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[APPLICATION INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS(R)
RETAIL CLASS OF AIM EQUITY FUNDS, INC.
AIM BLUE CHIP FUND
(Growth)
PROSPECTUS
JUNE 3, 1996
This Prospectus contains information about the AIM BLUE CHIP FUND ("BLUE CHIP"
or the "Fund"), one of six separate investment portfolios comprising series of
AIM Equity Funds, Inc. (the "Company"), an open-end, series, management
investment company.
The Fund is a diversified portfolio with an investment objective of long-term
growth of capital. Current income is a secondary objective. The Fund seeks to
achieve its investment objectives by investing primarily in common stocks,
convertible securities and bonds of Blue Chip companies (i.e., companies which
possess leading market characteristics and typically certain financial
characteristics).
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated June
3, 1996, has been filed with the United States Securities and Exchange
Commission ("SEC") and is incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to the
Company at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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PAGE PAGE
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SUMMARY.................................. 2 How to Purchase Shares................. A-1
THE FUND................................. 4 Terms and Conditions of Purchase of the
Table of Fees and Expenses............. 4 AIM Funds........................... A-2
Financial Highlights................... 5 Special Plans.......................... A-8
Performance............................ 6 Exchange Privilege..................... A-10
Investment Program..................... 6 How to Redeem Shares................... A-12
Management............................. 9 Determination of Net Asset Value....... A-15
Organization of the Company............ 11 Dividends, Distributions and Tax
INVESTOR'S GUIDE TO THE AIM FAMILY OF Matters............................. A-16
FUNDS(R)............................... A-1 General Information.................... A-18
Introduction to The AIM Family of APPLICATION INSTRUCTIONS................. B-1
Funds............................... A-1
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SUMMARY
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THE FUND
AIM Equity Funds, Inc. (the "Company") is a Maryland corporation organized as
an open-end, diversified, series, management investment company. Currently, the
Company offers six series comprising six separate investment portfolios, each of
which pursues unique investment objectives. This Prospectus relates only to BLUE
CHIP. The Fund's primary investment objective is long-term growth of capital.
Current income is a secondary objective. The Fund seeks to achieve its
investment objectives by investing primarily in common stocks, convertible
securities and bonds of Blue Chip companies (which AIM defines as companies
which possess leading market characteristics and typically certain financial
characteristics). While current income is a secondary objective, most of the
stocks in the Fund's portfolio are expected to pay dividends. There is no
assurance that the investment objective of the Fund will be achieved. For more
complete information on the Fund's investment policies, see "Investment
Program." The Fund may invest in futures, options and foreign securities.
Investments in these instruments involve certain risks, which are described in
detail under "Investment Program -- Certain Investment Strategies and Policies."
The Company also offers other classes of shares in five other investment
portfolios, AIM AGGRESSIVE GROWTH ("AGGRESSIVE GROWTH") FUND, AIM CAPITAL
DEVELOPMENT FUND ("CAPITAL DEVELOPMENT"), AIM CHARTER FUND ("CHARTER"), AIM
CONSTELLATION FUND ("CONSTELLATION") and AIM WEINGARTEN FUND ("WEINGARTEN")
(collectively, with BLUE CHIP, the "Funds"), each of which pursues unique
investment objectives. All of such other Funds (except AGGRESSIVE GROWTH and
CAPITAL DEVELOPMENT) offer multiple classes of shares to different types of
investors. The shares of the other Funds of the Company have different sales
charges and expenses, which may affect performance. To obtain information about
AGGRESSIVE GROWTH, CAPITAL DEVELOPMENT, CHARTER, CONSTELLATION or WEINGARTEN
call (800) 347-4246. See "General Information."
The assets of each Fund are invested in a separate portfolio. Each class of a
Fund shares a common investment objective and portfolio of investments. The
income from the investment portfolio of a Fund is allocated to each class of the
Fund based on the net assets of such class as of the close of business on the
previous business day, as adjusted for the current day's shareholder activity.
Each class bears proportionately those expenses, such as the advisory fee, that
are allocated to the Fund as a whole and bears separately certain expenses, such
as those associated with the distribution of the shares of such class.
Consequently, the amounts available for payment of dividends and the net asset
value per share of each class will vary. See "General Information."
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as the Fund's investment
advisor pursuant to a Master Advisory Agreement dated as of October 18, 1993, as
amended (the "Master Advisory Agreement"). AIM, together with its affiliates,
manages or advises 43 investment company portfolios (including the Fund). As of
May 1, 1996, the total assets of the investment company portfolios advised or
managed by AIM or its affiliates were approximately $51 billion. Under the
Master Advisory Agreement, AIM receives a fee for its services based on the
Fund's average daily net assets. Under a Master Administrative Services
Agreement dated as of October 18, 1993, as amended (the "Master Administrative
Services Agreement") between the Company and AIM, AIM may receive reimbursement
of its costs to perform certain accounting and other administrative services to
the Fund. Under a Transfer Agency and Service Agreement, as amended, A I M Fund
Services, Inc. ("AFS"), AIM's wholly-owned subsidiary and a registered transfer
agent, receives a fee for its provision of transfer agency, dividend
distribution and disbursement, and shareholder services to the Fund.
The total advisory fees paid by the Fund are higher than those paid by many
other investment companies of all sizes and investment objectives.
PURCHASING SHARES. Class A shares of the Fund are offered by this Prospectus
at net asset value plus a sales charge of 5.50% of the public offering price
(5.82% of the net amount invested). The sales charge is reduced on purchases of
$25,000 or more. Initial investments must be at least $500 and additional
investments must be at least $50. The minimum initial investment is modified for
investments through tax-qualified retirement plans and accounts initially
established with an Automatic Investment Plan. The distrib-
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utor of the Fund's shares is A I M Distributors, Inc. ("AIM Distributors"), P.O.
Box 4739, Houston, Texas 77210-4739, a wholly-owned subsidiary of AIM. See "How
to Purchase Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds"). Shares of the Fund may
be exchanged for shares of other funds in The AIM Family of Funds in the manner
and subject to the policies and charges set forth herein. See "Exchange
Privilege."
REDEEMING SHARES. Shareholders may redeem all or a portion of their shares at
their net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1.00% may apply to certain redemptions where
a purchase of more than $1 million is made at net asset value. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund makes distributions of
realized capital gains, if any, on an annual basis. Dividends and distributions
of the Fund may be reinvested at net asset value without payment of a sales
charge in the Fund's shares or may be invested in shares of the other funds in
The AIM Family of Funds. See "Dividends, Distributions and Tax Matters" and
"Special Plans."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos is a service mark of A I M Management
Group Inc.
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THE FUND
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The Company was organized in 1988 as a Maryland corporation, and is registered
with the SEC as a diversified, open-end, series management investment company.
The Fund is a series of the Company comprising a separate investment portfolio
that acquired the investment portfolio of Baird Blue Chip Fund, Inc. (the "BBC
Fund"), a registered, diversified, management investment company, on June 3,
1996 in a transaction involving a reorganization of the BBC Fund (the
"Reorganization").
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Fund understand the
various costs that an investor will bear, both directly and indirectly. The
annual fund operating expenses set forth in the table have been restated for the
current fiscal year using the current fees that would have been applicable had
they been in effect during the previous fiscal year and are based upon the
assumption that the value of the assets acquired by the Fund at the closing of
the Reorganization is the same as the net asset value of the BBC Fund on
September 30, 1995.
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Shareholder Transaction (Class A)
Maximum sales load imposed on purchase of shares (as a percentage of offering
price)..................................................................... 5.50%(1)
Maximum sales load imposed on reinvested dividends and distributions.......... None
Deferred sales load(2)........................................................ None
Redemption fees............................................................... None
Exchange fee(3)............................................................... None
Annual Fund Operating Expenses (Class A) (as a percentage of average net assets)
(after fee waivers)
Management fee (after fee waiver)(4).......................................... .68%
12b-1 fees(5)................................................................. .35%
Other Expenses:
Administration fees........................................................ .05%
All other expenses......................................................... .23%
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Total fund operating expenses (after fee waivers)............................... 1.31%
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(1) The rules of the Commission require that the maximum sales charge be
reflected in the table even though certain investors may qualify for reduced
sales charges. See "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions" below for more information
about applicable sales charges.
(2) Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months after such purchases were made. See the
Investor's Guide, under the caption "How to Redeem Shares -- Contingent
Deferred Sales Charge Program for Large Purchases."
(3) No fee is charged for exchanges among The AIM Family of Funds; however, a $5
service fee will be charged for exchanges by market timers.
(4) AIM has agreed to waive fees for two years to the extent necessary to keep
the expense ratio at 1.31%. Without such waiver the "Management fees" would
be 0.75% per annum, and Total fund operating expenses would be 1.38%.
(5) As a result of 12b-1 fees, a long-term shareholder may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
rules of the National Association of Securities Dealers, Inc. Given the Rule
12b-1 fee of the Fund, however, AIM estimates that it would take a
substantial number of years for a shareholder to exceed such maximum
front-end sales charges.
EXAMPLES. An investor would pay the following expenses on a $1,000 investment,
assuming (a) a 5% annual return and (b) redemption at the end of each time
period:
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1 year............................................................................ $68
3 years........................................................................... $94
5 years........................................................................... $123
10 years........................................................................... $204
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The above examples assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of $1 million or more, which are made at
net asset value and subject to a contingent deferred sales charge for 18 months
following purchase.
THE ABOVE EXAMPLE IS BASED UPON RESTATED EXPENSES FOR THE CURRENT FISCAL YEAR
AND SHOULD NOT BE CONSIDERED REPRESENTATIVE OF ACTUAL OR FUTURE EXPENSES, WHICH
MAY BE GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLE ASSUMES
A 5% ANNUAL RETURN, ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN THAT IS GREATER OR LESS THAN 5%. THE EXAMPLE ASSUMES REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS AND THAT THE PERCENTAGE AMOUNTS FOR TOTAL FUND
OPERATING EXPENSES REMAIN THE SAME FOR EACH YEAR.
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FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP,
independent accountants, whose unqualified report thereon is included in the
Statement of Additional Information. The Financial Highlights should be read in
conjunction with the financial statements and notes thereto also included in the
Statement of Additional Information. On June 3, 1996, the Fund acquired the
investment portfolio of the BBC Fund in connection with the Reorganization. All
historical financial information contained in this prospectus for periods prior
to June 3, 1996 relating to Blue Chip is that of the BBC Fund, which was advised
during that period by Robert W. Baird & Co. Incorporated.
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YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87(1)
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Net asset value,
beginning of period..... $19.22 $18.89 $18.24 $16.77 $13.60 $13.82 $11.48 $13.10 $10.00
Income from investment
operations:
Net investment income... 0.14 0.15 0.19 0.20 0.23 0.25 0.24 0.12 0.01
Net gains (losses) on
securities (both
realized and
unrealized)........... 5.05 1.24 0.63 1.48 3.19 (0.20) 2.25 (1.68) 3.09
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............ 5.19 1.39 0.82 1.68 3.42 0.05 2.49 (1.56) 3.10
Less distributions:
Dividends from net
investment income..... (0.12) (0.21) (0.17) (0.21) (0.25) (0.27) (0.15) (0.02) --
Distributions from net
realized gains........ (0.46) (0.85) -- -- -- -- -- (0.04) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions..... (0.58) (1.06) (0.17) (0.21) (0.25) (0.27) (0.15) (0.06) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period.................. $23.83 $19.22 $18.89 $18.24 $16.77 $13.60 $13.82 $11.48 $13.10
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Total return(3).......... 27.8% 7.7% 4.5% 10.1% 25.5% 0.3% 22.0% (11.8%) 13.5%(2)
Ratios/supplemental data:
Net assets, end of
period(4)............. 71,324 60,115 65,112 61,601 46,958 31,706 21,170 18,681 16,917
Ratio of expenses to
average net assets(5).. 1.3% 1.4% 1.3% 1.4% 1.5% 1.6% 1.7% 2.2% 2.6%(2)
Ratio of net investment
income to average net
assets................ 0.7% 0.8% 1.0% 1.2% 1.6% 2.0% 1.9% 3.3% 0.2%(2)
Portfolio turnover
rate.................. 16.7% 12.7% 24.9% 5.4% 8.8% 12.2% 14.8% 14.8% 9.0%
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(1) For the period from December 31, 1986 (commencement of operations) to
September 30, 1987.
(2) Annualized.
(3) Total return does not include the sales load.
(4) Numbers in thousands.
(5) Includes a maximum, .75% distribution fee from December 31, 1986 through
September 30, 1988 and a maximum .45% distribution fee beginning October 1,
1988.
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PERFORMANCE
The Fund's performance may be quoted in advertising in terms of yield or total
return. All advertisements of the Fund will disclose the maximum sales charge
imposed on purchases of the Fund's shares. If any advertised performance data
does not reflect the maximum sales charge, if any, such advertisement will
disclose that the sales charge has not been deducted in computing the
performance data, and that, if reflected, the maximum sales charge would reduce
the performance quoted. See the Statement of Additional Information for further
details concerning performance comparisons used in advertisements by the Fund.
Total return shows the overall value, including changes in share price and
assuming all the dividends and capital gain distributions are reinvested and
that all charges and expenses are deducted. A cumulative total return reflects
the Fund's performance over a stated period of time. An average annual total
return reflects the hypothetical annually compounded return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gain or loss.
Yield is computed in accordance with a standardized formula described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield is a function of the
type and quality of investments, the maturity and the operating expense ratio of
the Fund.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such a practice will
have the effect of increasing the Fund's total return. The performance will vary
from time to time and past results are not necessarily indicative of future
results. Performance is a function of AIM's portfolio management in selecting
the type and quality of portfolio securities and is affected by operating
expenses of the Fund and market conditions. A shareholder's investment is not
insured or guaranteed. These factors should be carefully considered by the
investor before making an investment.
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INVESTMENT PROGRAM
The Company has six series, each of which is a separate investment
portfolio -- AGGRESSIVE GROWTH, BLUE CHIP, CAPITAL DEVELOPMENT, CHARTER,
CONSTELLATION and WEINGARTEN. AGGRESSIVE GROWTH, CAPITAL DEVELOPMENT, CHARTER,
CONSTELLATION and WEINGARTEN are offered to investors pursuant to separate
prospectuses.
The Fund may invest, for temporary or defensive purposes, all or a substantial
portion of its assets in investment grade (high quality) corporate bonds,
commercial paper or United States Government obligations. In addition, a portion
of the Fund's assets may be held, from time to time, in cash, repurchase
agreements or other short-term debt securities, when such positions are deemed
advisable in light of economic or market conditions.
Blue Chip's primary investment objective is to provide long-term growth of
capital. Current income is a secondary objective. It is anticipated that the
major portion of Blue Chip's portfolio will ordinarily be invested in common
stocks, convertible securities and bonds of Blue Chip companies (i.e., companies
with leading market positions and which possess strong financial
characteristics, as described below). While current income is a secondary
objective, most of the stocks in the Fund's portfolio are expected to pay
dividends. There can, of course, be no assurance that the Fund will in fact
achieve its objectives since all investments are inherently subject to market
risks.
Blue Chip will invest primarily (at least 65% of its total assets) in the
common stocks of Blue Chip companies as determined by AIM. These companies will
have the potential for above-average growth in earnings or be well established
in their respective industries. The Fund will generally invest in large and
medium sized companies (i.e., companies which fall in the largest 85% of market
capitalization of publicly traded companies listed in the United States) which
possess the following characteristics:
o MARKET CHARACTERISTICS
Blue Chip companies are those which occupy (or in AIM's judgment have the
potential to occupy) leading market positions that are expected to be
maintained or enhanced over time. Strong market positions, particularly in
growing industries, can give a company pricing flexibility as well as the
potential for strong unit sales. These factors can in turn lead to higher
earnings growth and greater share price appreciation. Market leaders can be
identified within an industry as those companies which have:
-- superior growth prospects compared with other companies in the same
industry;
-- possession of proprietary technology with the potential to bring about
major changes within an industry; and/or
-- leading sales within an industry, or the potential to become a market
leader.
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- FINANCIAL CHARACTERISTICS
A Blue Chip company possesses at least one of the following attributes:
-- faster earnings growth than its competitors and the market in general;
-- higher profit margins relative to its competitors;
-- strong cash flow relative to its competitors; and/or
-- a balance sheet with relatively low debt and a high return on equity
relative to its competitors.
The Fund will diversify among industries and therefore will not invest 25% or
more of its total assets in any one industry. Under normal market conditions,
Blue Chip's portfolio will be diversified among industries in a manner similar
to the industry diversification of broad market indices.
When AIM believes securities other than common stocks offer opportunity for
long-term growth of capital and income, the Fund may invest in United States
government securities, corporate bonds and debentures and convertible preferred
stocks and debt securities. The Fund will invest only in debt securities (other
than convertible debt securities) which are rated as "Investment Grade" by
either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's"). Debt securities in the lowest investment grade (e.g., rated BBB by
S&P or Baa by Moody's) have speculative characteristics and changes in economic
conditions and other circumstances are more likely to lead to a weakened
capacity on the part of the issuer to make principal and interest payments than
is the case with higher grade bonds. The Fund will limit its investments in
convertible securities to those in which the underlying common stock is a
suitable investment for the Fund without regard to debt rating category, but
will not invest more than 10% of its total assets in convertible securities. The
Fund may invest in United States government securities and corporate bonds and
debentures when AIM believes interest rates on such investments may decline
thereby potentially increasing the market value of such securities or to meet
the additional investment objective of producing current income. Under normal
market conditions, the Fund expects at all times to have at least 80% of its
total assets invested in securities which AIM believes offer opportunity for
long-term growth of capital or income.
The Fund may invest up to 25% of total assets in securities of issuers
domiciled in foreign countries and engage in the purchase and sale of put and
call options in an amount up to 25% of its net assets. For the risks involved in
investing in foreign securities, see "Risk Factors Regarding Foreign Securities"
below. The Fund may invest up to 10% of its total assets in securities of other
investment companies.
The investment objectives of the Fund are fundamental policies of the Fund and
cannot be changed without the consent of the holders of a majority of the Fund's
outstanding shares. The Board of Directors of the Company reserves the right to
change any of the investment policies, strategies or practices of the Fund, as
described in this Prospectus and in the Statement of Additional Information,
without shareholder approval, except in those instances where shareholder
approval is expressly required.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of its objectives and
policies, the Fund may employ one or more of the following strategies in order
to enhance investment results:
TEMPORARY DEFENSIVE MEASURES. The Fund has adopted a temporary defensive
policy which permits it to invest without limitation in short-term instruments,
such as Treasury bills and other U.S. Government and governmental agency
securities, bank obligations, commercial paper and repurchase agreements with a
maturity of one year or less, as a temporary defensive measure during abnormal
market or economic conditions when the Fund's investment adviser deems it
appropriate. The Fund may also invest in short-term instruments as a reserve for
expenses or anticipated redemptions, as necessary, to the extent permitted by
its fundamental and non-fundamental investment policies. To the extent that the
Fund invests to a significant degree in these instruments, its ability to
achieve its investment objectives may be adversely affected.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement is an instrument under which the Fund acquires ownership of
a debt security and the seller agrees, at the time of the sale, to repurchase
the obligation at a mutually agreed upon time and price, thereby determining the
yield during the Fund's holding period. With regard to repurchase transactions,
in the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (a) a possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto; (b) possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights. Repurchase
agreements are not included in the Fund's restrictions on lending.
STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may purchase and
sell stock index futures contracts and may also purchase options on stock index
futures as a hedge against changes in market conditions. A stock index futures
contract is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar or other currency
amount times the difference between the stock index value at the close of the
last trading day of the contract and the price at which the futures contract is
originally struck. No physical delivery of the underlying stocks in the index is
made. The Fund will only
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enter into futures contracts, or purchase options thereon, in order to hedge the
value of its portfolio against changes in market conditions. Generally, the Fund
may elect to close a position in a futures contract by taking an opposite
position which will operate to terminate the Fund's position in the futures
contract. See the Statement of Additional Information for a description of the
Fund's investments in futures contracts and options on futures contracts,
including certain related risks. The Fund may purchase or sell futures contracts
or purchase related options if, immediately thereafter, the sum of the amount of
margin deposits and premiums on open positions with respect to futures contracts
and related options would not exceed 5% of the market value of the Fund's total
assets.
