annual report for AIM Blue Chip Fund, an
Chairman of investment portfolio of stocks in large, established
the Board of companies with attractive long-term growth potential. Many
the Fund, of the stocks in the Fund may be companies familiar to you
APPEARS HERE] as leaders in their respective businesses--such as General
Electric Co., Johnson & Johnson, & Boeing Co.
What may be new to many of you is The Aim Family of
Funds--Registered Trademark--. Others of you may be long time investors in AIM
funds, but new to this Fund. AIM acquired the assets of the Baird Blue Chip
Fund, Inc. in late spring 1996, and those assets were merged into AIM Blue
Chip Fund which commenced operations on June 3, 1996, as a series portfolio of
AIM Equity Funds, Inc. The Fund's B shares commenced operations on October 1,
1996. The Fund's fiscal year end was changed from September 30 to October 31,
and as a result, this report includes financial information for the fiscal year
ended September 30 and for the fiscal year ended October 31.
For the year ended October 31, 1996, the Fund's total return on Class A
shares was strong--25.88%. That eclipsed the impressive 22.92% total return
posted for the Russell 1000 Index of large-company stocks and the 16.94% return
for the Lipper Growth Fund Index. The Fund's net assets stood at $128.5
million as of October 31, 1996. For a complete discussion of the market
conditions and Fund investment strategy during the reporting period, see the
MANAGEMENT'S DISCUSSION AND ANALYSIS on the next page.
The Fund's focus is a value-based approach to blue-chip investing, our own
blend of two proven investment strategies: growth through earnings acceleration
and growth through value recognition. AIM believes earnings hold the key to
long-term investment growth, and the Fund seeks to identify and purchase stocks
in key market sectors with earnings that seem to be growing. The Fund also
looks for growth at a reasonable price, much as you would try to buy a quality
product at a relatively low price to get the best value for your dollar.
While past performance cannot guarantee comparable future results, these
time-tested strategies have worked well for AIM through the years that we have
managed investments for shareholders like you. Today, AIM ranks among the top
15 mutual fund families in assets under management, according to data released
October 31, 1996, by Lipper Analytical Services, Inc.
As always, we are glad to respond to questions or comments about this
report. You may reach us by calling Client Services 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.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
- -----------------------
For the
year ended
October 31, 1996,
the fund's total return
was 25.88%
- -----------------------
<PAGE> 4
The Managers' Overview
BLUE CHIPS RESILIENT IN
VOLATILE MARKET
A roundtable discussion with the Fund management team for AIM Blue Chip Fund
for the year ended October 31, 1996.
- --------------------------------------------------------------------------------
Q. HOW DID AIM BLUE CHIP FUND PERFORM DURING THE FISCAL YEAR COVERED BY THIS
REPORT?
A. The Fund's total return was 25.88% for the year ended October 31,1996,
and that compared favorably to the 22.92% reported for the Russell 1000
Index for large company stocks. Similar funds returned 16.94% during the same
period, according to the Lipper Growth Fund Index.
Q. WHAT FACTORS INFLUENCED THE MARKET DURING THE REPORTING PERIOD?
A. For most of the period, investors primarily were concerned that the
economy might be overheating and that the Federal Reserve Board might raise
interest rates. Economic data released in early March revealed an economy
growing much faster than previously thought. That was later confirmed when
gross domestic product came in at 2.0% in the first quarter and 4.7% in the
second quarter.
But employment statistics released in August, September, and October
suggested an economy that was growing at a reasonable rate. There also was
mounting evidence that labor and production costs weren't eroding corporate
profits. Moreover, inflation remained moderate. The Fed appeared to be
satisfied with the pace of the economy when it left interest rates unchanged at
its meetings in July, August, and September.
Q. HOW DID THE MARKET PERFORM IN THIS ECONOMIC ENVIRONMENT?
A. The DJIA rose 15% through the first three quarters of 1996. In
mid-October, it soared past the 6000 mark to set a new record. But the ride to
the top was anything but smooth.
After climbing to 5778 on May 22, the DJIA fell 7.4% over the following
weeks to 5349.51 on July 15, according to The Wall Street Journal. The steepest
decline occurred July 1-15, when the Dow dropped 7.0%, a selling spree mainly
attributed to unexpectedly strong employment figures which heightened fears of
an overheating economy.
But subsequent data suggested that the economy was growing at a
manageable rate without rising inflation. The DJIA recouped its losses in
August, returning to its May levels. In September and October, traditionally
"down" months for the stock market, the Dow resumed its march into record
territory, surpassing the 6000 mark on October 14.
Q. HOW WERE THE FUND'S HOLDINGS AFFECTED IN THIS MARKET CLIMATE?
A. The Fund benefited when investors were drawn to the stocks of large,
industry-dominating companies whose profits were less likely to be adversely
affected in an uncertain economic environment. The stocks in which the Fund
invests - industry leaders like General Electric Co., Boeing Co., and
========================================
AIM BLUE CHIP FUND VS. INDEXES
10/31/95-10/31/96
Aim Blue Chip Fund 25.88%
Russell 1000 Index 22.92%
Lipper Growth Fund Index 16.94%
========================================
========================================
MORNINGSTAR RATINGS
as of 10/31/96
Funds in
Period Rating Equity Category
OVERALL **** NA
5 YEARS *** 1,031
3 YEARS ***** 1,724
========================================
Morningstar's rating system of one
(lowest) to five (highest) stars is
based on risk and return ratios for
three-, five-, and 10-year periods and
considers all loads, fees, and expenses.
Ratings compare funds with similar
investment objectives and represent past
performance, which is no guarantee of
comparable future results.
- ------------------------
The stocks in which
the Funds invests
helped power the Dow
to impressive gains over
the first three quarters
of 1996.
- ------------------------
See important Fund & Index disclosures on inside front cover.
2
<PAGE> 5
================================================================================
TOP TEN HOLDINGS
================================================================================
as of 10/31/96
Top 10 Securities Top 10 Industries
1. Merck & Co., Inc. 1. Retail (Stores)
2. General Electric Co. 2. Computer Software/Services
3. Gillette Co. (The) 3. Medical (Drugs)
4. Intel Corp. 4. Insurance (Multi-Line Property)
5. Johnson & Johnson 5. Business Services
6. Reuters Holdings PLC 6. Banking
7. American International Group, Inc. 7. Electronic Components/Miscellaneous
8. Boeing Co. (The) 8. Medical (Instruments/Products)
9. Medtronic, Inc. 9. Electric Power
10. Fiserv, Inc. 10. Telecommunications
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
================================================================================
Proctor & Gamble Co.--helped power the Dow to its impressive gains over
the first three quarters of 1996.
Q. HOW DID YOU MANAGE THE FUND DURING THIS PERIOD?
A. We further diversified the portfolio. Among the Fund's top equity
holdings were securities in the following sectors: technology, 24%; financial,
13%; health care, 11%, and consumer cyclicals, 10%. These are broad categories
which include a wide variety of industries. For example, the technology sector
includes the stocks of aerospace and defense industries, software developers,
computer hardware manufacturers, and networking equipment providers.
Q. WHAT WERE THE TOP-PERFORMING TECHNOLOGY SECTORS?
A. Overall, technology stocks posted respectable gains during the
reporting period despite falling out of favor with investors in July and
August. Among the top-performing sectors were aerospace/defense-industry
stocks and software-company stocks.
Semiconductor stocks, which had lagged the securities of other
technology industries, staged a more recent comeback--a rally that was given a
boost when Intel Corp., the microchip manufacturing giant, reported its
third-quarter earnings were better than expected. Among the Fund's technology
holdings, Intel Corp. was a strong performer as were Boeing Co., Microsoft
Corp., and General Electric Co.
In addition to technology stocks, health-care and financial-company
equities also performed well during the period, thanks to positive earnings
trends.
Q. WHAT'S BEHIND THE POSITIVE EARNINGS TRENDS IN THE FINANCIAL AND
HEALTH-CARE INDUSTRIES?
A. The stocks of financial institutions such as banks and insurance
companies recorded impressive gains thanks to a higher proportion of positive
earnings surprises than any other sector, due to the favorable interest-rate
environment present for most of the reporting period. Fund holdings in this
sector included State Street Boston Corp., American International Group, Inc.,
and Citicorp. Large hospital chains and managed-care companies have improved
efficiency through major restructuring efforts including consolidations,
networking, and increased reliance on managed care. Drug manufacturers
worldwide continue to benefit from ongoing cost-cutting efforts, price
increases, and the introduction of new drugs. Among the Fund's top performers
in the health-care sector were Merck & Co. Inc., Abbott Laboratories, and
Johnson & Johnson.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. As 1996 neared its close, conditions appeared favorable for the
stock market. Recent reports show the economy slowed to a 2.0% annual rate in
the third-quarter from 4.7% in the second quarter. The economy is growing at a
reasonable rate without rising inflation. The bull market has run longer than
any in history--October marked its sixth year.
How much longer can this record bull market last? Analysts disagree.
Some predict it will continue into 1997 and perhaps beyond. But other
forecasters see an aging bull rather than a raging bull and are predicting that
the current market rally may soon end.
However, in light of the heady market performance that stocks have
delivered for more than six years, it's important to keep an eye on the
big picture. Certainly, investors have enjoyed successful performance in
the stock market for some time. But markets run in cycles--even
the longest bull market in history.
See important Fund & Index disclosure on inside front cover.
---------------
The economy is growing
at a reasonable rate
without rising inflation.
---------------
3
<PAGE> 6
Long-Term Performance
BLUE CHIP FUND VS. BENCHMARK INDEX
The chart below compares your Fund to a benchmark index. It is intended to
give you a general idea of how your Fund performed compared to the stock market
over the period 2/4/87-10/31/96. It is important to understand the difference
between your Fund and an index. Your Fund's total return is shown with a sales
charge and includes Fund expenses and management fees. An index measures the
performance of a hypothetical portfolio, in this case the Russell 1000 and the
S&P 500 Indexes. Unlike your Fund, the index is not managed; therefore there
are no sales charges, expenses or fees. You cannot invest in an index. But if
you could buy all the securities that make up a particular index, you would
incur expenses that would affect the return on your investment.
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES
Including sales charges.
As of As of
9/30/96 10/31/96
------- --------
1 Year 15.65%* 18.95%**
5 Years 12.88% 12.95%
Inception
(2/4/87) 11.50% 11.63%
*22.39% excluding sales charges.
**25.88% excluding sales charges.
Class B shares commenced operations on October 1, 1996.
AIM Blue Chip Fund has elected to use the Russell 1000 Index--a broad measure
of the performance of 1,000 large-company stocks--which more closely reflects
the performance of stocks in which the Fund invests. In previous reports, the
Fund used the Standard & Poor's Composite Index of 500 Stocks (S&P 500) which
measures the performance of large- and small-company stocks. In accordance with
SEC guidelines, we have included a comparison of the Fund's performance to
that of the S&P 500 Index, which was used in previous reports, and the Russell
1000 Index.
- ------------------------------------------------------------------------------
================================================================================
GROWTH OF A $10,000 INVESTMENT
================================================================================
Past performance is no guarantee of future results.
2/4/87-9/30/96
AIM BLUE CHIP RUSSELL STANDARD &
FUND CLASS A SHARES 1000 INDEX POOR'S 500
In thousands
2/4/87 9,451 10,000 10,000
9/87 10,889 11,751 11,759
9/88 9,604 10,421 10,297
9/89 11,714 13,772 13,685
9/90 11,754 12,194 12,421
9/91 14,754 16,311 16,278
9/92 16,244 18,205 18,068
9/93 16,982 20,980 20,406
9/94 18,288 21,510 21,165
9/95 23,380 27,964 27,438
9/96 28,613 33,468 32,999
2/4/87-10/31/96
AIM BLUE CHIP RUSSELL STANDARD &
FUND CLASS A SHARES 1000 INDEX POOR'S 500
In thousands
2/4/87 9,451 10,000 10,000
10/87 8,861 9,202 9,200
10/88 9,612 10,641 10,565
10/89 11,524 13,405 13,340
10/90 11,708 12,133 12,338
10/91 15,005 16,573 16,471
10/92 16,498 18,356 18,106
10/93 17,314 21,257 20,802
10/94 18,739 21,916 21,607
10/95 23,193 27,835 27,302
10/96 29,195 34,208 33,860
================================================================================
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.
4
<PAGE> 7
Financials
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS-81.74%
ADVERTISING/BROADCASTING-0.75%
20,000 Interpublic Group of Companies, Inc. $ 970,000
- ----------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-2.52%
23,900 Boeing Co. (The) 2,279,463
- ----------------------------------------------------------------------------------------------
7,500 United Technologies Corp. 965,625
- ----------------------------------------------------------------------------------------------
3,245,088
- ----------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.67%
16,000 General Motors Corp. 862,000
- ----------------------------------------------------------------------------------------------
BANKING-3.80%
31,000 Fifth Third Bancorp 1,941,375
- ----------------------------------------------------------------------------------------------
25,000 Norwest Bank Corp. 1,096,875
- ----------------------------------------------------------------------------------------------
29,200 State Street Boston Corp. 1,850,550
- ----------------------------------------------------------------------------------------------
4,888,800
- ----------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.81%
10,500 Citicorp 1,039,500
- ----------------------------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.37%
16,000 PepsiCo, Inc. 474,000
- ----------------------------------------------------------------------------------------------
BIOTECHNOLOGY-0.93%
26,000 Guidant Corp. 1,199,250
- ----------------------------------------------------------------------------------------------
BUSINESS SERVICES-4.24%
8,500 AccuStaff, Inc.(a) 227,375
- ----------------------------------------------------------------------------------------------
10,000 Dun & Bradstreet Corp. 578,750
- ----------------------------------------------------------------------------------------------
35,000 Equifax, Inc. 1,041,250
- ----------------------------------------------------------------------------------------------
55,450 Olsten Corp. 1,109,000
- ----------------------------------------------------------------------------------------------
33,600 Reuters Holdings PLC-Sponsored ADR (United Kingdom) 2,499,000
- ----------------------------------------------------------------------------------------------
5,455,375
- ----------------------------------------------------------------------------------------------
CHEMICALS-0.80%
18,000 PPG Industries, Inc. 1,026,000
- ----------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.82%
28,000 IMC Global, Inc. 1,050,000
- ----------------------------------------------------------------------------------------------
COMPUTER MAINFRAMES-1.00%
10,000 International Business Machines Corp. 1,290,000
- ----------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-1.55%
16,000 COMPAQ Computer Corp.(a) 1,114,000
- ----------------------------------------------------------------------------------------------
10,600 Dell Computer Corp.(a) 862,575
- ----------------------------------------------------------------------------------------------
1,976,575
- ----------------------------------------------------------------------------------------------
COMPUTER NETWORKING-1.65%
9,000 Ascend Communications, Inc.(a) 588,375
- ----------------------------------------------------------------------------------------------
16,500 Cisco Systems, Inc.(a) 1,020,937
- ----------------------------------------------------------------------------------------------
13,000 FORE Systems, Inc.(a) 516,750
- ----------------------------------------------------------------------------------------------
2,126,062
- ----------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-5.86%
20,500 Computer Associates International, Inc. $ 1,212,062
- ----------------------------------------------------------------------------------------------
7,000 Computer Sciences Corp.(a) 519,750
- ----------------------------------------------------------------------------------------------
8,000 Electronic Data Systems Corp. 360,000
- ----------------------------------------------------------------------------------------------
51,100 Fiserv, Inc.(a) 1,960,962
- ----------------------------------------------------------------------------------------------
12,000 Microsoft, Corp.(a) 1,647,000
- ----------------------------------------------------------------------------------------------
31,950 Oracle Systems Corp.(a) 1,351,884
- ----------------------------------------------------------------------------------------------
7,000 PairGain Technologies, Inc.(a) 482,125
- ----------------------------------------------------------------------------------------------
7,533,783
- ----------------------------------------------------------------------------------------------
CONGLOMERATES-1.20%
16,600 Du Pont (E.I.) de Nemours & Co. 1,539,650
- ----------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-2.74%
18,000 Avon Products, Inc. 976,500