OPTION CONTRACTS. The Fund may write (sell) covered call options, purchase
covered put options and may engage in strategies employing combinations of
covered put and call options. The purpose of such transactions is to hedge
against changes in the market value of the Fund's portfolio securities caused by
fluctuating interest rates, fluctuating currency exchange rates and changing
market conditions, and to close out or offset existing positions in such options
or futures contracts as described below. The Fund will not engage in such
transactions for speculative purposes.
All covered call and put options must remain covered as long as the option is
open. A call option is "covered" if the Fund owns the underlying security
covered by the call and a put option is "covered" if the Fund has segregated
cash or other liquid assets in an amount at least equal to the market value of
the option. If an option expires unexercised, the writer realizes a gain in the
amount of the premium received. If the option is exercised, a gain or loss will
be recognized from the sale or purchase of the underlying security depending
upon the relationship between the market price and strike price of the security.
Prior to its expiration, an option may be closed out by means of a purchase of
an offsetting option.
Options are subject to certain risks, including the risk of imperfect
correlation between the option and the Fund's other investments and the risk
that there might not be a liquid secondary market for the option when the Fund
seeks to hedge against adverse market movements. In general, options whose
strike prices are close to their underlying securities' current values will have
the highest trading value, while options whose strike prices are further away
may be less liquid. The liquidity of options may also be affected if options
exchanges impose trading halts, particularly when markets are volatile.
The investment policies of the Fund permit the use of options on securities
comprising no more than 25% of the value of the Fund's net assets. The Fund's
policies with respect to the use of options may be changed by the Company's
Board of Directors without shareholder approval.
ILLIQUID SECURITIES. The Fund will not invest more than 15% of its net assets
in illiquid securities, including repurchase agreements with maturities in
excess of seven days.
RULE 144A SECURITIES. The Fund may invest in securities that are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933 (the "1933 Act"). Although securities which may be resold
only to "qualified institutional buyers" in accordance with the provisions of
Rule 144A under the 1933 Act are unregistered securities, the Fund may purchase
Rule 144A securities without regard to the limitation on investments in illiquid
securities described above under "Illiquid Securities," provided that a
determination is made that such securities have a readily available trading
market. AIM will determine the liquidity of Rule 144A securities under the
supervision of the Company's Board of Directors, taking into account such
factors as: (1) the frequency of trades and quotes for the security; (2) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security; and (4) the nature of the security and the nature of the marketplace
trades. The liquidity of Rule 144A securities will be monitored by AIM and, if
as a result of changed conditions, it is determined that a Rule 144A security is
no longer liquid, the Fund's holdings of illiquid securities will be reviewed to
determine what, if any, action is required to assure that the Fund does not
exceed its applicable percentage limitation for investments in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the level of Fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets in
foreign securities which may be payable in U.S. or foreign currencies and
publicly traded in the United States or abroad. For purposes of computing such
limitation, American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs") and other securities representing underlying securities of foreign
issuers are treated as foreign securities. These securities will be marketable
equity securities (including common and preferred stock, depositary receipts for
stock and fixed income or equity securities exchangeable for or convertible into
stock) of foreign companies which, with their predecessors, have been in
continuous operation for three years or more and which generally are listed on a
recognized securities exchange or traded in an over-the-counter market.
FOREIGN EXCHANGE TRANSACTIONS. The Fund has authority to deal in foreign
exchange between currencies of the different countries in which it will invest
for the settlement of transactions.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by the Fund in foreign
securities, whether denominated in U.S. currencies or foreign currencies, may
entail all of the risks set forth below. Investments in ADRs, EDRs or similar
securities also may entail some or all of the risks as set forth below.
8
<PAGE> 9
Currency Risk. The value of the Fund's foreign investments will be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
decreases when the value of the U.S. dollar rises against the foreign currency
in which the security is denominated, and increases when the value of the U.S.
dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which
the Fund may invest are not as developed as the United States economy and may be
subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation, and limitations on the removal of funds
or other assets could also adversely affect the value of the Fund's investments.
Regulatory Risk. Foreign companies are not registered with the SEC and are
generally not subject to the regulatory controls imposed on the United States
issuers and, as a consequence, there is generally less publicly available
information about foreign securities than is available about domestic
securities. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Income from foreign securities owned by
the Fund may be reduced by a withholding tax at the source, which tax would
reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which the Fund
invests have substantially less trading volume than the major United States
markets. As a result, the securities of some foreign companies may be less
liquid and experience more price volatility than comparable domestic securities.
Increased custodian costs as well as administrative costs (such as the need to
use foreign custodians) may be associated with the maintenance of assets in
foreign jurisdictions. There is generally less government regulation and
supervision of foreign stock exchanges, brokers and issuers which may make it
difficult to enforce contractual obligations. In addition, transaction costs in
foreign securities markets are likely to be higher, since brokerage commission
rates in foreign countries are likely to be higher than in the United States.
Emerging Markets. Foreign securities purchased by the Fund may be issued by
foreign companies located in developing countries in various regions of the
world. A "developing country" is a country in the initial stages of its
industrial cycle. As compared to investment in the securities markets of
developed countries, investment in the securities markets of developing
countries involves exposure to markets that may have substantially less trading
volume and greater price volatility, economic structures that are less diverse
and mature, and political systems that may be less stable.
PORTFOLIO TURNOVER. Any particular security will be sold, and the proceeds
reinvested, whenever such action is deemed prudent from the viewpoint of the
Fund's investment objectives, regardless of the holding period of that security.
The estimated portfolio turnover rate for the Fund is less than 100%. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gains may increase.
Reference is made to the Statement of Additional Information for additional
descriptions of the Fund's investment policies and the risks associated with the
permitted investments of the Fund.
The investment policies stated above are not fundamental policies of the Fund
and may be changed by the Board of Directors of the Company without shareholder
approval. Shareholders will be notified before any material change in the
investment policies stated above become effective.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment
restrictions, including the following:
BORROWING. The Fund may borrow money to a limited extent from banks (including
the Fund's custodian bank) for temporary or emergency purposes. The Fund may
borrow amounts from banks up to 10% of the value of its total assets, including
the proceeds of such borrowing, and may secure such borrowings by pledging up to
20% of the value of its total assets.
The foregoing investment restriction is a matter of fundamental policy and may
not be changed without shareholder approval. For additional investment
restrictions applicable to the Fund, see the Statement of Additional
Information.
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Fund is vested with
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company and persons or companies furnishing
services to the Fund, including the Master Advisory Agreement with AIM, the
Master Administrative Service Agreement with AIM, the Master Distribution
Agreement with AIM Distributors as the distributor of the shares of the Fund,
the Custodian Agreement with State Street Bank and Trust Company as custodian
and the Transfer Agency and Service Agreement with AFS as transfer agent. The
day-to-day operations of the Fund are delegated to its officers and to AIM,
subject always to the objectives and policies of the Fund and to the general
supervision of the Company's Board of Directors. Certain directors and officers
of the Company are affiliated with AIM and A I M Management Group Inc. ("AIM
Management"), the parent of AIM. AIM Management is a holding company engaged in
the financial services business. Information concerning the Board of Directors
of the Company may be found in the Statement of Additional Information.
9
<PAGE> 10
INVESTMENT ADVISOR. AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173, serves as the investment advisor to the Fund pursuant to the Master
Advisory Agreement. AIM was organized in 1976, and, together with its
affiliates, advises or manages 43 investment company portfolios (including the
Fund). As of May 1, 1996, the total assets of the investment company portfolios
advised or managed by AIM and its affiliates were approximately $51 billion. AIM
is a wholly-owned subsidiary of AIM Management.
Under the terms of the Master Advisory Agreement, AIM supervises all aspects
of the Fund's operations and provides investment advisory services to the Fund.
AIM obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Fund. AIM will not be liable
to the Fund or its shareholders except in the case of AIM's willful misfeasance,
bad faith, gross negligence or reckless disregard of duty; provided, however,
that AIM may be liable for certain breaches of duty under the 1940 Act.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the directors, AIM may
take into account sales of shares of the Fund and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf of the Fund.
Prior to the Reorganization, Robert W. Baird & Co. Incorporated ("Baird")
served as the investment advisor to the BBC Fund. Baird is an indirect
partially-owned subsidiary of The Northwestern Mutual Life Insurance Company and
is controlled by such firm. Baird is a securities broker-dealer and investment
adviser providing brokerage, research, investment banking and investment
advisory services to individuals, trusts, estates, corporations and other
institutional clients. Baird received a fee from the BBC Fund for the investment
advisory services it provided in an amount equal to 0.74% of the average daily
net assets of the BBC Fund.
ADMINISTRATOR. The Company has entered into the Master Administrative Services
Agreement with AIM pursuant to which AIM has agreed to provide or arrange for
the provision of certain accounting and other administrative services to the
Fund, including the services of a principal financial officer and related staff.
As compensation to AIM for its services under the Master Administrative Services
Agreement, the Fund reimburses AIM for expenses incurred by AIM or its
affiliates in connection with such services.
Prior to the Reorganization, Fiduciary Management, Inc. ("FMI") provided such
administrative services to the BBC Fund. In return for such services, FMI
received a fee from the BBC Fund in an amount equal to 0.1% per annum of the
first $30 million of its daily net assets and 0.05% per annum on the daily net
assets over $30 million.
FEE WAIVERS. AIM may in its discretion, from time to time, agree to
voluntarily waive all or any portion of its advisory fee and/or assume certain
expenses of the Fund but will retain its ability to be reimbursed prior to the
end of the fiscal year.
ADVISORY FEES. As compensation for its services AIM is entitled to receive an
investment advisory fee in an amount equal to 0.75% of the first $350 million
the Fund's average daily net assets and 0.625% of its average daily net assets
over $350 million. AIM is also entitled to receive reimbursement of
administrative services costs incurred on behalf of the Fund.
DISTRIBUTOR. The Company has entered into a Master Distribution Agreement,
dated as of October 18, 1993, as amended, on behalf of Class A shares of the
Fund (the "Distribution Agreement") with AIM Distributors, a registered
broker-dealer and a wholly-owned subsidiary of AIM, to act as the distributor of
the shares of the Fund. The address of AIM Distributors is 11 Greenway Plaza,
Suite 1919, Houston, TX 77046-1173. Certain directors and officers of the
Company are affiliated with AIM Distributors.
The Distribution Agreement provides that AIM Distributors has the exclusive
right to distribute Class A shares of the Fund through affiliated broker-dealers
and through other broker-dealers with whom AIM Distributors has entered into
selected dealer agreements.
DISTRIBUTION PLAN. The Company has adopted a Master Distribution Plan
applicable to Class A shares of the Fund (the "Class A Plan") pursuant to Rule
12b-1 under the 1940 Act. Under the Class A Plan, the Company may compensate AIM
Distributors an aggregate amount of 0.35% of the average daily net assets of the
Fund on an annualized basis for the purpose of financing any activity that is
intended to result in the sale of shares of the Fund. The Class A Plan is
designed to compensate AIM Distributors, on a quarterly basis, for certain
promotional and other sales-related costs, and to implement a dealer incentive
program which provides for periodic payments to selected dealers who furnish
continuing personal shareholder services to their customers who purchase and own
shares of the Fund. In addition, certain banks who have entered into a Bank
Shareholder Service Agreement and who sells shares of the Fund on an agency
basis, may receive payments pursuant to the Class A Plan. Administrators of
retirement plans may also be paid fees to offset costs of services. The Company
will obtain a representation from financial institutions that they will be
licensed as dealers as required under applicable state law, or that they will
not engage in activities which would constitute acting as a "dealer" as defined
under applicable state law. Activities appropriate for financing under the Class
A Plan include, but are not limited to, the following: preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; overhead of AIM Distributors; printing
of prospectuses and statements of additional information (and supplements
thereto) and reports for other than existing shareholders; supplemental payments
to dealers under a dealer incentive program; and costs of administering the
Class A Plan. The fees payable to selected dealers, banks and retirement plan
administrators who participate in the program are calculated at the annual rate
of 0.25% of the average daily net asset value of the Fund's shares that are held
in such institution's customers' accounts which were purchased on or after a
prescribed date set forth in the Class A Plan.
The Class A Plan became effective on September 5, 1991, and was most recently
amended on December 5, 1995. The Class A Plan conforms to the amended rules of
the National Association of Securities Dealers, Inc., by providing that, of the
aggregate amount payable under the Class A Plan, payments to dealers and other
financial institutions that provide continuing personal shareholder
10
<PAGE> 11
services to their customers who purchase and own shares of the Fund, in amounts
of up to 0.25% of the average net assets of the Fund attributable to the
customers of such dealers or financial institutions may be characterized as a
service fee, and that payments to dealers and other financial institutions in
excess of such amount and payments to AIM Distributors would be characterized as
an asset-based sales charge pursuant to the Class A Plan. The Class A Plan also
imposes a cap on the total amount of sales charges, including asset-based sales
charges, that may be paid by the Company with respect to the Fund. The Class A
Plan does not obligate the Fund to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Class A Plan on behalf of the Fund. Thus, under the Class A Plan, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Fund will not be obligated to pay more than
that fee. If AIM Distributors' expenses are less than the fee it receives, AIM
Distributors will retain the full amount of the fee. Payments pursuant to the
Plans are subject to any applicable limitations imposed by rules of the National
Association of Securities Dealers, Inc.
Under the Class A Plan, AIM Distributors may in its discretion from time to
time agree to waive voluntarily all or any portion of its fee, while retaining
its ability to be reimbursed for such fee prior to the end of each fiscal year.
The Plan may be terminated at any time by a vote of the majority of those
directors who are not "interested persons" of the Company or by a vote of the
majority of the outstanding shares of the Fund.
PORTFOLIO MANAGERS
AIM uses a team approach and a disciplined investment process in providing
investment advisory services to all of its accounts, including the Funds. AIM's
investment staff consists of 85 individuals. While individual members of AIM's
investment staff are assigned primary responsibility for the day-to-day
management of each of AIM's accounts, all accounts are reviewed on a regular
basis by AIM's Investment Policy Committee to ensure that they are being
invested in accordance with the account's and AIM's investment policies. The
individuals who are primarily responsible for the day-to-day management of the
Funds and their titles, if any, with AIM or its affiliates and the Fund, the
length of time they have been responsible for the management, and their years of
investment experience and prior experience (if they have been with AIM for less
than five years) are shown below.
Jonathan C. Schoolar and Joel E. Dobberpuhl are primarily responsible for the
day-to-day management of Blue Chip. Mr. Schoolar is Senior Vice President and
Director of A I M Capital Management, Inc. ("AIM Capital"), a wholly-owned
subsidiary of AIM, Vice President of AIM and Senior Vice President of the
Company and has been responsible for the Fund since 1996. He has been associated
with AIM and/or its affiliates since 1986 and has twelve years of experience as
an investment professional. Mr. Dobberpuhl is Vice President of AIM Capital and
has been responsible for the Fund since 1996. He has been associated with AIM
and/or its affiliates since 1990 and has seven years of experience as an
investment professional.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was organized in 1988 as a Maryland corporation, and is registered
with the Commission as a diversified, open-end, series, management investment
company. The Company currently consists of six separate portfolios: CHARTER and
WEINGARTEN, each of which has retail classes of shares consisting of Class A and
Class B shares and an Institutional Class; CONSTELLATION, which has a retail
class of Class A shares and an Institutional Class; and AGGRESSIVE GROWTH, BLUE
CHIP and CAPITAL DEVELOPMENT, which have a retail class of shares consisting
Class A shares. The Fund acquired the investment portfolio of the BBC Fund on
June 3, 1996 in the Reorganization.
The authorized capital stock of the Company consists of 7,000,000,000 shares
of common stock with a par value of $.001 per share, of which 750,000,000 shares
are classified Class A Shares of each investment portfolio, 750,000,000 shares
are classified Class B Shares of each of CHARTER and WEINGARTEN, 200,000,000
shares are classified Institutional Shares of each of CHARTER, WEINGARTEN and
CONSTELLATION, and the balance of which are unclassified. Each class of shares
of the same Fund represent interests in that Fund's assets and have identical
voting, dividend, liquidation and other rights on the same terms and conditions,
except that each class of shares bears differing class-specific expenses, is
subject to differing sales loads, conversion features and exchange privileges,
and has exclusive voting rights on matters pertaining to the distribution plan
for that class.
Except as specifically noted above, shareholders of each Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the different classes of shares,
where applicable, of a Fund. However, on matters affecting one portfolio of the
Company or one class of shares, a separate vote of shareholders of that
portfolio or class is required. Shareholders of a portfolio or class are not
entitled to vote on any matter which does not affect that portfolio or class but
which requires a separate vote of another portfolio or class. An example of a
matter which would be voted on separately by shareholders of a portfolio is the
approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares of a Fund, there are no conversion rights. Shares do not have cumulative
voting rights, which means that in situations in which shareholders elect
directors, holders of more than 50% of the shares voting for the election of
directors can elect all of the directors of the Company, and the holders of less
than 50% of the shares voting for the election of directors will not be able to
elect any directors.
11
<PAGE> 12
A Fund shareholder is entitled to such dividends payable out of the net assets
of the Fund as may be declared by the Board of Directors of the Company. In the
event of liquidation or dissolution of the Company, the holders of shares of the
Fund will be entitled to receive pro rata, subject to the rights of creditors,
the net assets of the Fund. Fractional shares of the Fund have the same rights
as full shares to the extent of their proportionate interest.
Under Maryland law and the Company's By-Laws, the Company need not hold an
annual meeting of shareholders unless a meeting is required under the 1940 Act
to elect directors. Shareholders may remove directors from office, and a meeting
of shareholders may be called at the request of the holders of 10% or more of
the Company's outstanding shares.
12
<PAGE> 13
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 a.m. TO 5:30 p.m. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS(R)
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM AGGRESSIVE GROWTH FUND AIM HIGH YIELD FUND
AIM BALANCED FUND AIM INCOME FUND
AIM BLUE CHIP FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM CAPITAL DEVELOPMENT FUND AIM INTERNATIONAL EQUITY FUND
AIM CHARTER FUND AIM LIMITED MATURITY TREASURY SHARES
AIM CONSTELLATION FUND AIM MONEY MARKET FUND*
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM MUNICIPAL BOND FUND
AIM GLOBAL GROWTH FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL INCOME FUND AIM TAX-EXEMPT CASH FUND*
AIM GLOBAL UTILITIES FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GROWTH FUND AIM VALUE FUND
AIM WEINGARTEN FUND
</TABLE>
* Shares of AIM TAX-EXEMPT CASH FUND, and Class C shares of AIM MONEY MARKET
FUND, are offered to investors at net asset value, without payment of a sales
charge, as described below. Other funds, including the Class A and Class B
shares of AIM MONEY MARKET FUND, are sold with an initial sales charge or
subject to a contingent deferred sales charge upon redemption, as described
below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Account ("IRA") is $250. There are no
minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 403(b) plans or 457 (state deferred compensation)
plans (except that the minimum initial investment for salary deferrals for such
plans is $25), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM Funds account.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
MCF 05/96
A-1
<PAGE> 14
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: AIM Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM AGGRESSIVE GROWTH FUND, AIM BALANCED FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND,
AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY
MARKET FUND, AIM MUNICIPAL BOND FUND, AIM VALUE FUND and AIM WEINGARTEN FUND
(other than AIM AGGRESSIVE GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, and AIM CONSTELLATION FUND, collectively, the "Multiple Class
Funds") may be purchased at their respective net asset value plus a sales charge
as indicated below, except that shares of AIM TAX-EXEMPT CASH FUND and Class C
shares (the "Class C shares") of AIM MONEY MARKET FUND are sold without a sales
charge and Class B shares (the "Class B shares") of the Multiple Class Funds are
sold at net asset value subject to a contingent deferred sales charge payable
upon certain redemptions. These contingent deferred sales charges are described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Securities dealers and other persons entitled to receive compensation for
selling or servicing shares of a Multiple Class Fund may receive different
compensation for selling or servicing one particular class of shares over
another class in the same Multiple Class Fund. Factors an investor should
consider prior to purchasing Class A or Class B shares (or, if applicable, Class
C shares) of a Multiple Class Fund are described below under "Special
Information Relating to Multiple Class Funds." For information on purchasing any
of the AIM Funds and to receive a prospectus, please call (800) 347-4246. As
described below, the sales charge otherwise applicable to a purchase of shares
of a fund may be reduced if certain conditions are met. In order to take
advantage of a reduced sales charge, the prospective investor or his dealer must
advise AIM Distributors that the conditions for obtaining a reduced sales charge
have been met. Net asset value is determined in the manner described under the
caption "Determination of Net Asset Value." The following tables show the sales
charge and dealer concession at various investment levels for the AIM Funds.