- ----------------------------------------------------------------------------------------------
34,000 Gillette Co. (The) 2,541,500
- ----------------------------------------------------------------------------------------------
3,518,000
- ----------------------------------------------------------------------------------------------
ELECTRIC POWER-3.05%
26,000 Allegheny Power System, Inc. 776,750
- ----------------------------------------------------------------------------------------------
27,500 Consolidated Edison Co. of New York, Inc. 804,375
- ----------------------------------------------------------------------------------------------
28,000 Entergy Corp. 784,000
- ----------------------------------------------------------------------------------------------
34,000 Houston Industries Inc. 777,750
- ----------------------------------------------------------------------------------------------
28,600 Illinova Corp. 779,350
- ----------------------------------------------------------------------------------------------
3,922,225
- ----------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-3.56%
22,000 Emerson Electric Co. 1,958,000
- ----------------------------------------------------------------------------------------------
27,000 General Electric Co. 2,612,250
- ----------------------------------------------------------------------------------------------
4,570,250
- ----------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.61%
9,000 Federal Home Loan Mortgage Corp. 909,000
- ----------------------------------------------------------------------------------------------
14,000 Student Loan Marketing Association 1,158,500
- ----------------------------------------------------------------------------------------------
2,067,500
- ----------------------------------------------------------------------------------------------
FOOD/PROCESSING-1.95%
30,000 Archer-Daniels-Midland Co. 652,500
- ----------------------------------------------------------------------------------------------
52,200 Sara Lee Corp. 1,853,100
- ----------------------------------------------------------------------------------------------
2,505,600
- ----------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.76%
32,000 Hilton Hotels Corp. 972,000
- ----------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.28%
22,000 Conseco, Inc. 1,177,000
- ----------------------------------------------------------------------------------------------
20,000 Equitable Companies Inc. 470,000
- ----------------------------------------------------------------------------------------------
1,647,000
- ----------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-5.04%
23,500 Allstate Corp. 1,318,938
- ----------------------------------------------------------------------------------------------
21,000 American International Group, Inc. 2,281,125
- ----------------------------------------------------------------------------------------------
6,800 CIGNA Corp. 887,400
- ----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(Continued)
13,200 MGIC Investment Corp. $ 905,850
- ----------------------------------------------------------------------------------------------
20,000 Travelers Group, Inc. 1,085,000
- ----------------------------------------------------------------------------------------------
6,478,313
- ----------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.74%
21,000 Harley-Davidson, Inc. 947,625
- ----------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-5.40%
25,000 Abbott Laboratories 1,265,625
- ----------------------------------------------------------------------------------------------
51,200 Johnson & Johnson 2,521,600
- ----------------------------------------------------------------------------------------------
42,500 Merck & Co., Inc. 3,150,313
- ----------------------------------------------------------------------------------------------
6,937,538
- ----------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-3.17%
32,000 Baxter International Inc. 1,332,000
- ----------------------------------------------------------------------------------------------
33,900 Medtronic, Inc. 2,182,313
- ----------------------------------------------------------------------------------------------
14,300 St. Jude Medical, Inc.(a) 564,850
- ----------------------------------------------------------------------------------------------
4,079,163
- ----------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.39%
24,000 Columbia/HCA Healthcare Corp. 858,000
- ----------------------------------------------------------------------------------------------
32,000 Sybron International Corp.(a) 932,000
- ----------------------------------------------------------------------------------------------
1,790,000
- ----------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-0.29%
6,200 Columbia Gas System, Inc. 376,650
- ----------------------------------------------------------------------------------------------
OFFICE AUTOMATION-0.52%
17,000 Danka Business Systems PLC-ADR (United Kingdom) 673,625
- ----------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-2.70%
15,000 Halliburton Co. 849,375
- ----------------------------------------------------------------------------------------------
10,000 Royal Dutch Petroleum Co.-ADR-New York shares (Netherlands) 1,653,750
- ----------------------------------------------------------------------------------------------
9,500 Texaco, Inc. 965,438
- ----------------------------------------------------------------------------------------------
3,468,563
- ----------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.36%
17,700 Schlumberger Ltd. 1,754,512
- ----------------------------------------------------------------------------------------------
PUBLISHING-0.70%
25,000 New York Times Co. 903,125
- ----------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.23%
6,600 Kroger Co.(a) 294,525
- ----------------------------------------------------------------------------------------------
RETAIL (STORES)-6.24%
21,500 Lowe's Companies, Inc. 868,062
- ----------------------------------------------------------------------------------------------
38,000 Pep Boys-Manny, Moe & Jack 1,330,000
- ----------------------------------------------------------------------------------------------
45,000 Staples, Inc.(a) 838,125
- ----------------------------------------------------------------------------------------------
35,000 Sysco Corp. 1,190,000
- ----------------------------------------------------------------------------------------------
43,000 Toys "R" Us, Inc.(a) 1,456,625
- ----------------------------------------------------------------------------------------------
50,000 Viking Office Products Inc.(a) 1,456,250
- ----------------------------------------------------------------------------------------------
33,000 Wal-Mart Stores, Inc. 878,625
- ----------------------------------------------------------------------------------------------
8,017,687
- ----------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS-2.45%
10,000 Altera Corp.(a) $ 620,000
- ----------------------------------------------------------------------------------------------
23,000 Intel Corp. 2,527,125
- ----------------------------------------------------------------------------------------------
3,147,125
- ----------------------------------------------------------------------------------------------
SHOES & RELATED APPAREL-0.78%
17,000 NIKE, Inc.-Class B 1,000,875
- ----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.77%
25,000 Lucent Technologies, Inc. 1,175,000
- ----------------------------------------------------------------------------------------------
20,400 MFS Communications Co., Inc.(a) 1,022,550
- ----------------------------------------------------------------------------------------------
56,000 WorldCom, Inc.(a) 1,365,000
- ----------------------------------------------------------------------------------------------
3,562,550
- ----------------------------------------------------------------------------------------------
TELEPHONE-1.88%
19,000 BellSouth Corp. 774,250
- ----------------------------------------------------------------------------------------------
18,000 Cincinnati Bell, Inc. 888,750
- ----------------------------------------------------------------------------------------------
15,400 SBC Communications, Inc. 748,825
- ----------------------------------------------------------------------------------------------
2,411,825
- ----------------------------------------------------------------------------------------------
TEXTILES-0.38%
7,000 Gucci Group NV-ADR-New York shares (Netherlands) 483,000
- ----------------------------------------------------------------------------------------------
TOBACCO-2.41%
20,000 Philip Morris Companies, Inc. 1,852,500
- ----------------------------------------------------------------------------------------------
43,100 RJR Nabisco Holdings Corp. 1,244,513
- ----------------------------------------------------------------------------------------------
3,097,013
- ----------------------------------------------------------------------------------------------
TRANSPORTATION-1.37%
70,000 Canadian Pacific, Ltd. (Canada) 1,767,500
- ----------------------------------------------------------------------------------------------
Total Common Stocks 105,069,872
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS-13.10%(b)
$17,210,000(c) 5.17%, 04/03/97 16,845,664
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-5.40%(d)
939,177 Daiwa Securities America, Inc., 5.53%, 11/01/96(e) 939,177
- ----------------------------------------------------------------------------------------------
6,000,000 SBC Capital Markets, Inc., 5.55%, 11/01/96(f) 6,000,000
- ----------------------------------------------------------------------------------------------
Total Repurchase Agreements 6,939,177
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.24% 128,854,713
- ----------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.24)% (306,359)
- ----------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 128,548,354
==============================================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount. In such cases the interest
rate shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(c) A portion of the principal was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(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 insure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 08/15/23.