MCF 05/96
A-2
<PAGE> 15
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM AGGRESSIVE GROWTH FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM INTERNATIONAL EQUITY FUND,
AIM MONEY MARKET FUND, AIM VALUE FUND and AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
INVESTOR'S DEALER
SALES CHARGE CONCESSION
--------------------- -----------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE OF THE OF THE
PUBLIC NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ---------- ----------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." Purchases of $1,000,000 or more are
at net asset value, subject to a contingent deferred sales charge of 1% if
shares are redeemed prior to 18 months from the date such shares were purchased,
as described under the caption "How to Redeem Shares -- Contingent Deferred
Sales Charge Program for Large Purchases."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: AIM TAX-EXEMPT BOND FUND OF CONNECTICUT; and the Class A
shares of each of AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
INVESTOR'S DEALER
SALES CHARGE CONCESSION
--------------------- -----------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE OF THE OF THE
PUBLIC NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ---------- ----------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." Purchases of $1,000,000 or more are
at net asset value, subject to a contingent deferred sales charge of 1% if
shares are redeemed prior to 18 months from the date such shares were purchased,
as described under the caption "How to Redeem Shares -- Contingent Deferred
Sales Charge Program for Large Purchases."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE
INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
INVESTOR'S DEALER
SALES CHARGE CONCESSION
--------------------- -----------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE OF THE OF THE
PUBLIC NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ---------- ----------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
MCF 05/96
A-3
<PAGE> 16
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases. See "Contingent Deferred Sales Charge Program for Large Purchases."
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of shares which normally involve
payment of initial sales charges, and which are sold at net asset value and are
not subject to a contingent deferred sales charge, in an amount up to 0.10% of
such purchases of shares of AIM LIMITED MATURITY TREASURY SHARES, and in an
amount up to 0.25% of such purchases of shares of AIM TAX-FREE INTERMEDIATE
SHARES.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.0% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class
Funds, other than AIM MONEY MARKET FUND, currently offer two classes of shares,
and AIM MONEY MARKET FUND currently offers three classes of shares, through
separate distribution systems (the "Multiple Distribution System"). Although the
Class A and Class B shares (and with respect to AIM MONEY MARKET FUND, Class C
shares) of a particular Multiple Class Fund represent an interest in the same
portfolio of investments, each class is subject to a different distribution
structure and, as a result, differing expenses. This Multiple Distribution
System allows investors to select the class that is best suited to the
investor's needs and objectives. In considering the options afforded by the
Multiple Distribution System, investors should consider both the applicable
initial sales charge or contingent deferred sales charge, as well as the ongoing
expenses borne by Class A or Class B shares and, if applicable, Class C shares,
and other relevant factors, such as whether his or her investment goals are
long-term or short-term.
MCF 05/96
A-4
<PAGE> 17
CLASS A SHARES are sold subject to the initial sales charges described
above and are subject to the other fees and expenses described herein.
Class A shares of AIM MONEY MARKET FUND are designed to meet the needs of
an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares an investor owns may be exchanged at net
asset value for Class A shares of another Multiple Class Fund or shares of
another AIM Fund which is not a Multiple Class Fund, subject to the terms
and conditions described under the caption "Exchange Privilege -- Terms and
Conditions of Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Class B Plan payments of 1.00% per
annum on the average daily net assets of a Multiple Class Fund attributable
to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Class B Plan payments associated
with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. Such
shares are, however, subject to the other fees and expenses described in
the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon or NYSE Close on any business day of
the Fund will be confirmed at the price next determined. Net asset value is
normally determined at 12:00 noon and NYSE Close on each business day of AIM
MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND AND AIM TAX-EXEMPT CASH
FUND (THE "MONEY MARKET FUNDS"). Because each Money Market Fund uses the
amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of such funds will remain constant at $1.00 per share.
However, there is no assurance that either Money Market Fund can maintain a
$1.00 net asset value per share. In order to earn dividends with respect to AIM
MONEY MARKET FUND on the same day that a purchase is made, purchase payments in
the form of federal funds must be received by the Transfer Agent before 12:00
noon Eastern Time on that day. Purchases made by payments in any other form, or
payments in the form of federal funds received after such time but prior to NYSE
Close, will begin to earn dividends on the next business day following the date
of purchase. The Money Market Funds generally will not issue share certificates
but will record investor holdings in noncertificate form and regularly advise
the shareholder of his ownership position. Class B shares of AIM MONEY MARKET
FUND are designed for temporary investment as part of an investment program in
the Class B shares and, unlike shares of most money market funds, are subject to
a contingent deferred sales charge as well as Rule 12b-1 distribution fees and
service fees.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of shares of AIM
TAX-EXEMPT CASH FUND, Class C shares of AIM MONEY MARKET FUND and Class B shares
of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
MCF 05/96
A-5
<PAGE> 18
The term "purchaser" means:
- an individual and his or her spouse and minor children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) AIM TAX-EXEMPT CASH FUND and Class C shares of AIM MONEY MARKET FUND and
(ii) Class B shares of the Multiple Class Funds) within the following 13
consecutive months. By marking the LOI section on the account application and by
signing the account application, the purchaser indicates that he understands and
agrees to the terms of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Trans-
MCF 05/96
A-6
<PAGE> 19
fer Agent the difference between the sales charge on the specified amount and
the amount actually purchased. If the purchaser does not pay such difference
within 20 days of the expiration date, he irrevocably constitutes and appoints
the Transfer Agent as his attorney to surrender for redemption any or all
shares, to make up such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH
FUND and Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the
Multiple Class Funds) at the time of the proposed purchase. Rights of
Accumulation are also available to holders of the Connecticut General Guaranteed
Account, established for tax-qualified group annuities, for contracts purchased
on or before June 30, 1992. To determine whether or not a reduced initial sales
charge applies to a proposed purchase, AIM Distributors takes into account not
only the money which is invested upon such proposed purchase, but also the value
of all shares of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH FUND and
Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the Multiple
Class Funds) owned by such purchaser, calculated at their then current public
offering price. If a purchaser so qualifies for a reduced sales charge, the
reduced sales charge applies to the total amount of money then being invested by
such purchaser and not just to the portion that exceeds the breakpoint above
which a reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum initial sales charge of 5.50%,
the reduced initial sales charge of 5.25% will apply to the full $20,000
purchase and not just to the $15,000 in excess of the $25,000 breakpoint. To
qualify for obtaining the discount applicable to a particular purchase, the
purchaser or his dealer must furnish AFS with a list of the account numbers and
the names in which such accounts of the purchaser are registered at the time the
purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, minor children, parents and parents of spouse) of any
such person, of AIM Management or its affiliates or of certain mutual funds
which are advised or managed by AIM, or any trust established exclusively for
the benefit of such persons; (c) any employee benefit plan established for
employees of AIM Management or its affiliates; (d) any current or retired
officer, director, trustee or employee, or any member of the immediate family
(including spouse, minor children, parents and parents of spouse) of any such
person, or of CIGNA Corporation or of any of its affiliated companies, or of
First Data Investor Services Group (formerly The Shareholders Services Group,
Inc.); (e) any investment company sponsored by CIGNA Investments, Inc. or any of
its affiliated companies for the benefit of its directors' deferred compensation
plans; (f) discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, minor children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the AIM Funds in connection with such services; and (i)
shareholders of Baird Capital Development Fund who are exchanging their shares
for shares of AIM CAPITAL DEVELOPMENT FUND.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
MCF 05/96
A-7
<PAGE> 20
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the initial amount invested in
the fund(s) is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3)
such shares are purchased by an employer-sponsored plan with at least 100
eligible employees, or (4) all of the plan's transactions are executed through a
single omnibus account per fund and the financial institution or service
organization has entered into an agreement with AIM Distributors with respect to
their use of the AIM Funds in connection with such accounts. Section 403(b)
plans sponsored by public educational institutions will not be eligible for net
asset value purchases based on the aggregate investment made by the plan or the
number of eligible employees. Participants in such plans will be eligible for
reduced sales charges based solely on the aggregate value of their individual
investments in the applicable AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE
NOT APPROPRIATE INVESTMENTS FOR SUCH PLANS. AIM Distributors may pay investment
dealers or other financial service firms up to 1.00% of the net asset value of
any shares of the Load Funds (as defined on page A-10 herein) up to 0.10% of the
net asset value of any shares of AIM LIMITED MATURITY TREASURY SHARES, and up to
0.25% of the net asset value of any shares of all other AIM Funds sold at net
asset value to an employee benefit plan in accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns Class A shares of a Multiple Class Fund, Class C shares of AIM Money
Market Fund, or shares of another AIM Fund can arrange for monthly, quarterly or
annual checks in any amount (but not less than $50) to be drawn against the
balance of his account in the designated AIM Fund. Shareholders who own Class B
shares of a Multiple Class Fund can only arrange for monthly or quarterly
withdrawals under a Systematic Withdrawal Plan. Payment of this amount is
normally made on or about the tenth or the twenty-fifth day of each month in
which a payment is to be made. A minimum account balance of $5,000 is required
to establish a Systematic Withdrawal Plan, but there is no requirement
thereafter to maintain any minimum investment. No contingent deferred sales
charge with respect to Class B shares of a Multiple Class Fund will be imposed
on withdrawals made under a Systematic Withdrawal Plan, provided that the
amounts withdrawn under such a plan do not exceed on an annual basis 12% of the
account value at the time the shareholder elects to participate in the
Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to Class B
shares that exceed on an annual basis 12% of such account will be subject to a
contingent deferred sales charge on the amounts exceeding 12% of the initial
account value.
MCF 05/96
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<PAGE> 21
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B Shares and Class C Shares of the Multiple Class Funds), it
is disadvantageous to effect such purchases while a Systematic Withdrawal Plan
is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable month, a draft is
drawn on the shareholder's bank account in the amount specified by the
shareholder (minimum $50 per investment, per account). The proceeds of the draft
are invested in shares of the designated AIM Fund at the applicable offering
price determined on the date of the draft. An Automatic Investment Plan may be
discontinued upon 10 days' prior notice to the Transfer Agent or AIM
Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; and dividends and distributions attributable to
Class C shares of AIM MONEY MARKET FUND may be reinvested in additional shares
of such fund, in Class A shares of another Multiple Class Fund or in shares of
another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; IRA plans; and SEP plans
(collectively, "retirement accounts"). Information concerning these plans,
including the custodian's fees and the forms necessary to adopt such plans, can
be obtained by calling or writing the AIM Funds or AIM Distributors. Shares of
the AIM Funds are also available for investment through existing 401(k) plans
(for both individuals and employers) adopted under the Code. The plan custodian
currently imposes an annual $10 maintenance fee with respect to each retirement
account for which it serves as the custodian. This fee is generally charged in
December. Each AIM Fund and/or the custodian reserve the right to change this
maintenance fee and to initiate an establishment fee (not to exceed its cost).
MCF 05/96
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<PAGE> 22
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, referred to
herein as the "Load Funds," are sold at a public offering price that includes a
maximum sales charge of 5.50% or 4.75% of the public offering price of such
shares; shares of certain of the AIM Funds, referred to herein as the "Lower
Load Funds," are sold at a public offering price that includes a maximum sales
charge of 1.00% of the public offering price of such shares; and shares of
certain other funds, including the Class C shares of AIM MONEY MARKET FUND,
referred to herein as the "No Load Funds," are sold at net asset value, without
payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------
AIM AGGRESSIVE GROWTH AIM HIGH YIELD FUND -- CLASS A AIM LIMITED MATURITY TREASURY SHARES
FUND -- CLASS A AIM INCOME FUND -- CLASS A AIM TAX-FREE INTERMEDIATE SHARES
AIM BALANCED FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM BLUE CHIP FUND -- CLASS A FUND -- CLASS A NO LOAD FUNDS:
AIM CAPITAL DEVELOPMENT AIM INTERNATIONAL EQUITY --------------
FUND -- CLASS A FUND -- CLASS A AIM MONEY MARKET FUND
AIM CHARTER FUND -- CLASS A AIM MONEY MARKET -- CLASS C
AIM CONSTELLATION FUND -- CLASS A AIM TAX-EXEMPT CASH FUND
FUND -- CLASS A AIM MUNICIPAL BOND
AIM GLOBAL AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL GROWTH OF CONNECTICUT
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL INCOME AIM WEINGARTEN FUND -- CLASS A
FUND -- CLASS A
AIM GLOBAL UTILITIES
FUND -- CLASS A
AIM GROWTH FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund,
except that (i) Load Fund share purchases of $1,000,000 or more which are
subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND; (ii) Lower Load Fund share purchases
of $1,000,000 or more and No Load Fund purchases may be exchanged for Load Fund
shares in amounts of $1,000,000 or more which will then be subject to a
contingent deferred sales charge; however, for purposes of calculating the
contingent deferred sales charge on the Load Fund shares acquired, the 18-month
period shall be computed from the date of such exchange; (iii) Class A shares
and shares of all other AIM Funds may not be exchanged for Class B shares; (iv)
Class B shares may be exchanged only for Class B shares; and (v) Class C shares
of AIM MONEY MARKET FUND may not be exchanged for Class A shares of AIM MONEY
MARKET FUND or for Class B shares. DEPENDING UPON THE FUND FROM WHICH AND INTO
WHICH AN EXCHANGE IS BEING MADE, SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE
ACQUIRED AT THEIR OFFERING PRICE OR AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF
A SALES CHARGE) AS SET FORTH IN THE TABLE BELOW FOR SHARES INITIALLY PURCHASED
PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
- ---------------- ------------------------------------- --------------------- ---------------- --------------
<S> <C> <C> <C> <C>
Load Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable
Lower Load Funds.... Net Asset Value if shares were held Net Asset Value Net Asset Value Not Applicable
for at least 30 days; or if shares
were acquired upon exchange of any
Load Fund; or if shares were acquired
upon exchange from any Lower Load
Fund and such shares were held for at
least 30 days. (No exchange privilege
is available for the first 30 days
following the purchase of the Lower
Load Fund shares.)
</TABLE>
(Table continued on following page)
MCF 05/96
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<PAGE> 23
<TABLE>
<CAPTION>
MULTIPLE CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
- ---------------- ------------------------------------- --------------------- ---------------- --------------
<S> <C> <C> <C> <C>
No Load Funds....... Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not Applicable
directly purchased. Net Asset Value Load shares were
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund exchange of shares of
or any Lower Load Fund; Net Asset any Load Fund or any
Value if No Load shares were acquired Lower Load Fund;
upon exchange of Lower Load Fund otherwise,
shares and were held for at least 30 Offering Price.
days following the purchase of the
Lower Load Fund shares. (No exchange
privilege is available for the first
30 days following the acquisition of
the Lower Load Fund shares.)
Multiple Class Funds:
Class B........... Not Applicable Not Applicable Not Applicable Net Asset Value
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable
Lower Load Funds.... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable
acquired upon exchange of any Load
Fund. Otherwise, difference in sales
charge will apply.
No Load Funds....... Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not Applicable
directly purchased. Net Asset Value Load shares were
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund. exchange of shares of
Difference in sales charge will apply any Load Fund or any
if No Load shares were acquired upon Lower Load Fund;
exchange of Lower Load Fund shares. otherwise, Offering
Price.
Multiple Class Funds:
Class B........... Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A and Class B shares of a Multiple Class Fund cannot be
exchanged for each other), except that Class C shares of AIM MONEY MARKET FUND
may be exchanged for Class A shares of another Multiple Class Fund; (b) the
dollar amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the fund acquired through such exchange; (c) the
shares of the fund acquired through exchange must be qualified for sale in the
state in which the shareholder resides; (d) the exchange must be made between
accounts having identical registrations and addresses; (e) the full amount of
the purchase price for the shares being exchanged must have already been
received by the fund; (f) the account from which shares have been exchanged must
be coded as having a certified taxpayer identification number on file or, in the
alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
There is no fee for exchanges among the AIM Funds. A service fee of $5 per
transaction may, however, be charged by AIM Distributors on accounts of market
timing investment firms to help to defray the costs of maintaining an automated
exchange service. This service fee will be charged against the market timing
account from which shares are being exchanged.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is
MCF 05/96
A-11
<PAGE> 24
determined that a fund would be materially disadvantaged by an immediate
transfer of the proceeds of the exchange. If a shareholder is exchanging into a
fund paying daily dividends (See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions," below), and the release of the exchange
proceeds is delayed for the foregoing five-day period, such shareholder will not
begin to accrue dividends until the sixth business day after the exchange.
Shares purchased by check may not be exchanged until it is determined that the
check has cleared, which may take up to ten business days from the date that the
check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B SHARES. A contingent deferred sales charge will not be
imposed in connection with exchanges among Class B shares of Multiple Class
Funds. For purposes of determining a shareholder's holding period of Class B
shares in the calculation of the applicable contingent deferred sales charge,
the period of time during which Class B shares were held prior to an exchange
will be added to the holding period of Class B shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares purchased under the Multiple
Distribution System may be redeemed on any business day of a Multiple Class Fund
at the net asset value per share next determined following receipt of the
redemption order, as described under the caption "Timing and Pricing of
Redemption Orders," less the applicable contingent deferred sales charge shown
in the table below. No deferred sales charge will be imposed (i) on redemptions
of Class B shares following six years from the date such shares were purchased,
(ii) on Class B shares acquired through reinvestments of dividends and
distributions attributable to Class B shares or (iii) on amounts that represent
capital appreciation in the shareholder's account above the purchase price of
the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- ------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
MCF 05/96
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<PAGE> 25
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Contingent deferred sales charges on Class B shares will be waived on
redemptions (1) following the registered shareholder's (or in the case of joint
accounts, all registered joint owners') death or disability, as defined in
Section 72(m)(7) of the Code (provided AIM Distributors is notified of such
death or disability at the time of the redemption request and is provided with
satisfactory evidence of such death or disability), (2) in connection with
certain distributions from individual retirement accounts, custodial accounts
maintained pursuant to Code Section 403(b), deferred compensation plans
qualified under Code Section 457 and plans qualified under Code Section 401
(collectively, "Retirement Plans"), (3) pursuant to a Systematic Withdrawal
Plan, provided that amounts withdrawn under such plan do not exceed on an annual
basis 12% of the value of the shareholder's investment in Class B shares at the
time the shareholder elects to participate in the Systematic Withdrawal Plan,
(4) effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund and (5) effected by AIM of its investment
in Class B shares. Waiver category (1) above applies only to redemptions: (i)
made within one year following death or initial determination of disability and
(ii) of Class B shares held at the time of death or initial determination of
disability. Waiver category (2) above applies only to redemptions resulting
from: (i) required minimum distributions to plan participants or beneficiaries
who are age 70-1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value; (ii) in kind transfers of assets where the
participant or beneficiary notifies AIM Distributors of such transfer no later
than the time such transfer occurs; (iii) tax-free rollovers or transfers of
assets to another Retirement Plan invested in Class B shares of one or more
Multiple Class Funds; (iv) tax-free returns of excess contributions or returns
of excess deferral amounts; and (v) distributions upon the death or disability
(as defined in the Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B shares of a Multiple Class Fund and purchases of shares of
the No Load Funds and Lower Load Funds, a contingent deferred sales charge of 1%
applies to purchases of $1,000,000 or more that are redeemed within 18 months of
the date of purchase. For a description of the AIM Funds participating in this
program, see "Terms and Conditions of Purchase of the AIM Funds -- Sales Charges
and Dealer Concessions." This charge will be 1% of the lesser of the value of
the shares redeemed (excluding reinvested dividends and capital gain
distributions) or the total original cost of such shares. In determining whether
a contingent deferred sales charge is payable, and the amount of any such
charge, shares not subject to the contingent deferred sales charge are redeemed
first (including shares purchased by reinvested dividends and capital gains
distributions and amounts representing increases from capital appreciation), and
then other shares are redeemed in the order of purchase. No such charge will be
imposed upon exchanges unless the shares acquired by exchange are redeemed
within 18 months of the date the shares were originally purchased. For purposes
of computing this 18-month period (i) shares of any Load Fund or Class C shares
of AIM MONEY MARKET FUND which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held, and (ii)
shares of any Load Fund which are subject to the 1% contingent deferred sales
charge and which were acquired through an exchange of shares of a Lower Load
Fund or a No Load Fund which previously were not subject to the 1% contingent
deferred sales charge will not be credited with the period of time such
exchanged shares were held. The charge will be waived in the following
circumstances: (1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under Section
403(b) of the Code and sponsored by nonprofit organizations as defined under
Section 501(c)(3) of the Code, where (a) the initial amount invested by a Plan
in one or more of the AIM Funds is at least $1,000,000, (b) the sponsor of a
Plan signs a letter of intent to invest at least $1,000,000 in one or more of
the AIM Funds, or (c) the shares being redeemed were purchased by an
employer-sponsored Plan with at least 100 eligible employees; provided, however,
that Plans created under Section 403(b) of the Code which are sponsored by
public educational institutions shall qualify under (a), (b) or (c) above on the
basis of the value of each Plan participant's aggregate investment in the AIM
Funds, and not on the aggregate investment made by the Plan or on the number of
eligible employees; (2) redemptions of shares following the registered
shareholder's (or in the case of joint accounts, all registered joint owners')
death or disability, as defined in Section 72(m)(7) of the Code; (3) redemptions
of shares purchased at net asset value by private foundations or endowment funds
where the initial amount invested was at least $1,000,000; and (4) redemptions
of shares purchased by an investor in amounts of $1,000,000 or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies AIM Distributors prior to the time of investment that the dealer waives
the payments otherwise payable to the dealer as described in the third paragraph
under the caption "Terms and Conditions of Purchase of the AIM Funds -- All
Groups of AIM Funds."
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
MCF 05/96
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<PAGE> 26
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59-1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth at that item of the account application if they reasonably believe such
request to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and Class C Shares of AIM MONEY
MARKET FUND). After completing the appropriate authorization form, shareholders
may use checks to effect redemptions from AIM TAX-EXEMPT CASH FUND and the Class
C Shares of AIM MONEY MARKET FUND. This privilege does not apply to retirement
accounts or qualified plans. Checks may be drawn in any amount of $250 or more.
Checks drawn against insufficient shares in the account, against shares held
less than ten business days, or in amounts of less than the applicable minimum
will be returned to the payee. The payee of the check may cash or deposit it in
the same way as an ordinary bank check. When a check is presented to the
Transfer Agent for payment, the Transfer Agent will cause a sufficient number of
shares of such fund to be redeemed to cover the amount of the check.
Shareholders are entitled to dividends on the shares redeemed through the day on
which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that Class B shares of the Multiple Class Funds,
and Class A shares of the Multiple Class Funds and shares of the other AIM Funds
that are subject to the contingent deferred sales charge program for large
purchases described above, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Terms and Conditions
of Purchase of the AIM Funds -- Timing of Purchase Orders." A charge for special
handling (such as wiring of funds or expedited delivery services) may be made by
the Transfer Agent. The right of redemption may
MCF 05/96
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<PAGE> 27
not be suspended or the date of payment upon redemption postponed except under
unusual circumstances such as when trading on the NYSE is restricted or
suspended. Payment of the proceeds of redemptions relating to shares for which
checks sent in payment have not yet cleared will be delayed until it is
determined that the check has cleared, which may take up to ten business days
from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in shares of the
AIM Fund from which the redemption was made at the net asset value next computed
after receipt by the Transfer Agent of the funds to be reinvested. The
shareholder must ask the Transfer Agent for such privilege at the time of
reinvestment. A realized gain on the redemption is taxable, and reinvestment
will not alter any capital gains payable. If there has been a loss on the
redemption, all of the loss may not be tax deductible, depending on the timing
and amount reinvested. Under the Code, if the redemption proceeds of fund shares
on which a sales charge was paid are reinvested in (or exchanged for) shares of
the same fund within 90 days of the payment of the sales charge, the
shareholder's basis in the fund shares redeemed may not include the amount of
the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption. Each AIM Fund may amend, suspend or cease
offering this privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. This privilege may only be exercised once
each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares of the Multiple Class Funds or shares of
any other AIM Fund, and who subsequently reinvest a portion or all of the value
of the redeemed shares in shares of the same AIM Fund within 90 days after such
redemption may do so at net asset value if such privilege is claimed at the time
of reinvestment. Such reinvested proceeds will not be subject to either a
front-end sales charge at the time of reinvestment or an additional contingent
deferred sales charge upon subsequent redemption. In order to exercise this
reinvestment privilege, the shareholder must notify the Transfer Agent of his or
her intent to do so at the time of reinvestment. This reinvestment privilege
does not apply to Class B shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon and 4:00 p.m. Eastern Time with respect
to AIM MONEY MARKET FUND), on each "business day" of a fund as previously
defined. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of an AIM Fund's share will be
determined as of the close of the NYSE on such day. For purposes of determining
net asset value per share, futures and options contract closing prices which are
available 15 minutes after the close of trading of the NYSE will generally be
used. The net asset value per share is calculated by subtracting a class'
liabilities from its assets and dividing the result by the total number of class
shares outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the Money Market Funds, are valued at amortized cost as
reflecting fair value. AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE SHARES value variable rate securities
that have an unconditional demand or put feature exercisable within seven days
or less at par, which reflects the market value of such securities.
MCF 05/96
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<PAGE> 28
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
- ---------------------------------------- ------------------------------ ------------- -------------
<S> <C> <C> <C>
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM GROWTH FUND........................... declared and paid annually annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY SHARES...... declared daily; paid monthly quarterly annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT.. declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE SHARES.......... declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Class A, Class B or Class C shares
are reinvested in additional shares of such Class, absent an election by a
shareholder to receive cash or to have such dividends and distributions
reinvested in Class A or Class B shares of another Multiple Class Fund, to the
extent permitted. For funds that do not declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date. Shareholders may elect, by written notice to the Transfer
Agent, to receive such distributions, or the dividend portion thereof, in cash,
or to invest such dividends and distributions in shares of another fund in the
AIM Funds; provided that (i) dividends and distributions attributable to Class B
shares may only be reinvested in Class B shares, (ii) dividends and
distributions attributable to Class A shares may not be reinvested in Class B
shares, and (iii) dividends and distributions attributable to the Class C shares
of AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that
Fund or in any Class B shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact
MCF 05/96
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<PAGE> 29
the Transfer Agent at any time to obtain a form to authorize such reinvestments
in another AIM Fund. Such reinvestments into the AIM Funds are not subject to
sales charges, and shares so purchased are automatically credited to the account
of the shareholder.
Dividends on Class B shares are expected to be lower than those for Class A or
Class C shares because of higher distribution fees paid by Class B shares.
Dividends on Class A, Class B and Class C shares may also be affected by other
class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM LIMITED MATURITY TREASURY SHARES, AIM MONEY MARKET FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT
CASH FUND or AIM TAX-FREE INTERMEDIATE SHARES will qualify for this dividends
received deduction. Shortly after the end of each year, shareholders will
receive information regarding the amount and federal income tax treatment of all
distributions paid during the year. No gain or loss will be recognized by
shareholders upon the automatic conversion of Class B shares of a Multiple Class
Fund into Class A shares of such Fund.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on income dividends and distributions (other than
exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of inter-
MCF 05/96
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<PAGE> 30
est on certain indebtedness of the shareholder, and may have other collateral
federal income tax consequences. The Tax-Exempt Funds may invest in Municipal
Securities the interest on which will constitute an item of tax preference and
which therefore could give rise to a federal alternative minimum tax liability
for shareholders, and may invest up to 20% of their net assets in such
securities and other taxable securities. For additional information concerning
the alternative minimum tax and certain collateral tax consequences of the
receipt of exempt-interest dividends, see the Statements of Additional
Information applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND AND AIM GLOBAL UTILITIES FUND -- SPECIAL TAX
INFORMATION. For taxable years in which it is eligible to do so, each of these
funds may elect to pass through to shareholders credits for foreign taxes paid.
If the fund makes such an election, a shareholder who receives a distribution
(1) will be required to include in gross income his proportionate share of
foreign taxes allocable to the distribution and (2) may claim a credit or
deduction for such share for his taxable year in which the distribution is
received, subject to the general limitations imposed on the allowance of foreign
tax credits and deductions. Shareholders should also note that certain gains or
losses attributable to fluctuations in exchange rates or foreign currency
forward contracts may increase or decrease the amount of income of the fund
available for distribution to shareholders, and should note that if such losses
exceed other income during a taxable year, the fund would not be able to pay
ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM MUNICIPAL BOND
FUND and AIM LIMITED MATURITY TREASURY SHARES, for which The Bank of New York,
110 Washington Street, New York, New York 10286, serves as custodian. Texas
Commerce Bank National Association, P.O. Box 2558, Houston, Texas 77252-8084,
serves as Sub-Custodian for retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a
wholly-owned subsidiary of AIM, serves as each AIM Fund's transfer agent and
dividend payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and has passed
upon the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. A Statement of Additional Information has been filed with the SEC and is
available upon request and without charge, by writing or calling AIM
Distributors. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF 05/96
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<PAGE> 31
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
<TABLE>
__________________________________________________________________________________________________________________________________
| <CAPTION> | |
| | |
| GIVE SOCIAL SECURITY | GIVE TAXPAYER I.D. |
| ACCOUNT TYPE NUMBER OF: | ACCOUNT TYPE NUMBER OF: |
| ------------ -------------------- | ------------ ------------------ |
| <S> <C> | <C> <C> |
| Individual Individual | Trust, Estate, Pension Trust, Estate, Pension |
| | Plan Trust Plan Trust and not |
| | personal TIN of fiduciary |
| | |
| Joint Individual First individual listed in the | |
| "Account Registration" portion | |
| of the Application | |
| | |
| Unif. Gifts to Minor | Corporation, Partnership, Corporation, Partnership, |
| Minors/Unif. | Other Organization Other Organization |
| Transfers to Minors | |
| | |
| Legal Guardian Ward, Minor or | |
| Incompetent | |
| | |
| Sole Proprietor Owner of Business | Broker/Nominee Broker/Nominee |
|___________________________ _____________________________________|_______________________________ ______________________________|
</TABLE>
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF 05/96
B-1
<PAGE> 32
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney to surrender for redemption any and all unissued shares held
by the Transfer Agent in the designated account(s), or in any other account with
any of the AIM Funds, present or future, which has the identical registration as
the designated account(s), with full power of substitution in the premises. The
Transfer Agent and AIM Distributors are thereby authorized and directed to
accept and act upon any telephone redemptions of shares held in any of the
account(s) listed, from any person who requests the redemption proceeds to be
applied to purchase shares in any one or more of the AIM Funds, provided that
such fund is available for sale and provided that the registration and mailing
address of the shares to be purchased are identical to the registration of the
shares being redeemed. An investor acknowledges by signing the form that he
understands and agrees that the Transfer Agent and AIM Distributors may not be
liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as agent subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone exchange
privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney to surrender for redemption any and all unissued shares
held by the Transfer Agent in the designated account(s), present or future, with
full power of substitution in the premises. The Transfer Agent and AIM
Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that the Transfer Agent and AIM Distributors may
not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as agent subject to this appointment,
and AIM Distributors reserves the right to modify or terminate the telephone
redemption privilege at any time without notice. An investor may elect not to
have this privilege by marking the appropriate box on the application. Then any
exchanges must be effected in writing by the investor (see the applicable Fund's
prospectus under the caption "Exchange Privilege -- Exchanges by Mail").
MCF 05/96
B-2
<PAGE> 33
[THIS PAGE INTENTIONALLY LEFT BLANK]
MCF 05/96
<PAGE> 34
[THIS PAGE INTENTIONALLY LEFT BLANK]
MCF 05/96
<PAGE> 35
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS(R)
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
Principal Underwriter
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
For more complete information about any other Fund in The AIM Family of Funds,
including charges and expenses, please call (800) 347-4246 or write to the
address shown above and request a free prospectus. Please read the prospectus
carefully before you invest or send money.
<PAGE> 36
STATEMENT OF
ADDITIONAL INFORMATION
RETAIL CLASSES OF
AIM BLUE CHIP FUND
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
AIM AGGRESSIVE GROWTH FUND
AIM CAPITAL DEVELOPMENT FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS, INC.)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TX 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE
FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (713) 626-1919, EXTENSION 5001 (IN HOUSTON)
OR (800) 347-4246 (ELSEWHERE).
STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 3, 1996
RELATING TO THE AIM AGGRESSIVE GROWTH FUND PROSPECTUS DATED JANUARY 2, 1996,
THE AIM CHARTER FUND, AIM WEINGARTEN FUND AND AIM CONSTELLATION FUND
PROSPECTUSES DATED JANUARY 2, 1996, AS REVISED APRIL 1, 1996,
THE AIM BLUE CHIP FUND PROSPECTUS DATED JUNE 3, 1996 AND THE AIM CAPITAL
DEVELOPMENT FUND PROSPECTUS DATED JUNE 17, 1996
<PAGE> 37
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION ............................................................................. 1
GENERAL INFORMATION ABOUT THE FUNDS ...................................................... 1
The Company and Its Shares ...................................................... 1
PERFORMANCE .............................................................................. 2
Total Return Calculations ....................................................... 2
Yield Quotations ................................................................ 3
Historical Portfolio Results .................................................... 3
PORTFOLIO TRANSACTIONS AND BROKERAGE ..................................................... 7
General Brokerage Policy ........................................................ 7
Section 28(e) Standards ......................................................... 9
Brokerage Commissions Paid ...................................................... 10
Portfolio Turnover .............................................................. 10
INVESTMENT OBJECTIVES AND POLICIES ....................................................... 11
Foreign Securities .............................................................. 12
Rule 144A Securities ............................................................ 13
Lending of Portfolio Securities ................................................. 13
Repurchase Agreements ........................................................... 13
Special Situations .............................................................. 14
Short Sales ..................................................................... 14
Warrants ........................................................................ 14
Options ......................................................................... 14
Futures Contracts ............................................................... 15
Stock Index Futures Contracts .......................................... 15
Foreign Currency Futures Contracts ..................................... 16
Options on Futures Contracts .................................................... 16
Risks as to Futures Contracts and Related Options ............................... 16
Certain Investments ............................................................. 17
INVESTMENT RESTRICTIONS .................................................................. 17
Blue Chip ....................................................................... 18
Charter ......................................................................... 19
Weingarten ...................................................................... 20
Constellation ................................................................... 21
Aggressive Growth ............................................................... 22
Capital Development ............................................................. 23
Additional Restrictions ......................................................... 24
MANAGEMENT ............................................................................... 24
Directors and Officers .......................................................... 24
Remuneration of Directors .............................................. 27
AIM Funds Retirement Plan for Eligible Directors/Trustees .............. 29
Deferred Compensation Agreements ....................................... 29
Investment Advisory, Administrative Services and Sub-Advisory Agreements ........ 30
DISTRIBUTION PLANS ...................................................................... 33
The Class A Plan ................................................................ 33
</TABLE>
i
<PAGE> 38
<TABLE>
<CAPTION>
<S> <C>
The Class B Plan ................................................................ 34
Both Plans ...................................................................... 34
THE DISTRIBUTOR .......................................................................... 37
HOW TO PURCHASE AND REDEEM SHARES ........................................................ 38
NET ASSET VALUE DETERMINATION ............................................................ 39
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ................................................. 40
Reinvestment of Dividends and Distributions ..................................... 40
Tax Matters ..................................................................... 40
Qualification as a Regulated Investment Company ................................. 40
Excise Tax on Regulated Investment Companies .................................... 42
Fund Distributions .............................................................. 42
Sale or Redemption of Shares .................................................... 44
Foreign Shareholders ............................................................ 45
Effect of Future Legislation; Local Tax Considerations .......................... 45
MISCELLANEOUS INFORMATION ................................................................ 45
Shareholder Inquiries ........................................................... 45
Audit Reports ................................................................... 46
Legal Matters ................................................................... 46
Custodian and Transfer Agent .................................................... 46
Principal Holders of Securities ................................................. 46
Other Information ............................................................... 48
APPENDIX ................................................................................. 49
Description of Commercial Paper Ratings ......................................... 49
Description of Corporate Bond Ratings ........................................... 49
FINANCIAL STATEMENTS ..................................................................... FS
</TABLE>
ii
<PAGE> 39
INTRODUCTION
AIM Equity Funds, Inc. (the "Company") is a series mutual fund. The
rules and regulations of the United States Securities and Exchange Commission
(the "SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information for AIM Charter Fund ("Charter"), AIM Weingarten
Fund ("Weingarten") and AIM Constellation Fund ("Constellation") is included in
a Prospectus dated January 2, 1996, as revised April 1, 1996 (the "Prospectus"),
which relates to the Retail Classes of the Funds (defined below). The
information for the Retail Class of AIM Aggressive Growth Fund ("Aggressive
Growth") is contained in a separate prospectus also dated January 2, 1996. The
information for the Retail Class of AIM Blue Chip Fund ("Blue Chip") is
contained in a separate prospectus dated June 3, 1996. The information for the
Retail Class of AIM Capital Development Fund ("Capital Development") is
contained in a separate prospectus dated June 17, 1996. Additional copies of the
Prospectuses and this Statement of Additional Information may be obtained
without charge by writing the principal distributor of the Funds' shares, A I M
Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739
or by calling (800) 347-4246. Investors must receive a Prospectus before they
invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus; and, in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omit certain information contained in
the Registration Statement filed with the SEC. Copies of the Registration
Statement, including items omitted from the Prospectus and this Statement of
Additional Information, may be obtained from the SEC by paying the charges
described under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE COMPANY AND ITS SHARES
The Company was organized in 1988 as a Maryland corporation, and is
registered with the SEC as a diversified open-end series management investment
company. The Company currently consists of six separate portfolios: Aggressive
Growth, Blue Chip, Capital Development, Charter, Constellation, and Weingarten
(each a "Fund" and collectively, the "Funds"). Charter and Weingarten each have
three separate classes: Class A and Class B and an Institutional Class.
Constellation has two classes of shares: Class A and an Institutional Class.
Aggressive Growth, Blue Chip and Capital Development have Class A only. Class A
shares (sold with a front-end sales charge) and Class B shares (sold with a
contingent deferred sales charge) of the Funds are also referred to as the
Retail Classes. Prior to October 15, 1993, Aggressive Growth was a portfolio of
AIM Funds Group ("AFG"), a Massachusetts business trust. Pursuant to an
Agreement and Plan of Reorganization between AFG and the Company, Aggressive
Growth was redomesticated as a portfolio of the Company. All historical
financial and other information contained in this Statement of Additional
Information for periods prior to October 15, 1993, relating to Aggressive Growth
is that of AFG's Aggressive Growth. Blue Chip acquired the investment portfolio
of Baird Blue Chip Fund, Inc. (the "BBC Fund"), a registered management
investment company, on June 3, 1996 in a corporate reorganization. All
historical financial information contained in this Statement of Additional
Information for periods prior to June 3, 1996, relating to Blue Chip is that of
the BBC Fund. The Company has entered into an Agreement and Plan of
Reorganization with Baird Capital Development Fund, Inc. pursuant to which
Capital Development will acquire substantially all of the assets of Baird
Capital Development Fund, Inc., which is expected to occur no later than
December 31, 1996.