(f) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collateralized by $691,506,000 U.S. Treasury obligations, 0%
to 9.125% due 11/30/96 to 10/31/01.
See Notes to Financial Statements.
8
<PAGE> 11
Financials
SCHEDULE OF INVESTMENTS
September 30, 1996
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS-89.03%
ADVERTISING/BROADCASTING-0.89%
20,000 Interpublic Group of Companies, Inc. $ 945,000
- ----------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-2.97%
23,900 Boeing Co. (The) 2,258,550
- ----------------------------------------------------------------------------------------------
7,500 United Technologies Corp. 900,938
- ----------------------------------------------------------------------------------------------
3,159,488
- ----------------------------------------------------------------------------------------------
AIRLINES-0.88%
41,000 Southwest Airlines Co. 937,875
- ----------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.72%
16,000 General Motors Corp. 768,000
- ----------------------------------------------------------------------------------------------
BANKING-4.23%
31,000 Fifth Third Bancorp 1,801,875
- ----------------------------------------------------------------------------------------------
25,000 Norwest Bank Corp. 1,021,875
- ----------------------------------------------------------------------------------------------
29,200 State Street Boston Corp. 1,675,350
- ----------------------------------------------------------------------------------------------
4,499,100
- ----------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.89%
10,500 Citicorp 951,563
- ----------------------------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.76%
28,500 PepsiCo, Inc. 805,125
- ----------------------------------------------------------------------------------------------
BIOTECHNOLOGY-1.04%
20,000 Guidant Corp. 1,105,000
- ----------------------------------------------------------------------------------------------
BUSINESS SERVICES-4.35%
35,000 Equifax, Inc. 923,125
- ----------------------------------------------------------------------------------------------
55,450 Olsten Corp. 1,379,319
- ----------------------------------------------------------------------------------------------
33,600 Reuters Holdings PLC-Sponsored ADR (United Kingdom) 2,326,800
- ----------------------------------------------------------------------------------------------
4,629,244
- ----------------------------------------------------------------------------------------------
CHEMICALS-1.34%
26,300 PPG Industries, Inc. 1,430,063
- ----------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.74%
13,500 Air Products & Chemicals, Inc. 786,375
- ----------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-0.78%
10,600 Dell Computer Corp.(a) 824,150
- ----------------------------------------------------------------------------------------------
COMPUTER NETWORKING-2.03%
9,000 Ascend Communications, Inc.(a) 595,125
- ----------------------------------------------------------------------------------------------
16,500 Cisco Systems, Inc.(a) 1,024,031
- ----------------------------------------------------------------------------------------------
13,000 FORE Systems, Inc.(a) 537,875
- ----------------------------------------------------------------------------------------------
2,157,031
- ----------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-7.55%
18,000 Computer Associates International, Inc. $ 1,075,500
- ----------------------------------------------------------------------------------------------
7,000 Computer Sciences Corp.(a) 538,125
- ----------------------------------------------------------------------------------------------
16,000 Electronic Data Systems Corp. 982,000
- ----------------------------------------------------------------------------------------------
51,100 Fiserv, Inc.(a) 1,954,575
- ----------------------------------------------------------------------------------------------
12,000 Microsoft, Corp.(a) 1,582,500
- ----------------------------------------------------------------------------------------------
31,950 Oracle Systems Corp.(a) 1,359,872
- ----------------------------------------------------------------------------------------------
7,000 PairGain Technologies, Inc.(a) 546,875
- ----------------------------------------------------------------------------------------------
8,039,447
- ----------------------------------------------------------------------------------------------
CONGLOMERATES-1.38%
16,600 Du Pont (E.I.) de Nemours & Co. 1,464,950
- ----------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-4.47%
10,000 Avon Products, Inc. 496,250
- ----------------------------------------------------------------------------------------------
34,000 Gillette Co. (The) 2,452,250
- ----------------------------------------------------------------------------------------------
18,500 Procter & Gamble Co. 1,803,750
- ----------------------------------------------------------------------------------------------
4,752,250
- ----------------------------------------------------------------------------------------------
ELECTRIC POWER-3.56%
26,000 Allegheny Power System, Inc. 754,000
- ----------------------------------------------------------------------------------------------
27,500 Consolidated Edison Co. of New York, Inc. 763,125
- ----------------------------------------------------------------------------------------------
28,000 Entergy Corp. 756,000
- ----------------------------------------------------------------------------------------------
34,000 Houston Industries Inc. 752,250
- ----------------------------------------------------------------------------------------------
28,600 Illinova Corp. 757,900
- ----------------------------------------------------------------------------------------------
3,783,275
- ----------------------------------------------------------------------------------------------
ELECTRIC COMPONENTS/MISCELLANEOUS-4.17%
22,000 Emerson Electric Co. 1,982,750
- ----------------------------------------------------------------------------------------------
27,000 General Electric Co. 2,457,000
- ----------------------------------------------------------------------------------------------
4,439,750
- ----------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.69%
10,000 Federal Home Loan Mortgage Corp. 978,750
- ----------------------------------------------------------------------------------------------
11,000 Student Loan Marketing Association 820,875
- ----------------------------------------------------------------------------------------------
1,799,625
- ----------------------------------------------------------------------------------------------
FOOD/PROCESSING-1.75%
52,200 Sara Lee Corp. 1,866,150
- ----------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.85%
32,000 Hilton Hotels Corp. 908,000
- ----------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.50%
22,000 Conseco, Inc. 1,083,500
- ----------------------------------------------------------------------------------------------
20,000 Equitable Companies Inc. 515,000
- ----------------------------------------------------------------------------------------------
1,598,500
- ----------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-6.59%
21,000 American International Group, Inc. 2,115,750
- ----------------------------------------------------------------------------------------------
32,400 Chubb Corp. 1,490,400