This Statement of Additional Information relates solely to the Retail
Classes of the Funds.
The term "majority of the outstanding shares" of the Company, of a
particular Fund or of a particular class of a Fund means, respectively, the vote
of the lesser of (a) 67% or more of the shares of the Company, such Fund or such
class present at a meeting of the Company's shareholders, if the holders of more
than 50%
1
<PAGE> 40
of the outstanding shares of the Company, such Fund or such class are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Company, such Fund or such class.
Shares of the Retail Class and the Institutional Class of each Fund
have equal rights and privileges. Each share of a particular class is entitled
to one vote, to participate equally in dividends and distributions declared by
the Company's Board of Directors with respect to the class of such Fund and,
upon liquidation of the Fund, to participate proportionately in the net assets
of the Fund allocable to such class remaining after satisfaction of outstanding
liabilities of the Fund allocable to such class. Fund shares are fully paid,
non-assessable and fully transferable when issued and have no preemptive rights
and have such conversion and exchange rights as set forth in the Prospectus and
this Statement of Additional Information. Fractional shares have proportionately
the same rights, including voting rights, as are provided for a full share.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of directors may elect all of the members of the
Board of Directors of the Company. In such event, the remaining holders cannot
elect any directors of the Company.
PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical investment in a particular Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that a Fund's performance is not constant over time, but changes from year to
year, and that average annual returns do not represent the actual year-to-year
performance of such Fund.
In addition to average annual returns, the Retail Class of each Fund
may quote unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions, over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph or similar
illustration. Total returns may be quoted with or without taking the applicable
Fund's maximum applicable Class A front-end sales charge or Class B contingent
deferred sales charge into account. Excluding sales charges from a total return
calculation produces a higher total return figure.
2
<PAGE> 41
YIELD QUOTATIONS
The standard formula for calculating yield, as described in the
Prospectus, is as follows:
YIELD = 2[((a-b)/(c x d) + 1)6 -1]
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued rather
than recorded on the ex-dividend date. Interest earned under
this formula must generally be calculated based on the yield to
maturity of each obligation (or, if more appropriate, based on
yield to call date).
b = expense accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the
period.
d = the maximum offering price per share on the last day of the
period.
HISTORICAL PORTFOLIO RESULTS
Charter, Weingarten, Aggressive Growth and Constellation's total
returns for Class A shares for the following periods ended October 31, 1995
(which include the maximum sales charge of 5.50% and reinvestment of all
dividends and distributions) were as follows:
<TABLE>
<CAPTION>
CLASS A AVERAGE ANNUAL RETURNS
------------------------------
ONE FIVE TEN FIFTEEN TWENTY
YEAR YEARS YEARS YEARS YEARS
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CHARTER 20.02% 14.42% 15.01% 13.24% 16.95%
WEINGARTEN 21.13% 15.62% 16.33% 15.31% 19.16%
CONSTELLATION 26.06% 28.91% 21.71% 15.80% NA
AGGRESSIVE GROWTH 33.68% 37.51% 18.04% NA NA
</TABLE>
<TABLE>
<CAPTION>
CLASS A CUMULATIVE RETURNS
--------------------------
ONE FIVE TEN FIFTEEN TWENTY
YEAR YEARS YEARS YEARS YEARS
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CHARTER 20.02% 96.15% 304.77% 545.61% 2,192.80%
WEINGARTEN 21.13% 106.61% 353.87% 747.10% 3,229.09%
CONSTELLATION 26.06% 255.98% 613.55% 802.51% NA
AGGRESSIVE GROWTH 33.68% 391.69% 425.35% NA NA
</TABLE>
- -----------------
During the 10-year period ended October 31, 1995, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter,
Weingarten, Constellation and Agressive Growth would have been worth $4,047.72,
$4,538.65, $7,135.50 and $5,253.54, respectively, assuming all distributions
were reinvested.
During the 15-year period ended October 31, 1995, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter,
Weingarten and Constellation would have been worth $6,456.09, $8,471.00 and
$9,025.13, respectively, assuming all dividends were reinvested.
During the 20-year period ended October 31, 1995 a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter and
Weingarten would have been worth $22,928.03 and $33,290.90, respectively,
assuming all distributions were reinvested. This was a period of widely
fluctuating stock and bond prices and interest rates, and should not necessarily
be considered a representation of the income or capital gain or loss that may be
realized from an investment in any of the Funds today.
3
<PAGE> 42
Charter and Weingarten's total returns for Class B shares for the
period June 26, 1995 (inception date for Class B shares of Charter and
Weingarten) through October 31, 1995 (which include the maximum contingent
deferred sales charge of 5% and reinvestment of all dividends and distributions)
were as follows:
<TABLE>
<CAPTION>
CLASS B AVERAGE ANNUAL RETURNS
------------------------------
Since
Inception
---------
<S> <C>
CHARTER N/A
WEINGARTEN N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B CUMULATIVE RETURNS
--------------------------
SINCE
INCEPTION
---------
<S> <C>
CHARTER 3.48%
WEINGARTEN 4.27%
</TABLE>
Average annual total return is not available for Class B shares of
Charter and Weingarten as the effective date of the Class B shares was June 26,
1995.
Blue Chip acquired the investment portfolio of the BBC Fund on June 3,
1996. Set forth below is certain performance data for the BBC Fund for the
periods ended September 30, 1995 (which includes the maximum sales charge of
5.75% and reinvestment of all dividends and distributions). The following
performance data is not necessarily indicative of the future performance of
Blue Chip.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
----------------------
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
<S> <C> <C> <C>
BBC Fund 20.51% 13.39% N/A
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE RETURNS
------------------
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
<S> <C> <C> <C>
BBC Fund 20.51% 87.47% N/A
</TABLE>
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Analytical Services, Inc. and other independent services
which monitor the performance of mutual funds. The Funds may also advertise
mutual fund performance rankings which have been assigned to each respective
Fund by such monitoring services.
4
<PAGE> 43
Each Fund's performance may also be compared in advertising and other
materials to the performance of comparative benchmarks such as the Consumer
Price Index ("CPI"), the Standard & Poor's ("S&P") 500 Stock Index, and
fixed-price investments such as bank certificates of deposit and/or savings
accounts.
In addition, each Fund's long-term performance may be described in
advertising in relation to historical, political and/or economic events. For
instance, Charter's Class A shares performance since its inception has been
accomplished through various years in which there have been recessions, a
presidential assassination attempt, a 20% prime rate, an 13% annual inflation
rate, and significant stock market declines. The performance of Class A shares
of Weingarten, Aggressive Growth and Constellation has been achieved through
years in which similar events occurred.
Each Fund's advertising may from time to time include discussions of
general economic conditions and interest rates. Each Fund's advertising may also
include references to the use of the Fund as part of an individual's overall
retirement investment program.
From time to time, Fund sales literature and/or advertisements may
disclose (i) top holdings included in the Fund's portfolio, (ii) certain selling
group members, and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. These topics
include, but are not limited to, literature addressing general information about
mutual funds, variable annuities, dollar-cost averaging, stocks, bonds, money
markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning and inflation.
The following charts show the cumulative total return of Class A shares
of Charter, Weingarten and Constellation (and their predecessors) compared to
the percentage change in the CPI, the S&P 500 Stock Index and a hypothetical
8.00% fixed-price investment for each specified 10-year period ended December
31.
RELATIVE TOTAL RETURN PERFORMANCE FOR CLASS A SHARES OF CHARTER (AND ITS
PREDECESSOR), CPI, S&P 500 STOCK INDEX & 8.00% FIXED-PRICE INVESTMENT
FOR ALL 10-YEAR INVESTMENT PERIODS BEGINNING WITH 1969 - 1986
<TABLE>
<CAPTION>
10-YEAR AIM CHARTER 8.00% FIXED PRICE
PERIOD FUND* CPI** S&P 500*** INVESTMENT****
<C> <C> <C> <C> <C>
1969-1978 135.33% 90.70% 36.51% 115.89%
1970-1979 249.95% 103.45% 76.53% 115.89%
1971-1980 462.17% 116.84% 125.00% 115.89%
1972-1981 316.59% 128.71% 87.42% 115.89%
1973-1982 251.54% 129.64% 91.45% 115.89%
1974-1983 384.68% 119.26% 174.67% 115.89%
1975-1984 526.07% 102.89% 295.86% 115.89%
1976-1985 494.52% 96.94% 280.01% 115.89%
1977-1986 391.37% 89.86% 264.08% 115.89%
1978-1987 415.89% 85.83% 312.67% 115.89%
1979-1988 305.19% 77.99% 351.35% 115.89%
1980-1989 288.53% 64.41% 401.33% 115.89%
1981-1990 214.74% 55.03% 266.97% 115.89%
1982-1991 328.08% 46.59% 402.55% 115.89%
1983-1992 274.52% 45.49% 345.17% 115.89%
1984-1993 243.15% 43.93% 299.84% 115.89%
1985-1994 248.63% 42.17% 281.56% 115.89%
1986-1995 275.83% 40.44% 298.37% 115.89%
</TABLE>
5
<PAGE> 44
RELATIVE TOTAL RETURN PERFORMANCE FOR CLASS A SHARES OF WEINGARTEN (AND ITS
PREDECESSOR), CPI, S&P 500 STOCK INDEX & 8.00% FIXED-PRICE INVESTMENT
FOR ALL 10-YEAR INVESTMENT PERIODS BEGINNING WITH 1970 - 1986
<TABLE>
<CAPTION>
10-YEAR AIM WEINGARTEN 8.00% FIXED PRICE
PERIOD FUND* CPI** S&P 500*** INVESTMENT****
<S> <C> <C> <C> <C>
1970-1979 183.68% 103.45% 76.53% 115.89%
1971-1980 362.14% 116.84% 125.00% 115.89%
1972-1981 192.63% 128.71% 87.42% 115.89%
1973-1982 225.23% 129.64% 91.45% 115.89%
1974-1983 439.58% 119.26% 174.67% 115.89%
1975-1984 658.94% 102.89% 295.86% 115.89%
1976-1985 677.90% 96.94% 280.01% 115.89%
1977-1986 735.19% 89.86% 264.08% 115.89%
1978-1987 670.91% 85.83% 312.67% 115.89%
1979-1988 577.58% 77.99% 351.35% 115.89%
1980-1989 510.87% 64.41% 401.33% 115.89%
1981-1990 289.25% 55.03% 266.97% 115.89%
1982-1991 550.92% 46.59% 402.55% 115.89%
1983-1992 394.71% 45.49% 345.17% 115.89%
1984-1993 289.86% 43.93% 299.84% 115.89%
1985-1994 313.29% 42.17% 281.56% 115.89%
1986-1995 309.56% 40.44% 298.37% 115.89%
</TABLE>
6
<PAGE> 45
RELATIVE TOTAL RETURN PERFORMANCE FOR CLASS A SHARES OF CONSTELLATION (AND ITS
PREDECESSOR), CPI, S&P 500 STOCK INDEX & 8.00% FIXED-PRICE INVESTMENT
FOR ALL 10-YEAR INVESTMENT PERIODS BEGINNING WITH 1977 - 1986
<TABLE>
<CAPTION>
10-YEAR AIM CONSTELLATION 8.00% FIXED PRICE
PERIOD FUND* CPI** S&P 500*** INVESTMENT****
<S> <C> <C> <C> <C>
1977-1986 462.49% 89.86% 264.08% 115.89%
1978-1987 500.80% 85.83% 312.67% 115.89%
1979-1988 476.45% 77.99% 351.35% 115.89%
1980-1989 350.02% 64.41% 401.33% 115.89%
1981-1990 147.55% 55.03% 266.97% 115.89%
1982-1991 410.95% 46.59% 402.55% 115.89%
1983-1992 412.18% 45.49% 345.17% 115.89%
1984-1993 381.97% 43.93% 299.84% 115.89%
1985-1994 476.07% 42.17% 281.56% 115.89%
1986-1995 507.06% 40.44% 298.37% 115.89%
</TABLE>
* Includes the effect of the Class A shares maximum sales charge of 5.50%
and assumes all dividends and capital gains are reinvested. Excluding the
effect of any sales charge, Charter appreciated 275.83%, Weingarten
appreciated 309.56% and Constellation appreciated 507.06% for the
ten-year period ended December 31, 1995.
** The CPI, published by the U.S. Bureau of Labor Statistics, is a
statistical measure of changes, over time, in the prices of goods and
services.
*** S&P's 500 Stock Index is a group of unmanaged securities widely regarded
by investors as representative of the stock market in general. The
results shown assume the reinvestment of dividends.
**** Fixed Price Investments, such as bank certificates of deposits and
savings accounts, are generally backed by federal agencies for up to
$100,000.00. Class A shares of Charter, Weingarten and Constellation are
not insured and their value will vary with market conditions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Directors of the
Company, A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and
sell securities for each Fund, for the selection of broker-dealers, for the
execution of each Fund's investment portfolio transactions, and for the
allocation of brokerage fees in connection with such transactions. AIM's primary
consideration in effecting a security transaction is to obtain the best net
price and the most favorable execution of the order. While AIM generally seeks
reasonably competitive commission rates, each Fund does not necessarily pay the
lowest commission or spread available.
A portion of the securities in which each Fund invests are traded in
over-the-counter markets, and in such transactions, a Fund deals directly with
the dealers who make markets in the securities involved, except in those
circumstances where better prices and executions are available elsewhere.
Portfolio transactions placed through dealers serving as primary market makers
are effected at net prices, generally without commissions as such, but which
include compensation in the form of mark up or mark down.
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AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Funds) over a certain time period. The target levels will be
determined based upon the following factors, among others: (a) the execution
services by the broker; (b) the research services provided by the broker; and
(c) the broker's attitude toward and interest in mutual funds in general and in
the Funds and other mutual funds advised by AIM or A I M Capital Management,
Inc. ("AIM Capital") in particular. No specific formula will be used in
connection with any of the foregoing considerations in determining the target
levels. However, if a broker has indicated a certain level of desired
commissions in return for certain research services provided by the broker, this
factor will be taken into consideration by AIM. Subject to the overall objective
of obtaining best price and execution for the Funds, AIM may also consider sales
of shares of the Funds and of the other mutual funds managed or advised by AIM
and AIM Capital as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds. AIM will seek, whenever possible, to
recapture for the benefit of each Fund any commission, fee, brokerage or similar
payment paid by such Fund on portfolio transactions. Normally, the only fees
which may be recaptured are the soliciting dealer fees on the tender of an
account's portfolio securities in a tender or exchange offer.
None of the Funds is under any obligation to deal with any broker or
group of brokers in the execution of transactions in portfolio securities.
Brokers who provide supplemental investment research to AIM and AIM Capital may
receive orders for transactions by the Funds. Information so received will be in
addition to and not in lieu of the services required to be performed by AIM and
AIM Capital under their agreements with the Funds and the expenses of AIM and
AIM Capital will not necessarily be reduced as a result of the receipt of such
supplemental information. Certain research services furnished by broker-dealers
may be useful to AIM and AIM Capital in connection with their services to other
advisory clients, including the investment companies which they advise. Also,
each Fund may pay a higher price for securities or higher commissions in
recognition of research services furnished by broker-dealers.
Provisions of the Investment Company Act of 1940, as amended ("1940
Act") and rules and regulations thereunder have been construed to prohibit the
Company from purchasing securities or instruments from, or selling securities or
instruments to, any holder of 5% or more of the voting securities of any
investment company managed or advised by AIM. The Company has obtained an order
of exemption from the SEC which permits the Company to engage in certain
transactions with such 5% holder, if the Company complies with conditions and
procedures designed to ensure that such transactions are executed at fair market
value and present no conflicts of interest.
AIM, AIM Capital and their affiliates manage several other investment
accounts, some of which may have investment objectives similar to those of one
or more of the Funds. It is possible that, at times, identical securities will
be appropriate for investment by one or more of the Funds and by one or more of
such investment accounts. The position of each account, however, in the
securities of the same issue may vary and the length of time that each account
may choose to hold its investment in the securities of the same issue may
likewise vary. The timing and amount of purchase by each account will be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of a Fund and one or more of these
accounts is considered at or about the same time, transactions in such
securities will be allocated among the Fund(s) and such accounts in a manner
deemed equitable by AIM. AIM may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Simultaneous transactions could, however, adversely affect
the ability of a Fund to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Company are prohibited
from dealing with the Funds as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
The Board of Directors has adopted procedures pursuant to Rule 17a-7 under the
1940 Act relating to portfolio transactions among the Funds and other accounts
advised by AIM or AIM Capital and each of the Funds may from time to time enter
into transactions in accordance with such Rule and procedures.
From time to time, a Fund may sell a security to, or purchase a
security from, an AIM Fund or another investment account advised by AIM or AIM
Capital when such transactions comply with applicable rules and
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<PAGE> 47
regulations and are deemed consistent with the investment objective(s) and
policies of the investment accounts involved. Procedures pursuant to Rule 17a-7
under the 1940 Act regarding transactions between investment accounts advised by
AIM or AIM Capital have been adopted by the Board of Directors/Trustees of the
various AIM Funds including the Company. Although such transactions may result
in custodian, tax or other related expenses, no brokerage commissions or other
direct transaction costs are generated by transactions among the investment
accounts advised by AIM or AIM Capital.
In some cases the procedure for allocating portfolio transactions among
the various investment accounts advised by AIM and AIM Capital could have an
adverse effect on the price or amount of securities available to a Fund. In
making such allocations, the main factors considered by AIM are the respective
investment objectives and policies of its advisory clients, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
judgments of the persons responsible for recommending the investment.
SECTION 28(e) STANDARDS
Under Section 28(e) of the Securities Exchange Act of 1934, AIM shall
not be "deemed to have acted unlawfully or to have breached its fiduciary duty"
solely because under certain circumstances it has caused the account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), AIM must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or [its]
overall responsibilities with respect to the accounts as to which [it] exercises
investment discretion," and that the services provided by a broker provide AIM
and AIM Capital with lawful and appropriate assistance in the performance of
their investment decision-making responsibilities. Accordingly, the price to a
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM and AIM Capital to be
beneficial to the Funds' investment programs. Research services received from
brokers supplement AIM's and AIM Capital's own research (and the research of
sub-advisors to other clients of AIM and AIM Capital), and may include the
following types of information: statistical and background information on
industry groups and individual companies; forecasts and interpretations with
respect to U.S. and foreign economies, securities, markets, specific industry
groups and individual companies; information on political developments;
portfolio management strategies; performance information on securities and
information concerning prices of securities; and information supplied by
specialized services to AIM and AIM Capital and to the Company's directors with
respect to the performance, investment activities and fees and expenses of other
mutual funds. Such information may be communicated electronically, orally or in
written form. Research services may also include the providing of equipment used
to communicate research information, the arranging of meetings with management
of companies and the providing of access to consultants who supply research
information.
The outside research assistance is useful to AIM and AIM Capital since
the brokers utilized by AIM as a group tend to follow a broader universe of
securities and other matters than AIM's and AIM Capital's staff can follow. In
addition, this research provides AIM and AIM Capital with a diverse perspective
on financial markets. Research services which are provided to AIM and AIM
Capital by brokers are available for the benefit of all accounts managed or
advised by AIM and AIM Capital or by sub-advisors to other accounts managed or
advised by AIM and AIM Capital. In some cases, the research services are
available only from the broker providing such services. In other cases, the
research services may be obtainable from alternative sources in return for cash
payments. AIM is of the opinion that because the broker research supplements,
rather than replaces, its research, the receipt of such research does not tend
to decrease its expenses, but tends to improve the quality of its investment
advice. However, to the extent that AIM or AIM Capital would have purchased any
such research services had such services not been provided by brokers, the
expenses of such services to AIM or AIM Capital could be considered to have been
reduced accordingly. Certain research services furnished by broker-dealers may
be useful to AIM or AIM Capital with clients other than the Funds.
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<PAGE> 48
Similarly, any research services received by AIM or AIM Capital through the
placement of portfolio transactions of other clients may be of value to AIM or
AIM Capital in fulfilling their obligations to the Funds. AIM is of the opinion
that this material is beneficial in supplementing AIM's and AIM Capital's
research and analysis; and, therefore, it may benefit the Funds by improving the
quality of the investment advice. The advisory fees paid by the Funds are not
reduced because AIM and AIM Capital receive such services. Some broker-dealers
may indicate that the provision of research services is dependent upon the
generation of certain specified levels of commissions and underwriting
concessions by AIM's and AIM Capital's clients, including the Funds.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1995, 1994 and 1993, Charter
paid brokerage commissions of $14,960,600, $4,188,692, and $5,005,249,
respectively. For the fiscal year ended October 31, 1995, AIM allocated certain
of Charter's brokerage transactions to certain broker-dealers that provided AIM
with certain research, statistical and other information. Such transactions
amounted to $269,685,180 and the related brokerage commissions were $374,801.
For the fiscal years ended October 31, 1995, 1994 and 1993, Weingarten
paid brokerage commissions of $21,766,760, $17,841,982, and $17,367,904,
respectively. For the fiscal year ended October 31, 1995, AIM allocated certain
of Weingarten's brokerage transactions to certain broker-dealers that provided
AIM with certain research, statistical and other information. Such transactions
amounted to $641,610,030 and the related brokerage commissions were $1,017,600.
For the fiscal years ended October 31, 1995, 1994 and 1993,
Constellation paid brokerage commissions of $15,359,510, $6,921,543 and
$4,683,461, respectively. For the fiscal year ended October 31, 1995, AIM
allocated certain of Constellation's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $353,895,595 and the related
brokerage commissions were $652,417.
For the fiscal years ended October 31, 1995, 1994 and the ten month
period ended October 31, 1993, Aggressive Growth paid brokerage commissions of
$9,917,185, $1,180,323 and $364,786, respectively. For the fiscal year ended
October 31, 1995, AIM allocated certain of Aggressive Growth's brokerage
transactions to certain broker-dealers that provided AIM with certain research,
statistical and other information. Such transactions amounted to $92,886,344 and
the related brokerage commissions were $223,343.
Brokerage commissions paid by the BBC Fund during the fiscal year ended
September 30, 1995, to brokers, other than its investment adviser Robert W.
Baird & Co. Incorporated ("Baird"), totaled $45,867. All of such brokers
provided research services to Baird. During such year, the BBC Fund did not pay
brokerage commissions to Baird. Brokerage commissions paid by the BBC Fund
during the fiscal year ended September 30, 1994 to brokers, other than Baird,
totaled $37,864. All of such brokers provided research services to Baird. During
such year, the BBC Fund did not pay Baird any brokerage commissions. Brokerage
commissions paid by the BBC Fund during the fiscal year ended September 30, 1993
to brokers, other than Baird, totaled $59,618. All of such brokers provided
research services to Baird. During such year, the BBC Fund paid Baird brokerage
commissions of $4,120.
PORTFOLIO TURNOVER
The portfolio turnover rate of Aggressive Growth, Charter,
Constellation, Weingarten and Blue Chip is shown under "Financial Highlights"
in the applicable Prospectus and the estimated portfolio turnover rate of
Capital Development is stated in the applicable Prospectus under the heading
"INVESTMENT PROGRAM - Portfolio Turnover." Higher portfolio turnover increases
transaction costs to the Fund.
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INVESTMENT OBJECTIVES AND POLICIES
The following discussion of investment policies supplements the
discussion of the investment objectives and policies set forth in the Prospectus
under the heading "Investment Program(s)."
Each of the Funds may invest, for temporary or defensive purposes, all
or substantially all of their assets in investment grade (high quality)
corporate bonds, commercial paper, or U.S. Government obligations. In addition,
a portion of each Fund's assets may be held, from time to time, in cash,
repurchase agreements or other short-term debt securities when such positions
are deemed advisable in light of economic or market conditions. For a
description of the various rating categories of corporate bonds and commercial
paper in which the Funds may invest, see the Appendix to this Statement of
Additional Information.
COMMON STOCKS -- The Funds will invest in common stocks. Common stocks
represent the residual ownership interest in the issuer and are entitled to the
income and increase in the value of the assets and business of the entity after
all of its obligations and preferred stocks are satisfied. Common stocks
generally have voting rights. Common stocks fluctuate in price in response to
many factors including historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
PREFERRED STOCKS -- The Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally dividends
as well) but is subordinated to the liabilities of the issuer in all respects.
As a general rule the market value of preferred stock with a fixed dividend rate
and no conversion element varies inversely with interest rates and perceived
credit risk, while the market price of convertible preferred stock generally
also reflects some element of conversion value. Because preferred stock is
junior to debt securities and other obligations of the issuer, deterioration in
the credit quality of the issuer will cause greater changes in the value of a
preferred stock than in a more senior debt security with similar stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
CONVERTIBLE SECURITIES -- The Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to nonconvertible income securities in
that they ordinarily provide a stable stream of income with generally higher
yields than those of common stocks of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure but
are usually subordinated to comparable nonconvertible securities. Convertible
securities may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument.
CORPORATE DEBT SECURITIES -- The Funds may invest in corporate debt
securities. Corporations issue debt securities of various types, including bonds
and debentures (which are long-term), notes (which may be short- or long-term),
bankers acceptances (indirectly secured borrowings to facilitate commercial
transactions) and commercial paper (short-term unsecured notes). These
securities typically provide for periodic payments of interest, at a rate which
may be fixed or adjustable, with payment of principal upon maturity and are
generally not secured by assets of the issuer or otherwise guaranteed. The
values of fixed rate income securities tend to vary inversely with changes in
interest rates, with longer-term securities generally being more volatile than
shorter-term securities. Corporate securities frequently are subject to call
provisions that entitle the issuer to repurchase such securities at a
predetermined price prior to their stated maturity. In the event that a security
is called during a period of declining interest rates, the Fund may be required
to reinvest the proceeds in securities having a lower yield. In addition, in the
event that a security was purchased at a premium over the
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call price, a Fund will experience a capital loss if the security is called.
Adjustable rate corporate debt securities may have interest rate caps and
floors.
Blue Chip will not invest in non-convertible corporate debt securities
rated below investment grade by S&P and Moody's or in unrated non-convertible
corporate debt securities believed by the Fund's investment adviser to be below
investment grade quality. Securities rated in the four highest long-term rating
categories by S&P and Moody's are considered to be "investment grade." S&P's
fourth highest long-term rating category is "BBB", with BBB being the lowest
investment grade rating. Moody's fourth highest long-term rating category is
"Baa", with Baa3 being the lowest investment grade rating. Publications of S&P
indicate that it assigns securities to the "BBB" rating category when such
securities are "regarded as having an adequate capacity to pay interest and
repay principal. Such securities normally exhibit adequate protection
parameters, but adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay," whereas securities rated AAA by
S&P are regarded as having "capacity to pay interest and repay principal [that]
is extremely strong." Publications of Moody's indicate that it assigns
securities to the "Baa rating category when such securities are considered as
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well," whereas securities rated Aaa by Moody's "are judged to
be of the best quality" and "carry the smallest degree of investment risk."
U.S. GOVERNMENT SECURITIES -- The Funds may invest in securities issued
or guaranteed by the United States government or its agencies or
instrumentalities. These include Treasury securities (bills, notes, bonds and
other debt securities) which differ only in their interest rates, maturities and
times of issuance. U.S. Government agency and instrumentality securities include
securities which are supported by the full faith and credit of the U.S.,
securities that are supported by the right of the agency to borrow from the U.S.
Treasury, securities that are supported by the discretionary authority of the
U.S. Government to purchase certain obligations of the agency or instrumentality
and securities that are supported only by the credit of such agencies. While the
U.S. Government may provide financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always will do
so. The U.S. government, its' agencies and instrumentalities do not guarantee
the market value of their securities and consequently the values of such
securities fluctuate.
FOREIGN SECURITIES
Each of Aggressive Growth, Blue Chip and Capital Development may invest
up to 25% of its total assets in foreign securities. Each of Charter, Weingarten
and Constellation may invest up to 20% of its total assets in foreign
securities. For purposes of computing such limitation American Depository
Receipts, European Depository Receipts and other securities representing
underlying securities of foreign issuers are treated as foreign securities.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. EDRs are receipts issued in Europe
which evidence a similar ownership arrangement. Generally, ADRs, in registered
form, are designed for use in the United States securities markets, and EDRs, in
bearer form, are designed for use in European securities markets. ADRs and EDRs
may be listed on stock exchanges, or traded in OTC markets in the United States
or Europe, as the case may be. ADRs, like other securities traded in the United
States, will be subject to negotiated commission rates. Investments by the Fund
in securities of foreign corporations may involve considerations and risks that
are different in certain respects from an investment in securities of U.S.
companies. Such risks include possible imposition of withholding taxes on
interest or dividends, possible adoption of foreign governmental restrictions on
repatriation of income or capital invested, or other adverse political or
economic developments. Additionally, it may be more difficult to enforce the
rights of a security holder against a foreign corporation, and information about
the operations of foreign corporations may be more difficult to obtain and
evaluate.
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RULE 144A SECURITIES
The Funds may each purchase securities which, while privately placed,
are eligible for purchase and sale pursuant to Rule 144A under the Securities
Act of 1933 (the "1933 Act"). This Rule permits certain qualified institutional
buyers, such as a Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Company's Board of Directors, will consider whether securities purchased
under Rule 144A are illiquid and thus subject to the Fund's restriction of
investing no more than 15% of its assets in illiquid securities. Determination
of whether a Rule 144A security is liquid or not is a question of fact. In
making this determination AIM will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, AIM could consider the (i) frequency of trades and quotes, (ii) number
of dealers and potential purchasers, (iii) dealer undertakings to make a market,
and (iv) nature of the security and of market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities will also be
monitored by AIM and, if as a result of changed conditions, it is determined
that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid
securities will be reviewed to determine what, if any, action is required to
assure that the Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Funds may each make
secured loans of portfolio securities amounting to not more than 33-1/3% of its
total assets. None of the Funds currently intend to engage in this investment
practice. Securities loans are made to banks, brokers and other financial
institutions pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the securities
lent marked to market on a daily basis. The collateral received will consist of
cash, U.S. Government securities, letters of credit or such other collateral as
may be permitted under the Fund's investment program. While the securities are
being lent, the Fund will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. The Fund has a right to
call each loan and obtain the securities on five business days' notice or, in
connection with securities trading on foreign markets, within such longer period
of time which coincides with the normal settlement period for purchases and
sales of such securities in such foreign markets. The Fund will not have the
right to vote securities while they are being lent, but it will call a loan in
anticipation of any important vote. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. Loans will only be made to persons deemed by
AIM to be of good standing and will not be made unless, in the judgment of AIM,
the consideration to be earned from such loans would justify the risk.
REPURCHASE AGREEMENTS
The Funds may each enter into repurchase agreements. A repurchase
agreement is an instrument under which a Fund acquires ownership of a debt
security and the seller (usually a broker or bank) agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. A repurchase agreement is collateralized
by the security acquired by the Fund and its value is marked to market daily in
order to minimize the Fund's risk. Repurchase agreements usually are for short
periods, such as one or two days, but may be entered into for longer periods of
time.
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Charter may enter into repurchase agreements (at any time, up to 50% of
its net assets), using only U.S. Government securities, for the sole purpose of
increasing its yield on idle cash. Charter will not invest in a repurchase
agreement of more than seven days' duration if, as a result of that investment,
the amount of repurchase agreements of more than seven days' duration would
exceed 15% of the assets of Charter.
SPECIAL SITUATIONS
Although Constellation does not currently intend to do so, it may
invest in "special situations." A special situation arises when, in the opinion
of the Fund's management, the securities of a particular company will, within a
reasonably estimable period of time, be accorded market recognition at an
appreciated value solely by reason of a development applicable to that company,
and regardless of general business conditions or movements of the market as a
whole. Developments creating special situations might include, among others:
liquidations, reorganizations, recapitalizations, mergers, material litigation,
technical breakthroughs, and new management or management policies. Although
large and well-known companies may be involved, special situations more often
involve comparatively small or unseasoned companies. Investments in unseasoned
companies and special situations often involve much greater risk than is
inherent in ordinary investment securities. Constellation will not, however,
purchase securities of any company with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the Fund's investment in all such companies, taken at cost, to exceed 5%
of the value of the Fund's total assets.
SHORT SALES
Although Blue Chip, Weingarten, Constellation, Aggressive Growth and
Capital Development do not currently intend to do so, they may each enter into
short sales transactions. Neither Weingarten, Constellation, Aggressive Growth,
Blue Chip nor Capital Development will make short sales of securities nor
maintain a short position unless at all times when a short position is open, the
Fund owns an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short. This is a
technique known as selling short "against the box." Such short sales will be
used by each of Blue Chip, Weingarten, Constellation, Aggressive Growth and
Capital Development for the purpose of deferring recognition of gain or loss for
federal income tax purposes. In no event may more than 10% of the value of the
respective Fund's net assets (10% of the value of total assets of Aggressive
Growth) be deposited or pledged as collateral for such sales at any time.
WARRANTS
The Funds may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors. The
investment in warrants by the Funds, valued at the lower of cost or market, may
not exceed 5% of the value of their net assets and not more than 2% of such
value may be warrants which are not listed on the New York or American Stock
Exchanges.
OPTIONS
Each of the Funds (except for Charter) is authorized to write (sell)
covered call options on the securities in which it may invest and to enter into
closing purchase transactions with respect to such options. Writing a call
option obligates a Fund to sell or deliver the option's underlying security, in
return for the strike
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price, upon exercise of the option. By writing a call option, the Fund receives
an option premium from the purchaser of the call option. Writing covered call
options is generally a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, the Fund would seek to mitigate the
effects of a price decline. By writing covered call options, however, the Fund
gives up the opportunity, while the option is in effect, to profit from any
price increase in the underlying security above the option exercise price. In
addition, the Fund's ability to sell the underlying security will be limited
while the option is in effect unless the Fund effects a closing purchase
transaction.
Capital Development and Blue Chip may purchase covered call and put
options, and may engage in strategies employing combinations of covered put and
call options. A put purchased by the Fund constitutes a hedge against a decline
in the price of a security owned by the Fund. It may be sold at a profit or loss
depending upon changes in the price of the underlying security. It may be
exercised at a profit provided that the amount of the decline in the price of
the underlying security below the exercise price during the option period
exceeds the option premium, or it may expire without value. A call constitutes a
hedge against an increase in the price of a security which the Fund has sold
short, it may be sold at a profit or loss depending upon changes in the price of
the underlying security, it may be exercised at a profit provided that the
amount of the increase in the price of the underlying security over the exercise
price during the option period exceeds the option premium, or it may expire
without value. The maximum loss exposure involved in the purchase of an option
is the cost of the option contract.
FUTURES CONTRACTS
Each of the Funds may purchase futures contracts. In cases of purchases
of futures contracts, an amount of cash and cash equivalents, equal to the cost
of the futures contracts (less any related margin deposits), will be segregated
with the Funds' custodian to collateralize the position and ensure that the use
of such futures contracts is unleveraged. Unlike when a Fund purchases or sells
a security, no price is paid or received by a Fund upon the purchase or sale of
a futures contract. Initially, a Fund will be required to deposit with its
custodian for the account of the broker a stated amount, as called for by the
particular contract, of cash or U.S. Treasury bills. This amount is known as
"initial margin." The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that futures
contract margin does not involve the borrowing of funds by the customer to
finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract assuming all contractual
obligations have been satisfied. Subsequent payments, called "variation margin,"
to and from the broker will be made on a daily basis as the price of the futures
contract fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-market." For example, when
a Fund has purchased a stock index futures contract and the price of the
underlying stock index has risen, that position will have increased in value and
the Fund will receive from the broker a variation margin payment with respect to
that increase in value. Conversely, where a Fund has purchased a stock index
futures contract and the price of the underlying stock index has declined, that
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. Variation margin payments would be made
in a similar fashion when a Fund has purchased an interest rate futures
contract. At any time prior to expiration of the futures contract, a Fund may
elect to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
A description of the various types of futures contracts that may be
utilized by the Funds is as follows:
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar (or, in the case of Aggressive Growth, other
currency) amount times the difference between
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the stock index value at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the underlying stocks in the index is made. Currently, stock index
futures contracts can be purchased or sold primarily with respect to broad based
stock indices such as the S&P's 500 Stock Index, the New York Stock Exchange
Composite Index, the American Stock Exchange Major Market Index, the NASDAQ --
100 Stock Index and the Value Line Stock Index. The stock indices listed above
consist of a spectrum of stocks not limited to any one industry such as utility
stocks. Utility stocks, at most, would be expected to comprise a minority of the
stocks comprising the portfolio of the index. The Funds will only enter into
stock index futures contracts in order to hedge the value of its portfolio
against changes in market conditions. When a Fund anticipates a significant
market or market sector advance, the purchase of a stock index futures contract
affords a hedge against not participating in such advance. Conversely, in
anticipation of or in a general market or market sector decline that adversely
affects the market values of a Fund's portfolio of securities, the Fund may sell
stock index futures contracts.
Foreign Currency Futures Contracts
With respect to Aggressive Growth, Blue Chip and Capital Development
only, futures contracts may also be used to hedge the risk of changes in the
exchange rate of foreign currencies.
OPTIONS ON FUTURES CONTRACTS
Blue Chip, Aggressive Growth and Capital Development may purchase
options on futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon exercise to
assume an offsetting futures position (a short position if the option is a call
and a long position if the option is a put) at a specified exercise price at any
time during the period of the option. Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. If an option on a futures contract is exercised on the last
trading date prior to the expiration date of the option, the settlement will be
made entirely in cash equal to the difference between the exercise price of the
option and the closing price of the futures contract on the expiration date.
Blue Chip, Aggressive Growth and Capital Development will purchase put
options on futures contracts to hedge against the risk of falling prices for
their respective portfolio securities. Blue Chip, Aggressive Growth and Capital
Development will purchase call options on futures contracts as a hedge against a
rise in the price of securities which it intends to purchase. Options on futures
contracts may also be used to hedge the risks of changes in the exchange rate of
foreign currencies. The purchase of a put option on a futures contract is
similar to the purchase of protective put options on a portfolio security or a
foreign currency. The purchase of a call option on a futures contract is similar
in some respects to the purchase of a call option on an individual security or a
foreign currency. Depending on the pricing of the option compared to either the
price of the futures contract upon which it based or the price of the underlying
securities or currency, it may or may not be less risky than ownership of the
futures contract or underlying securities or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks in connection with the use of futures
contracts and related options as hedging devices. One risk arises because of the
imperfect correlation between movements in the price of hedging instruments and
movements in the price of the stock, debt security or foreign currency which are
the subject of the hedge. If the price of a hedging instrument moves less than
the price of the stock, debt security or foreign currency which is the subject
of the hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt security or foreign
currency, a Fund will experience either a loss or gain on the hedging instrument
which will not be completely offset by movements in the price of the stock, debt
security or foreign currency which is the subject of the hedge. The use of
options futures
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contracts involves the additional risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option.
Successful use of hedging instruments by the Funds is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of foreign exchange rates. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments and
the investments being hedged, even a correct forecast by AIM of general market
trends may not result in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in its portfolio may decline. If
this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or, in the case of Blue Chip, Aggressive
Growth and Capital Development, purchase options only on exchanges or boards of
trade where there appears to be an active market, there is no assurance that a
liquid market on an exchange or a board of trade will exist for any particular
contract at any particular time. If there is not a liquid market, it may not be
possible to close a futures position or purchase an option at such time. In the
event of adverse price movements under those circumstances, the Fund would
continue to be required to make daily cash payments of maintenance margin on its
futures positions. The extent to which a Fund may engage in futures contracts
or, in the case of Blue Chip, Aggressive Growth and Capital Development, related
options, will be limited by Internal Revenue Code requirements for qualification
as a regulated investment company and a Fund's intent to continue to qualify as
such. The result of a hedging program cannot be foreseen and may cause a Fund to
suffer losses which it would not otherwise sustain.