- ----------------------------------------------------------------------------------------------
6,800 CIGNA Corp. 815,150
- ----------------------------------------------------------------------------------------------
5,200 General Re Corp. 737,100
- ----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Insurance (Multi-Line Property)-continued
13,000 MGIC Investment Corp. $ 875,875
- ----------------------------------------------------------------------------------------------
20,000 Travelers Group, Inc. 982,500
- ----------------------------------------------------------------------------------------------
7,016,775
- ----------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.85%
21,000 Harley-Davidson, Inc. 903,000
- ----------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-6.43%
25,000 Abbott Laboratories 1,231,250
- ----------------------------------------------------------------------------------------------
51,200 Johnson & Johnson 2,624,000
- ----------------------------------------------------------------------------------------------
42,500 Merck & Co., Inc. 2,990,937
- ----------------------------------------------------------------------------------------------
6,846,187
- ----------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-2.04%
33,900 Medtronic, Inc. 2,173,837
- ----------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.61%
13,800 Columbia/HCA Healthcare Corp. 784,875
- ----------------------------------------------------------------------------------------------
32,000 Sybron International Corp.(a) 928,000
- ----------------------------------------------------------------------------------------------
1,712,875
- ----------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-0.33%
6,200 Columbia Gas System, Inc. 347,200
- ----------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-3.02%
15,000 Halliburton Co. 774,375
- ----------------------------------------------------------------------------------------------
10,000 Royal Dutch Petroleum Co.-ADR-New York shares (Netherlands) 1,561,250
- ----------------------------------------------------------------------------------------------
9,500 Texaco, Inc. 874,000
- ----------------------------------------------------------------------------------------------
3,209,625
- ----------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.41%
17,700 Schlumberger Ltd. 1,495,650
- ----------------------------------------------------------------------------------------------
PUBLISHING-0.79%
25,000 New York Times Co. 843,750
- ----------------------------------------------------------------------------------------------
RESTAURANTS-0.76%
17,000 McDonald's Corp. 805,375
- ----------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.12%
28,300 Albertson's, Inc. 1,192,137
- ----------------------------------------------------------------------------------------------
RETAIL (STORES)-5.63%
15,700 Lowe's Companies, Inc. 641,738
- ----------------------------------------------------------------------------------------------
30,000 Pep Boys-Manny, Moe & Jack 1,068,750
- ----------------------------------------------------------------------------------------------
45,000 Staples, Inc.(a) 998,437
- ----------------------------------------------------------------------------------------------
27,000 Sysco Corp. 907,875
- ----------------------------------------------------------------------------------------------
50,000 Viking Office Products, Inc.(a) 1,500,000
- ----------------------------------------------------------------------------------------------
33,000 Wal-Mart Stores, Inc. 870,375
- ----------------------------------------------------------------------------------------------
5,987,175
- ----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS-1.91%
10,000 Altera Corp.(a) $ 506,250
- ----------------------------------------------------------------------------------------------
10,500 Intel Corp. 1,002,094
- ----------------------------------------------------------------------------------------------
9,500 Texas Instruments, Inc. 523,688
- ----------------------------------------------------------------------------------------------
2,032,032
- ----------------------------------------------------------------------------------------------
SHOES & RELATED APPAREL-0.97%
8,500 NIKE, Inc.-Class B 1,032,750
- ----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-1.91%
25,000 Lucent Technologies, Inc. 1,146,875
- ----------------------------------------------------------------------------------------------
20,400 MFS Communications Co., Inc.(a) 889,950
- ----------------------------------------------------------------------------------------------
2,036,825
- ----------------------------------------------------------------------------------------------
TELEPHONE-2.25%
19,000 BellSouth Corp. 703,000
- ----------------------------------------------------------------------------------------------
18,000 Cincinnati Bell, Inc. 954,000
- ----------------------------------------------------------------------------------------------
15,400 SBC Communications, Inc. 741,125
- ----------------------------------------------------------------------------------------------
2,398,125
- ----------------------------------------------------------------------------------------------
TEXTILES-0.95%
14,000 Gucci Group NV-ADR-New York shares (Netherlands) 1,015,000
- ----------------------------------------------------------------------------------------------
TOBACCO-1.92%
13,500 Philip Morris Companies, Inc. 1,211,625
- ----------------------------------------------------------------------------------------------
32,000 RJR Nabisco Holdings Corp. 832,000
- ----------------------------------------------------------------------------------------------
2,043,625
- ----------------------------------------------------------------------------------------------
Total Common Stocks 94,741,904
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS-4.49%(b)
$ 4,910,000(c) 5.17%, 04/03/97 4,783,027
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-5.42%(d)
766,387 Daiwa Securities America, Inc., 5.80%, 10/01/96(e) 766,387
- ----------------------------------------------------------------------------------------------
5,000,000 UBS Securities Inc., 5.90%, 10/01/96(f) 5,000,000
- ----------------------------------------------------------------------------------------------
Total Repurchase Agreements 5,766,387
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.94% 105,291,318
- ----------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.06% 1,123,392
- ----------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 106,414,710
==============================================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. treasury bills are traded on a discount. In such cases the interest
rate shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(c) A portion of the principal was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) Collateral on repurchase agreements, include the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 09/30/96 with a maturing value of
$750,737,063. Collateralized by $696,875,000 U.S. Treasury obligations,
7.875% to 8.375% due 11/15/07 to 08/15/08.
(f) Joint repurchase agreement entered into 09/30/96 with a maturing value of
$300,049,167. Collateralized by $678,362,131 U.S. Government agency
obligations, 0% to 11.00% due 10/01/00 to 03/01/33.
See Notes to Financial Statements.