CERTAIN INVESTMENTS
Aggressive Growth does not intend (a) to invest for the purposes of
influencing management or exercising control; (b) to purchase interests in oil,
gas or other mineral exploration or development programs; (c) to purchase
securities which are subject to restrictions on disposition under the Securities
Act of 1933; (d) to buy or sell mortgages; (e) to purchase securities of any
company with a record of less than three years' continuous operations (including
that of predecessors) if such purchase would cause the Fund's aggregate
investments in all such companies taken at cost to exceed 5% of the Fund's total
assets taken at market value; and (f) to purchase or retain the securities of
any issuer if the officers or directors of the Company and its investment
advisor who own beneficially more than 1/2 of 1% of the securities of such
issuer together own more than 5% of the securities of such issuer. Aggressive
Growth may purchase securities directly from an issuer for its own portfolio and
may dispose of such securities.
The investment policies stated above are not fundamental policies of
the Funds and may be changed by the Board of Directors of the Company without
shareholder approval. Shareholders will be notified before any material change
in the investment policies stated above become effective.
INVESTMENT RESTRICTIONS
The following additional fundamental policies and investment
restrictions have been adopted by each Fund as indicated and, except as noted,
such policies cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund, as defined in the 1940 Act.
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BLUE CHIP
Blue Chip may not:
(a) issue bonds, debentures or senior equity securities;
(b) concentrate its investments; that is, invest 25% or more
of the value of its assets in issuers which conduct their business
operations in the same industry;
(c) invest in real estate, except that this restriction does
not preclude investments in real estate investment trusts;
(d) write, purchase, or sell puts, calls, straddles, spreads
or combinations thereof (other than covered put and call options), or
sell securities short (except against the box collateralized by not
more than 10% of its net assets) or deal in commodities;
(e) make loans, except that the purchase of a portion of an
issue of publicly distributed bonds, debentures or other debt
securities, or purchasing short-term obligations, is not considered to
be a loan for purposes of this restriction, provided that the Fund may
lend its portfolio securities provided the value of such loaned
securities does not exceed 33-1/3% of its total assets;
(f) purchase securities on margin, except that the Fund may
obtain such short term credits as may be necessary for the clearance of
purchases or sales of securities;
(g) borrow money or pledge its assets except that, as a
temporary measure for extraordinary or emergency purposes and not for
investment purposes, the Fund may borrow from banks (including the
Fund's custodian bank) amounts of up to 10% of the value of its total
assets, and may pledge amounts of up to 20% of its total assets to
secure such borrowings; or
(h) act as an underwriter of securities of other issuers.
In addition, Blue Chip may not (a) purchase warrants, valued at the
lower of cost or market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges; (b) purchase or retain the securities of
any issuer, if the officers and directors of the Company, its advisors or
distributor who own individually more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such issuer; (c) with
respect to 75% of the Fund's total assets, invest more than 5% of the total
assets of the Fund (valued at market) in securities of any one issuer (other
than obligations of the U.S. Government and its instrumentalities) or purchase
more than 10% of the outstanding securities of any one issuer or more than 10%
of any class of securities of an issuer; (d) deal in forward contracts; (e)
invest in interests in oil, gas or other mineral exploration or development
programs; or (f) invest in securities of companies which have a record of less
than three years of continuous operation if such purchase at the time thereof
would cause more than 5% of the total assets of the Fund to be invested in the
securities of such companies (with such period of three years to include the
operation of any predecessor company or companies, partnership or individual
enterprise if the company whose securities are proposed for investment by the
Fund has come into existence as the result of a merger, consolidation,
reorganization or purchase of substantially all of the assets of such
predecessor company or companies, partnership or individual enterprise). These
additional restrictions are not fundamental, and may be changed by the Board of
Directors of the Company without shareholder approval.
To permit the sale of shares of Blue Chip in Texas, investments by Blue
Chip in warrants, valued at the lower of cost or market, may not exceed 5% of
the value of Blue Chip's net assets. Included within that amount, but not to
exceed 2% of Blue Chip's net assets, may be warrants which are not listed on the
New York or American Stock Exchanges. This restriction is not a fundamental
policy.
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The Fund will comply with Texas Rule 123.2(6), and follow SEC
guidelines, that provide that loans of the Fund's securities will be fully
collateralized.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
CHARTER
Charter may not:
(a) purchase the securities of any one issuer (except securities issued
or guaranteed by the U.S. Government) if, immediately after and as a result of
such purchase, (i) the value of the holdings of the Fund in the securities of
such issuer exceeds 5% of the value of the Fund's total assets, or (ii) the Fund
owns more than 10% of the outstanding voting securities of any one class of
securities of such issuer;
(b) purchase securities of other investment companies;
(c) concentrate its investments; that is, invest 25% or more of the
value of its assets in any particular industry;
(d) purchase or sell real estate or other interests in real estate
(except that this restriction does not preclude investments in marketable
securities of companies engaged in real estate activities);
(e) write, purchase, or sell puts, calls, straddles, spreads or
combinations thereof, or deal in commodities or oil, gas, or other mineral
exploration or development programs;
(f) make loans (except that the purchase of a portion of an issue of
publicly distributed bonds, debentures or other debt securities, or entering
into a repurchase agreement, is not considered to be a loan for purposes of this
restriction), provided that the Fund may lend its portfolio securities provided
the value of such loaned securities does not exceed 33-1/3% of its total assets;
(g) purchase securities on margin or sell short;
(h) borrow money or pledge its assets except that, as a temporary
measure for extraordinary or emergency purposes and not for investment purposes,
the Fund may borrow from banks (including the Fund's custodian bank) amounts of
up to 10% of the value of its total assets, and may pledge amounts of up to 20%
of its total assets to secure such borrowings;
(i) invest in companies for the purpose of exercising control or
management;
(j) act as an underwriter of securities of other issuers;
(k) purchase from or sell to any officer, director or employee of the
Fund, or its advisors or distributor, or to any of their officers or directors,
any securities other than shares of the capital stock of Charter;
(l) purchase or retain the securities of any issuer if those officers
and directors of the Company, its advisors or distributor owning individually
more than 1/2 of 1% of the securities of such issuer, together own more than 5%
of the securities of such issuer; or
(m) invest any of its assets in securities of companies having a record
of less than five years' continuous operation, including the operations of their
predecessors.
To permit the sale of shares of Charter in Texas, investments by
Charter in warrants, valued at the lower of cost or market, may not exceed 5% of
the value of Charter's net assets. Included within that amount,
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but not to exceed 2% of Charter's net assets, may be warrants which are not
listed on the New York or American Stock Exchanges. This restriction is not a
fundamental policy.
The Fund will comply with Texas Rule 123.2(6), and follow SEC
guidelines, that provide that loans of the Fund's securities will be fully
collateralized.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
WEINGARTEN
Weingarten may not:
(a) issue bonds, debentures or senior equity securities;
(b) underwrite securities of other companies or purchase restricted
securities ("letter stock");
(c) invest in real estate, except that the Fund may purchase securities
of real estate investment trusts;
(d) lend money, except in connection with the acquisition of a portion
of an issue of publicly distributed bonds, debentures or other corporate or
governmental obligations, provided that the Fund may lend its portfolio
securities provided the value of such loaned securities does not exceed 33-1/3%
of its total assets;
(e) purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(f) purchase shares in order to control management of a company;
(g) invest in commodities or commodity contracts or in puts or calls
except as set forth above under "Investment Objectives and Policies - Options";
(h) invest in securities of other investment companies;
(i) invest 25% or more of the value of its total assets in securities
of issuers all of which conduct their principal business activities in the same
industry; or
(j) borrow money or pledge its assets, except that, as a temporary
measure for extraordinary or emergency purposes and not for investment purposes,
the Fund may borrow from banks (including the Fund's custodian bank) amounts of
up to 10% of the value of its total assets, and may pledge amounts of up to 20%
of its total assets to secure such borrowings.
In addition, Weingarten may not (a) purchase warrants, valued at the
lower of cost or market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges; (b) purchase or retain the securities of
any issuer, if the officers and directors of the Company, its advisors or
distributor who own individually more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such issuer; (c) invest
more than 5% of the total assets of the Fund (valued at market) in securities of
any one issuer (other than obligations of the U.S. Government and its
instrumentalities); (d) purchase more than 10% of the outstanding securities of
any one issuer or more than 10% of any class of securities of an issuer; (e)
deal in forward contracts; (f) invest in interests in oil, gas or other mineral
exploration or development programs; or (g) invest in securities of companies
which have a record of less than three years of continuous operation if such
purchase at the time thereof would cause more than 5% of the total assets of the
Fund to be invested in the securities of such companies (with such period of
three years to include the operation of any predecessor company or companies,
partnership or individual enterprise if the company whose securities are
proposed for investment
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by the Fund has come into existence as the result of a merger, consolidation,
reorganization or purchase of substantially all of the assets of such
predecessor company or companies, partnership or individual enterprise). These
additional restrictions are not fundamental, and may be changed by the Board of
Directors of the Company without shareholder approval.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
CONSTELLATION
Constellation may not:
(a) invest for the purpose of exercising control over or management of
any company;
(b) engage in the underwriting of securities of other issuers;
(c) purchase and sell real estate or commodities or commodity
contracts;
(d) make loans, except by the purchase of a portion of an issue of
publicly distributed bonds, debentures or other obligations, provided that the
Fund may lend its portfolio securities provided the value of such loaned
securities does not exceed 33-1/3% of its total assets;
(e) invest in interests in oil, gas or other mineral exploration or
development programs;
(f) invest in securities of other investment companies; or
(g) invest 25% or more of the value of its total assets in securities
of issuers all of which conduct their principal business activities in the same
industry.
In addition, Constellation treats as fundamental its policy concerning
borrowing described under the caption "Investment Programs - Investment
Restrictions - Borrowing" in the Prospectus. In accordance with this policy, the
Fund may borrow funds from a bank (including its custodian bank) to purchase or
carry securities only if, immediately after such borrowing, the value of the
Fund's assets, including the amount borrowed, less its liabilities, is equal to
at least 300% of the amount borrowed, plus all outstanding borrowings. For the
purpose of determining this 300% asset coverage requirement, the Fund's
liabilities will not include the amount borrowed but will include the market
value, at the time of computation, of all securities borrowed by the Fund in
connection with short sales. The amount of borrowing will also be limited by the
applicable margin limitations imposed by the Federal Reserve Board. If at any
time the value of the Fund's assets should fail to meet the 300% asset coverage
requirement, the Fund will, within three days, reduce its borrowings to the
extent necessary. The Fund may be required to eliminate partially or totally its
outstanding borrowings at times when it may not be desirable for it to do so.
The Board of Directors of the Company has also adopted the following
limitations which are not matters of fundamental policy of Constellation and
which may be changed without shareholder approval:
(a) the Fund may not purchase or retain the securities of any issuer,
if those officers and directors of the Company, its advisors or distributor
owning individually more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer; or
(b) the Fund may not purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of the Fund's net assets, and no more than
2% of such value may be warrants which are not listed on the New York or
American Stock Exchanges.
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Except for the borrowing policy, if a percentage restriction is adhered
to at the time of investment, a later change in the percentage of such
investment held by a Fund resulting solely from changes in values or assets,
will not be considered to be a violation of the restriction.
AGGRESSIVE GROWTH
Aggressive Growth may not:
(a) with respect to 75% of the total assets of the Fund, purchase the
securities of any issuer if such purchase would cause more than 5% of the value
of its assets to be invested in the securities of such issuer (except U.S.
Government securities including securities issued by its agencies and
instrumentalities);
(b) concentrate 25% or more of its investments in a particular
industry;
(c) make short sales of securities (unless at all times when a short
position is open it either owns an amount of such securities or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short, and unless not more than 10% of the Fund's total assets
(taken at current value) is held for such sales at any one time) or purchase
securities on margin, but it may obtain such short-term credit as is necessary
for the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures contracts and
options thereon;
(d) act as a securities underwriter under the Securities Act of 1933;
(e) make loans, except (i) through the purchase of a portion of an
issue of bonds or other obligations of types commonly offered publicly and
purchased by financial institutions, and (ii) through the purchase of short-term
obligations (maturing within a year), including repurchase agreements, provided
that the Fund may lend its portfolio securities provided the value of such
loaned securities does not exceed 33-1/3% of its total assets;
(f) borrow, except that the Fund may enter into stock index futures
contracts and that the right is reserved to borrow from banks, provided that no
borrowing may exceed one-third of the value of its total assets (including the
proceeds of such borrowing) and may secure such borrowings by pledging up to
one-third of the value of its total assets. (For the purposes of this
restriction, neither collateral arrangements with respect to margin for a stock
index futures contracts nor the segregation of securities in connection with
short sales are deemed to be a pledge of assets);
(g) purchase the securities of any other investment company, except
that it may make such a purchase as part of a merger, consolidation or
acquisition of assets and except for the investment in such securities of funds
representing compensation otherwise payable to the directors of the Company
pursuant to any deferred compensation plan existing at any time between the
Company and one or more of its directors; or
(h) buy or sell commodities, commodity contracts or real estate.
To permit the sale of shares of Aggressive Growth in Texas, Aggressive
Growth may not: (a) purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of the Fund's net assets, and no more than 2% of such
value may be warrants which are not listed on the New York or American Stock
Exchanges; (b) invest more than 15% of its average net assets at the time of
purchase of investments which are not readily marketable. These restrictions are
not fundamental policies and may be changed by the directors without shareholder
approval.
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Except for the borrowing policy, if a percentage restriction is adhered
to at the time of investment, a later change in the percentage of such
investment held by a Fund resulting solely from changes in values or assets will
not be considered to be a violation of the restriction.
CAPITAL DEVELOPMENT
Capital Development may not:
(a) with respect to 75% of the total assets of the Fund, purchase the
securities of any one issuer (except securities issued or guaranteed by the U.S.
Government) if, immediately after and as a result of such purchase, (i) the
value of the holdings of the Fund in the securities of such issuer exceeds 5% of
the value of the Fund's total assets, or (ii) the Fund owns more than 10% of the
outstanding voting securities of any one class of securities of such issuer;
(b) concentrate its investments; that is, invest 25% or more of the
value of its assets in issuers who conduct their business operations in the same
industry;
(c) buy or sell commodities or commodity contracts or purchase or sell
real estate or other interests in real estate including real estate limited
partnership interests, except that this restriction does not preclude
investments in marketable securities of companies engaged in real estate
activities or in master limited partnership interests that are traded on a
national securities exchange;
(d) make loans, except that the purchase of a portion of an issue of
publicly distributed bonds, debentures or other debt securities, or purchasing
short-term obligations, is not considered to be a loan for purposes of this
restriction, provided that the Fund may lend its portfolio securities provided
the value of such loaned securities does not exceed 33-1/3% of its total assets;
(e) purchase securities on margin, except that the Fund may obtain such
short term credits as may be necessary for the clearance of purchases or sales
of securities, or sell securities short (except against the box and
collateralized by not more than 10% of its net assets);
(f) borrow money or pledge its assets except that, as a temporary
measure for extraordinary or emergency purposes and not for investment purposes,
the Fund may borrow from banks (including the Fund's custodian bank) provided
that no borrowing may exceed one-third of the value of its total assets,
including the proceeds of such borrowings, and may secure such borrowings by
pledging up to one-third of the value of its total assets.
(g) act as an underwriter of securities of other issuers.
In addition, Capital Development may not (a) purchase warrants, valued
at the lower of cost or market, in excess of 5% of the value of the Fund's net
assets, and no more than 2% of such value may be warrants which are not listed
on the New York or American Stock Exchanges; (b) purchase or retain the
securities of any issuer, if the officers and directors of the Company, its
advisors or distributor who own individually more than 1/2 of 1% of the
securities of such issuer, together own more than 5% of the securities of such
issuer; (c) deal in forward contracts (other than foreign exchange transactions
for hedging purposes); (d) invest in interests in oil, gas or other mineral
exploration or development programs; or (e) invest in securities of companies
which have a record of less than three years of continuous operation if such
purchase at the time thereof would cause more than 5% of the total assets of the
Fund to be invested in the securities of such companies (with such period of
three years to include the operation of any predecessor company or companies,
partnership or individual enterprise if the company whose securities are
proposed for investment by the Fund has come into existence as the result of a
merger, consolidation, reorganization or purchase of substantially all of the
assets of such predecessor company or companies, partnership or individual
enterprise). These additional restrictions are not fundamental, and may be
changed by the Board of Directors of the Company without shareholder approval.
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To permit the sale of shares of Capital Development in Texas,
investments by the Fund in warrants, valued at the lower of cost or market, may
not exceed 5% of the value of the Fund's net assets. Included within that
amount, but not to exceed 2% of the Fund's net assets, may be warrants which are
not listed on the New York or American Stock Exchanges. This restriction is not
a fundamental policy.
The Fund will comply with Texas Rule 123.2(6), and follow SEC
guidelines, that provide that loans of the Fund's securities will be fully
collateralized.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
ADDITIONAL RESTRICTIONS
In order to permit the sale of the Funds' shares in certain states,
each Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of fundamental
policy, and should a Fund determine that any such commitment is no longer in the
best interests of the Fund and its shareholders, it will revoke the commitment
by terminating sales of its shares in the states involved.
In order to comply with an undertaking to the State of Texas, each Fund
has agreed that any restriction on investments in "oil, gas and other mineral
exploration or development programs" shall include mineral leases and any
restriction on investments in "real estate or other interests in real estate"
shall include real estate limited partnerships.
In order to comply with an undertaking to the State of Arkansas, Blue
Chip and Capital Development have agreed to limit investments in securities
which the Company is restricted from selling to the public without
registration under the Securities Act of 1933 to 10% of their respective total
assets.
For purposes of the investment restrictions described above, the Funds
do not consider investments in financial futures to be investments in
commodities.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during the last five years are set forth below. Unless otherwise
indicated, the address of each director and officer is 11 Greenway Plaza, Suite
1919, Houston, TX 77046-1173. All of the Company's executive officers hold
similar offices with some or all of the other AIM Funds.
*CHARLES T. BAUER, Director and Chairman (77)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Institutional Fund Services, Inc. and Fund Management Company.
- --------------------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
24
<PAGE> 63
BRUCE L. CROCKETT, Director (52)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT; (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director,
CF& I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLING, Director (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., A I M Institutional Fund Services, Inc. and Fund Management
Company.
JOHN F. KROEGER, Director (71)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Trust, Flag Investors Emerging
Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag Investors
Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc., Flag
Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund, Inc.,
Flag Investors Value Builder Fund, Inc., Flag Investors Maryland Intermediate
Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities Fund, Inc.,
Alex. Brown Cash Reserve Fund, Inc. and North American Government Bond Fund,
Inc. (investment companies). Formerly, Consultant, Wendell & Stockel Associates,
Inc. (consulting firm).
- --------------------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
25
<PAGE> 64
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (73)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
***JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc.
SCOTT G. LUCAS, Senior Vice President (36)
Director and Senior Vice President, A I M Capital Management, Inc.; and
Vice President, A I M Management Group Inc. and A I M Advisors, Inc..
JONATHAN C. SCHOOLAR, Senior Vice President (34)
Director and Senior Vice President, A I M Capital Management, Inc.; and
Vice President, A I M Advisors, Inc.