12
<PAGE> 15
Financials
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
ASSETS:
Investments, at market value (cost: $101,592,848 and
$78,291,809) $128,854,713 $105,291,318
- --------------------------------------------------------------------------------------------
Receivables for:
Investments sold 1,528,029 --
- --------------------------------------------------------------------------------------------
Capital stock sold 1,934,587 1,144,249
- --------------------------------------------------------------------------------------------
Dividends and interest 65,749 144,747
- --------------------------------------------------------------------------------------------
Variation margin 115,600 --
- --------------------------------------------------------------------------------------------
Investment for deferred compensation plan 1,494 713
- --------------------------------------------------------------------------------------------
Other assets 46,398 48,053
- --------------------------------------------------------------------------------------------
Total assets 132,546,570 106,629,080
- --------------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,150,800 --
- --------------------------------------------------------------------------------------------
Capital stock reacquired 1,692,177 33,810
- --------------------------------------------------------------------------------------------
Deferred compensation 1,494 713
- --------------------------------------------------------------------------------------------
Accrued advisory fees 68,230 60,011
- --------------------------------------------------------------------------------------------
Accrued accounting services fees 4,309 16,263
- --------------------------------------------------------------------------------------------
Accrued directors' fees 595 1,580
- --------------------------------------------------------------------------------------------
Accrued distribution fees 37,233 76,346
- --------------------------------------------------------------------------------------------
Accrued transfer agent fees 9,908 10,150
- --------------------------------------------------------------------------------------------
Accrued operating expenses 33,470 15,497
- --------------------------------------------------------------------------------------------
Total liabilities 3,998,216 214,370
- --------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $128,548,354 $106,414,710
============================================================================================
NET ASSETS:
Class A $120,447,685 $106,414,710
- --------------------------------------------------------------------------------------------
Class B $ 8,100,669 --
- --------------------------------------------------------------------------------------------
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000 750,000,000
- --------------------------------------------------------------------------------------------
Outstanding 4,618,824 4,163,564
- --------------------------------------------------------------------------------------------
Class B:
Authorized 750,000,000 750,000,000
- --------------------------------------------------------------------------------------------
Outstanding 310,679 --
- --------------------------------------------------------------------------------------------
CLASS A:
Net asset value and redemption price per share $ 26.08 $ 25.56
- --------------------------------------------------------------------------------------------
Offering price per share:
(Net asset value divided by 94.50%) $ 27.60 $ 27.05
- --------------------------------------------------------------------------------------------
CLASS B:
Net asset value and offering price per share $ 26.07 --
============================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
Financials
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ONE MONTH ENDED YEAR ENDED
OCTOBER 31, SEPTEMBER 30,
1996 1996
----------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of $2,518 and $23,207 foreign withholding tax) $ 60,573 $ 1,208,166
- -----------------------------------------------------------------------------------------------------------
Interest 79,751 166,454
- -----------------------------------------------------------------------------------------------------------
Total investment income 140,324 1,374,620
- -----------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 75,253 578,569
- -----------------------------------------------------------------------------------------------------------
Custodian fees 2,838 19,467
- -----------------------------------------------------------------------------------------------------------
Distribution fees -- Class A 34,010 190,772
- -----------------------------------------------------------------------------------------------------------
Distribution fees -- Class B 3,166 --
- -----------------------------------------------------------------------------------------------------------
Transfer agent fees -- Class A 5,591 57,849
- -----------------------------------------------------------------------------------------------------------
Transfer agent fees -- Class B 1,601 --
- -----------------------------------------------------------------------------------------------------------
Accounting service fees 4,309 51,360
- -----------------------------------------------------------------------------------------------------------
Directors' fees 581 8,111
- -----------------------------------------------------------------------------------------------------------
Other 12,931 73,915
- -----------------------------------------------------------------------------------------------------------
Total expenses 140,280 980,043
- -----------------------------------------------------------------------------------------------------------
Less expenses assumed by advisor (7,024) (19,409)
- -----------------------------------------------------------------------------------------------------------
Net expenses 133,256 960,634
- -----------------------------------------------------------------------------------------------------------
Net investment income 7,068 413,986
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
Net realized gain on sales of investment securities 1,953,887 17,138,864
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 262,356 (1,150,933)
- -----------------------------------------------------------------------------------------------------------
Futures contracts (7,768) (22,050)
- -----------------------------------------------------------------------------------------------------------
254,588 (1,172,983)
- -----------------------------------------------------------------------------------------------------------
Net gain on investment securities and futures contracts 2,208,475 15,965,881
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 2,215,543 $ 16,379,867
==========================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ONE MONTH ENDED YEAR ENDED SEPTEMBER 30,
OCTOBER 31, ---------------------------------------
1996 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 7,068 $ 413,986 $ 435,096
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 1,953,887 17,138,864 3,508,717
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and futures contracts 254,588 (1,172,983) 11,889,076
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,215,543 16,379,867 15,832,889
- -------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (616,045) (358,084)
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains -- (8,878,928) (1,424,952)
- -------------------------------------------------------------------------------------------------------------------------
Capital stock transactions - net:
Class A 11,821,515 28,205,736 (2,840,672)
- -------------------------------------------------------------------------------------------------------------------------
Class B 8,096,586 -- --
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 22,133,644 35,090,630 11,209,181
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 106,414,710 71,324,080 60,114,899
- -------------------------------------------------------------------------------------------------------------------------
End of period $ 128,548,354 $ 106,414,710 $ 71,324,080
=========================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 87,482,889 $ 67,564,788 $ 39,359,052
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 209,005 201,937 403,996
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities 13,624,413 11,670,526 3,410,590
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
futures contracts 27,232,047 26,977,459 28,150,442
- -------------------------------------------------------------------------------------------------------------------------
$ 128,548,354 $ 106,414,710 $ 71,324,080
=========================================================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
Financials
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip 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 six operating diversified
portfolios: AIM Blue Chip Fund, AIM Aggressive Growth Fund, AIM Capital
Development Fund, AIM Charter Fund, AIM Constellation Fund, and AIM Weingarten
Fund. Prior to June 3, 1996, the Fund was the Baird Blue Chip Fund, Inc. which
was incorporated under the laws of Wisconsin. Pursuant to an Agreement and Plan
of Reorganization between the Company and the Baird Blue Chip Fund, Inc., the
Fund was reorganized as a portfolio of the Company effective June 3, 1996. As a
result of the reorganization, the Fund's fiscal year was changed from September
30 to October 31. The Fund currently offers two different classes of shares: the
Class A shares and the Class B shares. Class B shares commenced operations on
October 1, 1996. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The Fund's investment objective is long-term growth of
capital. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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--A security listed or traded on an exchange is valued at
its last price on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the mean
between the closing bid and asked prices on that day. Each security traded in
the over-the-counter market (but not including securities reported on the
NASDAQ National Market System) is valued at the mean between the last bid and
asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations that
are issued or guaranteed by the U.S. Treasury are valued on the basis of
prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translation--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A 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.
15
<PAGE> 18
Financials
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES-continued
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are recorded 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.
E. 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.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and that a change in the value of contracts may not correlate with
changes in the value of the securities being hedged.
G. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g., advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the fund's average daily net assets in excess of $350 million. AIM has agreed to
waive advisory fees for two years to the extent necessary to keep the annual
expense ratio for Class A shares at 1.31% for such period. During the one month
ended October 31, 1996 and the period from June 3, 1996 through September 30,
1996, AIM voluntarily waived advisory fees in the amounts of $7,024 and $19,409,
respectively. Prior to June 3, 1996, the Baird Blue Chip Fund, Inc., ("BBC") had
a management agreement with Robert W. Baird & Co. Incorporated ("RWB") to serve
as investment advisor and manager. Under the terms of the agreement, the BBC
paid RWB an advisory fee at the annual rate of 0.74% of the daily net assets of
the BBC.
At a special meeting held on March 15, 1996, the shareholders of the BBC
approved a transaction whereby the assets (net of liabilities) of the BBC would
be sold to AIM Blue Chip Fund, a newly-created portfolio of AIM Equity Funds,
Inc., pursuant to the Agreement and Plan of Reorganization dated December 20,
1995, as amended, between the BBC and AIM Equity Funds, Inc. (the "Agreement and
Plan of Reorganization"). The requisite vote for approval was a majority of the
shares of the BBC outstanding on the record date (January 25, 1996). Of the
3,085,577 shares outstanding on the record date, 1,925,583 shares (or 62.4% of
the total outstanding shares) were present at the meeting in person or by proxy,
1,773,720 shares (or 57.5% of the total outstanding shares) voted for approval
of the Agreement and Plan of Reorganization and the reorganization transaction,
and 151,863 shares either voted against or abstained from voting on the matter.
The transaction occurred on June 3, 1996.
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 one month ended October 31, 1996 and
the period from June 3, 1996 through September 30, 1996, AIM was reimbursed
$4,309 and $16,236, respectively, for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the one month ended October 31,
1996 and the period from June 3, 1996 through September 30, 1996, AFS was paid
$4,759 and $16,223, respectively, for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares
16
<PAGE> 19
Financials
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-continued
(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 an annual rate of 0.35% 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 assignees, its rights to all or a 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 payable to AIM
Distributors related to the Class B shares. During the one month ended October
31, 1996, the Class A shares and the Class B shares paid AIM Distributors
$34,010 and $3,166, respectively, as compensation pursuant to the Plans. During
the period from June 3, 1996 through September 30, 1996, the Class A shares paid
by AIM Distributors $97,045 as compensation pursuant to the Class A Plan. Prior
to June 3, 1996, the BBC had adopted a distribution plan (the "Plan"), pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The Plan provided that
the BBC may incur certain costs which may not exceed the lesser of a monthly
payment amount equal to 0.45% per year of the BBC's daily net assets or the
actual distribution costs incurred by RWB during the year. During the period
October 1, 1995 through June 3, 1996, BBC paid RWB $93,727 as compensation under
the Plan.
AIM Distributors received commissions of $42,859 and $101,484 from sales of
shares of the Class A's capital stock transactions during the one month ended
October 31, 1996 and the period from June 3, 1996 through September 30, 1996,
respectively. Such commissions are not an expense of the Fund. They are deducted
from, and are not included in, the proceeds from sales of capital stock. During
the one month ended October 31, 1996 and the period from June 3, 1996 through
September 30, 1996, AIM Distributors did not receive contingent deferred sales
charges imposed on redemption of Fund Shares. Certain officers and directors of
the Company are officers and directors of AIM, AFS and AIM Distributors. During
the period October 1, 1995 through June 3, 1996, the BBC was advised that RWB
received $51,342 from investors representing commissions on sales of BBC shares
and no brokerage fees on the execution of purchases and sales of portfolio
securities were paid by the BBC.
During the one month ended October 31, 1996 and the period from June 3, 1996
through September 30, 1996, the Fund paid legal fees of $66 and $362,
respectively, for services rendered by Kramer, Levin, Naftalis & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank d/b/a Chemical Bank. The Fund
may borrow up to the lesser of (i) $325,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM which are
parties to the line of credit may borrow on a first come, first served basis.
Interest on borrowings under the line of credit is payable on maturity or
prepayment date. During the one month ended October 31, 1996 and the period from
July 19, 1996 through September 30, 1996, the Fund did not borrow under the line
of credit agreement. The funds which are party to the line of credit are charged
a commitment fee of 0.08% on the unused balance of the committed line. The
commitment fee is allocated among the funds based on their respective average
net assets for the period.
17
<PAGE> 20
Financials
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the one month ended October 31, 1996 were $18,525,377
and $10,284,796, respectively, and during the year ended September 30, 1996 were
$54,111,108 and $43,365,584, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis is as follows:
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
1996 1996
------------ --------------
<S> <C> <C>
Aggregate unrealized appreciation of investment securities $27,860,837 $ 27,738,465
- ----------------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (650,839) (738,956)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $27,209,998 $ 26,999,509
======================================================================================================================
</TABLE>
Costs of investments for tax purposes for the one month ended October 31,
1996 and the period from June 3, 1996 through September 30, 1996 are
$101,644,715 and $78,291,809, respectively.
NOTE 5-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 6-CAPITAL STOCK
Changes in capital stock outstanding during the one month ended October 31, 1996
and the years ended September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1996 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
---------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sold:
Class A 620,358 $16,142,093 1,504,902 $ 36,636,393 235,753 $ 4,808,974
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Class B* 313,256 8,163,778 -- -- -- --
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Issued as reinvestment of dividends:
Class A -- -- 178,537 4,200,245 43,313 809,149
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Reacquired:
Class A (165,098) (4,320,578) (513,296) (12,630,902) (414,147) (8,458,795)
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Class B* (2,577) (67,192) -- -- -- --
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
765,939 $19,918,101 1,170,143 $ 28,205,736 (135,081) $(2,840,672)
================================================== ====================== ======================== ======================
</TABLE>
* Class B shares commenced operations on October 1, 1996.
NOTE 7-OPEN FUTURES CONTRACTS
On October 31, 1996, $473,000, principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
On September 30, 1996, $195,000, principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION/
CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
------------- --------- ------------------ --------------
<S> <C> <C> <C> <C>
Open futures contracts at October 31, 1996: S&P 500 Index 34 March 97/Buy $ (29,818)
Open futures contracts at September 30, 1996: S&P 500 Index 14 March 97/Buy (22,050)
</TABLE>
18
<PAGE> 21
Financials
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the Class A shares during the one month ended October 31, 1996
and each of the years in the nine-year period ended September 30, 1996 and for a
share of capital stock outstanding of the Class B shares during the period
October 1, 1996 (date operations commenced) through October 31, 1996.
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
----------- -----------------------------------------------------------
CLASS A: 1996 1996(a) 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.56 $ 23.83 $ 19.22 $ 18.89 $ 18.24
- ------------------------------------------ --------- ---------- --------- --------- ---------
Income from investment operations:
Net investment income (0.00) 0.33 0.14 0.15 0.19
- ------------------------------------------ --------- ---------- --------- --------- ---------
Net realized and unrealized gains
(losses) on investments 0.52 4.61 5.05 1.24 0.63
- ------------------------------------------ --------- ---------- --------- --------- ---------
Total from investment operations 0.52 4.94 5.19 1.39 0.82
- ------------------------------------------ --------- ---------- --------- --------- ---------
Less distributions:
Dividends from net investment income -- (0.21) (0.12) (0.21) (0.17)
- ------------------------------------------ --------- ---------- --------- --------- ---------
Distributions from net realized gains -- (3.00) (0.46) (0.85) --
- ------------------------------------------ --------- ---------- --------- --------- ---------
Total distributions -- (3.21) (0.58) (1.06) (0.17)
- ------------------------------------------ --------- ---------- --------- --------- ---------
Net asset value, end of period 26.08 25.56 23.83 19.22 18.89
========================================== ========= ========== ========= ========= =========
Total return(b) 2.04% 22.39% 27.84% 7.69% 4.54%
========================================== ========= ========== ========= ========= =========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 120,448 $ 106,415 $ 71,324 $ 60,115 $ 65,112
========================================== ========= ========== ========= ========= =========
Ratio of expenses to average net assets 1.30%(c) 1.26%(d) 1.3% 1.4% 1.3%
========================================== ========= ========== ========= ========= =========
Ratio of net investment income to average
net assets 0.12%(c) 0.53%(d) 0.7% 0.8% 1.0%
========================================== ========= ========== ========= ========= =========
Portfolio turnover rate 10% 58% 17% 13% 25%
========================================== ========= ========== ========= ========= =========
Average Brokerage Commission Rate $ 0.0665 N/A N/A N/A N/A
========================================== ========= ========== ========= ========= =========
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------------------------
CLASS A: 1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.77 $ 13.60 $ 13.82 $ 11.48 $ 13.10
- ------------------------------------------ --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.20 0.23 0.25 0.24 0.12
- ------------------------------------------ --------- --------- --------- --------- ---------
Net realized and unrealized gains
(losses) on investments 1.48 3.19 (0.20) 2.25 (1.68)
- ------------------------------------------ --------- --------- --------- --------- ---------
Total from investment operations 1.68 3.42 0.05 2.49 (1.56)
- ------------------------------------------ --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.21) (0.25) (0.27) (0.15) (0.02)
- ------------------------------------------ --------- --------- --------- --------- ---------
Distributions from net realized gains -- -- -- -- (0.04)
- ------------------------------------------ --------- --------- --------- --------- ---------
Total distributions (0.21) (0.25) (0.27) (0.15) (0.06)
- ------------------------------------------ --------- --------- --------- --------- ---------
Net asset value, end of period 18.24 16.77 13.60 13.82 11.48
========================================== ========= ========= ========= ========= =========
Total return(b) 10.10% 25.52% 0.34% 21.98% (11.81)%
========================================== ========= ========= ========= ========= =========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 61,601 $ 46,958 $ 31,706 $ 21,170 $ 18,681
========================================== ========= ========= ========= ========= =========
Ratio of expenses to average net assets 1.4% 1.5% 1.6% 1.7% 2.2%
========================================== ========= ========= ========= ========= =========
Ratio of net investment income to average
net assets 1.2% 1.6% 2.0% 1.9% 3.3%
========================================== ========= ========= ========= ========= =========
Portfolio turnover rate 5% 9% 12% 15% 15%
========================================== ========= ========= ========= ========= =========
Average Brokerage Commission Rate N/A N/A N/A N/A N/A
========================================== ========= ========= ========= ========= =========
</TABLE>
(a) The Fund changed investment advisors on June 3, 1996.
(b) Does not deduct sales charges and periods for less than one year are not
annualized.
(c) Ratios are based on average net assets of $114,411,384. Ratios of expenses
and net investment income to average net assets prior to fee waivers are
1.37% and 0.05%, respectively.
(d) Ratios are based on average net assets of $77,923,118. Ratios of expenses
and net investment income to average net assets prior to fee waivers are
1.28% and 0.50%, respectively.
<TABLE>
<CAPTION>
OCTOBER 31,
CLASS B: 1996
-----------
<S> <C>
Net asset value, beginning of period $ 25.56
- --------------------------------------------- ---------
Income from investment operations:
Net investment income (0.01)
- --------------------------------------------- ---------
Net realized and unrealized gains (losses)
on investments 0.52
- --------------------------------------------- ---------
Total from investment operations 0.51
- --------------------------------------------- ---------
Net asset value, end of period 26.07
============================================= =========
Total return(a) 2.00%
============================================= =========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 8,101
============================================= =========
Ratio of expenses to average net assets 2.01% (b)
============================================= =========
Ratio of net investment income (loss) to
average net assets (0.58) (b)
============================================= =========
Portfolio turnover rate 10%
============================================= =========
Average Brokerage Commission Rate $ 0.0665
============================================= =========
</TABLE>
(a) Does not deduct sales charges and periods for less
than one year are not annualized.
(b) Ratios are annualized and based on average net assets
of $3,728,067. Ratios of expenses and net investment
income (loss) to average net assets prior to fee
waivers are 2.08% (annualized) and (0.65)%
(annualized), respectively.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an Agreement and Plan of Merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM Funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
19
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Blue Chip Fund:
We have audited the accompanying statements of assets and liabilities of the AIM
Blue Chip Fund (a portfolio of AIM Equity Funds, Inc.), including the schedule
of investments, as of October 31, 1996 and September 30, 1996, the related
statements of operations for the one-month period ended October 31, 1996 and the
year ended September 30, 1996, the statements of changes in net assets for the
one-month period ended October 31, 1996 and the year ended September 30, 1996
and the financial highlights for the one-month period ended October 31, 1996 and
the year ended September 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the years in the eight
year period ended September 30, 1995 and the period from December 31, 1986 (date
operations commenced) to September 30, 1987 were audited by other auditors whose
report thereon, dated October 25, 1995, expressed an unqualified opinion on
those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 and September 30, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Blue Chip Fund as of October 31, 1996 and September 30, 1996, the results of its
operations for the one-month period ended October 31, 1996 and the year ended
September 30, 1996, the changes in its net assets for the one-month period ended
October 31, 1996 and the year ended September 30, 1996 and the financial
highlights for the one-month period ended October 31, 1996 and the year ended
September 30, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
November 22, 1996
20
<PAGE> 23
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
ROBERT H. GRAHAM
BRUCE L. CROCKETT President INVESTMENT ADVISOR
Formerly Director, President, and Chief
Executive Officer JOHN J. ARTHUR A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 1919
OWEN DALY II GARY T. CRUM Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT
SCOTT G. LUCAS
CARL FRISCHLING Senior Vice President A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis & Frankel CAROL F. RELIHAN Houston, TX 77210-4739
Senior Vice President and Secretary
CUSTODIAN
ROBERT H. GRAHAM JONATHAN C. SCHOOLAR
President and Chief Operating Officer Senior Vice President State Street Bank and Trust Company
A I M Management Group Inc. 225 Franklin Street
MELVILLE B. COX Boston, MA 02110
JOHN F. KROEGER Vice President
Formerly Consultant COUNSEL TO THE FUND
Wendell & Stockel Associates, Inc. DANA R. SUTTON
Vice President and Assistant Treasurer Ballard Spahr
LEWIS F. PENNOCK Andrews & Ingersoll
Attorney P. MICHELLE GRACE 1735 Market Street
Assistant Secretary Philadelphia, PA 19103
IAN W. ROBINSON
Consultant; Formerly Executive DAVID L. KITE COUNSEL TO THE DIRECTORS
Vice President and Assistant Secretary
Chief Financial Officer Kramer, Levin, Naftalis & Frankel
Bell Atlantic Management NANCY L. MARTIN 919 Third
Services, Inc. Assistant Secretary New York, NY 10022
LOUIS S. SKLAR OFELIA M. MAYO DISTRIBUTOR
Executive Vice President Assistant Secretary
Hines Interests A I M Distributors, Inc.
Limited Partnership KATHLEEN J. PFLUEGER 11 Greenway Plaza
Assistant Secretary Suite 1919
Houston, TX 77046
SAMUEL D. SIRKO
Assistant Secretary AUDITORS
STEPHEN I. WINER KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
MARY J. BENSON Houston, TX 77002
Assistant Treasurer
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS --Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
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
[PHOTO OF 11 GREENWAY PLAZA HIGH CURRENT INCOME
APPEARS HERE] 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
AIM Management Group has provided leadership STABILITY, LIQUIDITY, AND
in the mutual fund industry since 1976 and CURRENT TAX-FREE INCOME
currently manages approximately $59 billion AIM Tax-Exempt Cash Fund
in assets for more than 3.5 million
shareholders, including individual investors, *AIM Aggressive Growth Fund was closed to new
corporate clients, and financial institutions. investors on July 18, 1995. For more complete
The AIM Family of Funds --Registered Trademark-- information about any AIM Fund(s), including
is distributed nationwide, and AIM today sales charges and expenses, ask your financial
ranks among the nation's top 15 mutual consultant or securities dealer for a free prospectus(es).
fund companies in assets under management, Please read the prospectus(es) carefully before you
according to Lipper Analytical Services, Inc. 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>