- --------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
26
<PAGE> 65
***CAROL F. RELIHAN, Senior Vice President and Secretary (41)
Senior Vice President, General Counsel and Secretary, A I M Advisors
Inc.; Vice President, General Counsel and Secretary, A I M Management Group
Inc.; Vice President and General Counsel, Fund Management Company; Vice
President, A I M Distributors, Inc.; and Vice President, A I M Capital
Management, Inc., A I M Fund Services, Inc. and A I M Institutional Fund
Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for meeting
with the Company's auditors to review audit procedures and results and to
consider any matters arising from an audit to be brought to the attention of the
directors as a whole with respect to the Company's fund accounting or its
internal accounting controls, and considering such matters as may from time to
time be set forth in a charter adopted by the Board of Directors and such
committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investment Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Company maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, and considering such matters as may from time to time be set forth in
a charter adopted by the Board of Directors and such committee.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee attended. The Directors
of the Company who do not serve as officers of the Company are compensated for
their services according to a fee schedule which recognizes the fact that they
also serve as directors or trustees of certain other investment companies
advised or managed by AIM. Each
- --------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
27
<PAGE> 66
such director receives a fee, allocated among the AIM Funds for which he serves
as a director or trustee, which consists of an annual retainer component and a
meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each director of the Company:
<TABLE>
<CAPTION>
================================================================================
RETIREMENT
AGGREGATE BENEFITS
COMPENSATION ACCRUED TOTAL
FROM THE BY ALL AIM COMPENSATION
DIRECTOR COMPANY(1) FUNDS(2) FROM ALL AIM FUNDS(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------
Bruce L. Crockett 13,461 3,655 57,750
- --------------------------------------------------------------------------------
Owen Daly II 14,385 18,662 58,125
- --------------------------------------------------------------------------------
Carl Frischling 13,938 11,323 57,250
- --------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- --------------------------------------------------------------------------------
John F. Kroeger 14,807 22,313 58,125
- --------------------------------------------------------------------------------
Lewis F. Pennock 13,476 5,067 58,125
- --------------------------------------------------------------------------------
Ian Robinson 13,373 15,381 56,750
- --------------------------------------------------------------------------------
Louis S. Sklar 14,003 6,632 57,250
================================================================================
</TABLE>
(1) The total amount of compensation deferred by all Directors of the Company
during the fiscal year ended October 31, 1995, including interest earned
thereon, was $53,856.
(2) During the fiscal year ended October 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$31,585. Data reflects compensation estimated for the calendar year ended
December 31, 1995.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as Director or
Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling, Robinson
and Sklar each serves as a Director or Trustee of a total of ten AIM Funds.
Data reflects compensation estimated for the calendar year ended December
31, 1995.
28
<PAGE> 67
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each eligible director is entitled to receive an annual benefit from the AIM
Funds commencing on the first day of the calendar quarter coincident with or
following his date of retirement equal to 75% of the retainer paid or accrued by
the AIM Funds for such director during the twelve-month period immediately
preceding the director's retirement (including amounts deferred under a separate
agreement between the AIM Funds and the director) for the number of such
director's years of service (not in excess of 10 years of service) completed
with respect to any of the AIM Funds. Such benefit is payable to each eligible
director in quarterly installments. If an eligible director dies after attaining
the normal retirement date but before receipt of any benefits under the Plan
commences, the director's surviving spouse (if any) shall receive a quarterly
survivor's benefit equal to 50% of the amount payable to the deceased director
for no more than ten years beginning the first day of the calendar quarter
following the date of the director's death. Payments under the Plan are not
secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar are
8, 9, 18, 18, 14, 8 and 6 years, respectively.
<TABLE>
<CAPTION>
============================================================
Number of
Years of Annual Compensation
Service With Paid By All AIM Funds
the AIM Fund
$55,000 $60,000 $65,000
============================================================
<S> <C> <C> <C>
10 $41,250 $45,000 $48,750
------------------------------------------------------------
9 $37,125 $40,500 $43,875
------------------------------------------------------------
8 $33,000 $36,000 $39,000
------------------------------------------------------------
7 $28,875 $31,500 $34,125
------------------------------------------------------------
6 $24,750 $27,000 $29,250
------------------------------------------------------------
5 $20,625 $22,500 $24,375
============================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Company, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of ten
years beginning on the date the deferring director's
29
<PAGE> 68
retirement benefits commence under the Plan. The Company's Board of Directors,
in its sole discretion, may accelerate or extend the distribution of such
deferral accounts after the deferring director's termination of service as a
director of the Company. If a deferring director dies prior to the distribution
of amounts in his deferral account, the balance of the deferral account will be
distributed to his designated beneficiary in a single lump sum payment as soon
as practicable after such deferring director's death. The Agreements are not
funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring directors have the status of unsecured creditors of the
Company and of each other AIM Fund from which they are deferring compensation.
The Company paid the law firm of Kramer, Levin, Naftalis, Nessen, Kamin
& Frankel $6,853, $13,238, $4,657 and $14,394 in legal fees for services
provided to Charter, Weingarten, Aggressive Growth and Constellation,
respectively, during the fiscal year ended October 31, 1995. Mr. Carl
Frischling, a director of the Company, is a partner in such firm.
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES AND SUB-ADVISORY AGREEMENTS
AIM is a wholly-owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 1919, Houston, Texas 77046. AIM
Management is a holding company that has been engaged in the financial services
business since 1976. Certain of the directors and officers of AIM are also
executive officers of the Company and their affiliations are shown under
"Directors and Officers". AIM Capital, a wholly owned subsidiary of AIM, is
engaged in the business of providing investment advisory services to investment
companies, corporations, institutions and other accounts.
AIM was organized in 1976, and, together with its affiliates, advises
or manages 43 investment company portfolios. As of May 1, 1996, the total assets
of the investment company portfolios advised or managed by AIM and its
affiliates were approximately $51 billion.
AIM and the Company have adopted a Code of Ethics (the "Code") which
requires investment personnel and certain other employees (a) to pre-clear
personal securities transactions subject to the Code, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund, and (d) abide by certain other provisions under the
Code. The Code also prohibits investment personnel and all other AIM employees
from purchasing securities in an initial public offering. Personal trading
reports are reviewed periodically by AIM, and the Board of Directors reviews
quarterly and annual reports (including information on any substantial
violations of the Code). Sanctions for violation of the Code may include
censure, monetary penalties, suspension or termination of employment.
The Funds have entered into a Master Investment Advisory Agreement
dated as of October 18, 1993, as amended (the "Master Advisory Agreement") and a
Master Administrative Services Agreement dated as of October 18, 1993, as
amended (the "Master Administrative Services Agreement") with AIM. In addition,
AIM has entered into a Master Sub-Advisory Agreement dated as of October 18,
1993 (the "Master Sub-Advisory Agreement") with AIM Capital with respect to
Charter, Weingarten and Constellation. Prior investment advisory agreements (the
"Prior Investment Advisory Agreements"), administrative services agreements (the
"Prior Administrative Services Agreements") and sub-advisory agreements (the
"Prior Sub-Advisory Agreements"), with substantially identical terms (including
the fee schedules) to the Master Advisory Agreement, the Master Administrative
Services Agreement and the Master Sub-Advisory Agreement, respectively, were
previously in effect. Prior to June 30, 1992, Aggressive Growth's investment
advisor was CIGNA Investments, Inc. ("CII") (such agreement hereinafter referred
to as the "CII Agreement").
Both the Master Advisory Agreement and the Master Sub-Advisory
Agreement provide that the Fund will pay or cause to be paid all expenses of the
Fund not assumed by AIM or AIM Capital, including, without limitation: brokerage
commissions, taxes, legal, auditing or governmental fees, the cost of preparing
share
30
<PAGE> 69
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption, and repurchase of shares, expenses of registering
and qualifying shares for sale, expenses relating to directors and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Company on behalf of
the Fund in connection with membership in investment company organizations, the
cost of printing copies of prospectuses and statements of additional information
distributed to the Funds' shareholders and all other charges and costs of the
Funds' operations unless otherwise explicitly provided.
The Master Advisory Agreement and the Master Sub-Advisory Agreement
each provide that if, for any fiscal year, the total of all ordinary business
expenses of any Fund, including all investment advisory fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses, such
as litigation, exceed the applicable expense limitations imposed by state
securities regulations in any state in which such Fund's shares are qualified
for sale, as such limitations may be raised or lowered from time to time, the
aggregate of all such investment advisory fees with respect to such Fund shall
be reduced by the amount of such excess. The amount of any such reduction to be
borne by AIM shall be deducted from the monthly investment advisory fees
otherwise payable to AIM with respect to such Fund during such fiscal year. If
required pursuant to such state securities regulations, AIM will reimburse each
Fund, no later than the last day of the first month of the next succeeding
fiscal year, for any such annual operating expenses (after reduction of all
investment advisory fees in excess of such limitation).
The Master Advisory Agreement and the Master Sub-Advisory Agreement
became effective on October 18, 1993 and will continue in effect from year to
year thereafter only if such continuance is specifically approved at least
annually by (i) the Company's Board of Directors or the vote of a "majority of
the outstanding voting securities" of the Funds (as defined in the 1940 Act),
and (ii) the affirmative vote of a majority of the directors who are not parties
to the agreements or "interested persons" of any such party (the "Non-Interested
Directors") by votes cast in person at a meeting called for such purpose. Each
agreement provides that the Funds, AIM (in the case of the Master Advisory
Agreement) or AIM Capital (in the case of the Master Sub-Advisory Agreement) may
terminate such agreement on 60 days' written notice without penalty. Each
agreement terminates automatically in the event of its assignment.
With respect to each of Charter and Constellation, AIM receives a fee
calculated at an annual rate of 1.0% of the first $30 million of such Fund's
average daily net assets, plus 0.75% of such Fund's average daily net assets in
excess of $30 million to and including $150 million, plus 0.625% of such Fund's
average daily net assets in excess of $150 million. With respect to Weingarten,
AIM's fee is calculated at an annual rate of 1.0% of the first $30 million of
the Fund's average daily net assets, plus 0.75% of the Fund's average daily net
assets in excess of $30 million to and including $350 million, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. With respect to
Aggressive Growth, AIM's fee is calculated at an annual rate of 0.80% of the
first $150 million of the Fund's average daily net assets, plus 0.625% of the
Fund's average daily net assets in excess of $150 million. With respect to Blue
Chip and Capital Development, AIM is entitled to receive a fee calculated at an
annual rate of 0.75% of the first $350 million of such Fund's average daily net
assets, plus 0.625% of such Fund's average daily net assets in excess of $350
million. As compensation for its services, AIM pays 50% of the advisory fees it
receives pursuant to the Master Advisory Agreement with respect to Charter,
Weingarten and Constellation to AIM Capital.
31
<PAGE> 70
Each Fund paid to AIM the following advisory fees net of any expense
limitations for the years ended October 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Charter.................... $10,890,335 $10,447,924 $ 9,635,490
Weingarten................. 25,448,131 26,472,250 32,301,167
Constellation.............. 31,042,229 19,926,116 12,398,962
Aggressive Growth.......... 6,974,263 1,903,277 413,370*
</TABLE>
* Fee paid by Aggressive Growth was for the ten-month period ended
October 31, 1993.
Aggressive Growth paid AIM a management fee in the amount of $413,370
for the six-month period ended December 31, 1992 under the Prior Investment
Advisory Agreements. For the fiscal year ended December 31, 1992, Aggressive
Growth paid CII, pursuant to the CII Agreement, fees net of the expense
limitation of $30,905 in the amount of $17,206. Management fees before reduction
of the expense limitation would have been $48,111 for such period.
AIM, in turn, paid the following sub-advisory fees to AIM Capital, as
sub-advisor for each Fund (other than Aggressive Growth), for the years ended
October 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Charter.................... $ 5,445,168 $ 5,223,962 $ 4,817,745
Weingarten................. 12,724,066 13,236,125 16,150,583
Constellation.............. 15,521,115 9,963,058 6,199,481
</TABLE>
Prior to June 3, 1996, the investment adviser to Blue Chip was Baird.
Baird was also the Fund's distributor. Baird is an indirect partially-owned
subsidiary of, and controlled by, The Northwestern Mutual Life Insurance
Company. The BBC Fund and Baird entered into an investment advisory agreement
pursuant to which Baird furnished continuous investment advisory services to the
BBC Fund. That investment advisory agreement was terminated in connection with
the reorganization of the BBC Fund. During the fiscal years ended September 30,
1995, September 30, 1994 and September 30, 1993, the BBC Fund paid Baird fees of
$469,802, $454,724 and $489,616, respectively.
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting and, shareholder
services and other administrative services to each Fund which are not required
to be performed by AIM under the Master Advisory Agreement. For such services,
AIM would be entitled to receive from each Fund reimbursement of its costs or
such reasonable compensation as may be approved by the Company's Board of
Directors. The Master Administrative Services Agreement became effective on
October 18, 1993 and will continue in effect until June 30, 1996 and from year
to year thereafter only if such continuance is specifically approved at least
annually by (i) the Company's Board of Directors or the vote of a "majority of
the outstanding voting securities" of the Funds (as defined in the 1940 Act),
and (ii) the affirmative vote of a majority of the Non-Interested Directors by
votes cast in person at a meeting called for such purpose.
In addition, the Transfer Agency and Service agreement for the Fund
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly-owned subsidiary of AIM, will perform certain shareholder services for
the Fund for a fee per account serviced. The Transfer Agency and Service
Agreement provides that AFS will receive a per account fee plus out-of-pocket
expenses to process orders for purchases, redemptions and exchanges of shares,
prepare and transmit payments for dividends and distributions declared by the
fund, maintain shareholder accounts and provide shareholders with information
regarding the Fund and their accounts. The Transfer Agency and Service Agreement
became effective on November 1, 1994.
32
<PAGE> 71
The Funds paid AIM the following amounts as reimbursement of
administrative services costs for the years ended October 31, 1995, 1994 and
1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Charter................... $109,054 $ 980,837 $ 806,712
Weingarten................ 182,595 3,161,130 3,168,957
Constellation............. 173,257 2,196,752 1,119,692
Aggressive Growth......... 71,528 472,140 65,561*
</TABLE>
* Fee paid by Aggressive Growth was for the ten-month period ended
October 31, 1993.
For the six-month period ended December 31, 1992, AIM received
administrative services fees from Aggressive Growth of $12,353 under the Prior
Administrative Services Agreements.
For the period from November 1, 1993 through October 31, 1994, AFS
received shareholder services fees from AIM with respect to Class A shares of
Charter, Weingarten, Aggressive Growth and Constellation in the amount of
$890,434, $3,015,921, $424,814 and $2,080,638, respectively, under the AFS
Administrative Services Agreement between AIM and AFS. The agreement was
terminated November 1, 1994.
For the period November 1, 1994 through October 31, 1995, AFS received
transfer agency and shareholder services fees with respect to Class A shares of
Charter, Weingarten, Aggressive Growth and Constellation in the amounts of
$1,555,524, $4,006,530, $1,198,145 and $4,943,213, respectively. For the period
June 26, 1995 (inception date for Class B shares) through October 31, 1995, AFS
received transfer agency and shareholder services fees with respect to Class B
shares of Charter and Weingarten in the amount of $13,197 and $10,301,
respectively.
Prior to June 3, 1996, FMI served as the administrator to the BBC Fund.
Pursuant to the administration agreement between FMI and the BBC Fund, FMI
prepared and maintained the books, accounts and other documents required by the
1940 Act, determined the fund's net asset value, responded to shareholder
inquiries, prepared the fund's financial statements and excise tax returns,
prepared reports and filings with the Securities and Exchange Commission,
furnished statistical and research data, clerical, accounting and bookkeeping
services and stationery and office supplies, and maintained the fund's financial
accounts and records and generally assisted in all aspects of the fund's
operations other than portfolio management. This administration agreement
terminated in connection with the corporate reorganization of the BBC Fund.
During the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, the BBC Fund paid FMI fees of $46,743, $45,724 and $48,205,
respectively.
THE DISTRIBUTION PLANS
THE CLASS A PLAN. The Company has adopted a Master Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act relating to the Class A shares of the
Funds (the "Class A Plan"). The Class A Plan provides that the Class A shares
pay 0.35% per annum of their daily average net assets in the case of Blue Chip
and Capital Development, 0.30% per annum of their average daily net assets in
the case of Charter, Weingarten and Constellation and 0.25% per annum of the
average net assets of Aggressive Growth as compensation to AIM Distributors for
the purpose of financing any activity which is primarily intended to result in
the sale of Class A shares. Activities appropriate for financing under the Class
A Plan include, but are not limited to, the following: printing of prospectuses
and statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material and
sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class A Plan.
33
<PAGE> 72
THE CLASS B PLAN. The Company has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
Charter and Weingarten (the "Class B Plan", and collectively with the Class A
Plan, the "Plans"). Under the Class B Plan, Charter and Weingarten pay
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets attributable to Class B shares. Of such amount, Charter and
Weingarten pay a service fee of 0.25% of the average daily net assets
attributable to Class B shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares. Amounts paid in accordance with the Class B Plan may be
used to finance any activity primarily intended to result in the sale of Class B
shares, including, but not limited to, printing of prospectuses and statements
of additional information and reports for other than existing shareholders;
overhead; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class B Plan. AIM Distributors may transfer and sell its right
under the Class B Plan in order to finance distribution expenditures in respect
of Class B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment dealers
selected from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Fund's shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Fund's shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds and
the Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
shares of the Funds; and such other administrative services as the Funds
reasonably may request, to the extent permitted by applicable statute, rule or
regulation. Similar agreements may be permitted under the Plans for institutions
which provide recordkeeping for and administrative services to 401(k) plans.
The Company may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of Charter,
Weingarten and Constellation authorizing payments to selected insurance
companies offering variable annuity contracts to employers as funding vehicles
for retirement plans qualified under Section 401(a) of the Internal Revenue
Code. Services provided pursuant to such Variable Contract Agreements may
include some or all of the following: answering inquiries regarding the Fund and
the Company; performing sub-accounting; establishing and maintaining
Contractholder accounts and records; processing and bunching purchase and
redemption transactions; providing periodic statements of contract account
balances; forwarding such reports and notices to Contractholders relative to the
Fund as deemed necessary; generally, facilitating communications with
Contractholders concerning investments in a Fund on behalf of Plan participants;
and performing such other administrative services as deemed to be necessary or
desirable, to the extent permitted by applicable statute, rule or regulation to
provide such services.
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<PAGE> 73
Financial intermediaries and any other person entitled to receive
compensation for selling shares of the Funds may receive different compensation
for selling shares of one particular class over another.
Under a Shareholder Service Agreement, the Funds agree to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of the Funds during such period at the annual rate of
0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only to
those selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which the Funds' shares are held.
The Plans are subject to any applicable limitations imposed from time
to time by rules of the National Association of Securities Dealers, Inc.
AIM Distributors does not act as principal, but rather as agent for the
Funds, in making dealer incentive and shareholder servicing payments under the
Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
For the fiscal year ended October 31, 1995, with respect to the Class A
shares, Charter, Weingarten, Aggressive Growth and Constellation paid AIM
Distributors under the Plan $5,007,160, $12,217,290, $3,023,937 and $14,905,705,
respectively, or an amount equal to 0.30%, 0.30%, 0.25% and 0.30%, respectively,
of each Fund's average daily net assets.
For the fiscal year ended October 31, 1995, with respect to Class B
shares, Charter and Weingarten paid AIM Distributors under the Plan $94,462 and
$68,621, respectively, or an amount equal to 1.00% and 1.00%, respectively, of
each Fund's average daily net assets.
An estimate by category of actual fees paid by the following Funds
under the Class A Plan during the year ended October 31, 1995 were allocated as
follows:
<TABLE>
<CAPTION>
AGGRESSIVE
CHARTER WEINGARTEN GROWTH CONSTELLATION
------- ---------- ------ -------------
<S> <C> <C> <C> <C>
Advertising........................... $ 506,183 $1,079,097 $ 69,790 $ 1,548,808
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to
current shareholders)............... $ 80,029 $ 177,016 $ 11,964 $ 254,133
Seminars.............................. $ 170,062 $ 379,034 $ 26,919 $ 538,280
Compensation to Underwriters.......... $ 190,069 $1,004,091 $ 0 $ 0
Compensation to Dealers............... $4,060,817 $9,578,052 $2,915,264 $12,564,484
</TABLE>
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<PAGE> 74
An estimate by category of actual fees paid by the following Funds
under the Class B Plan during the period June 26, 1995 (inception date for Class
B shares) through October 31, 1995, were allocated as follows:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN
------- ----------
<S> <C> <C>
Advertising.......................... $14,376 $11,437
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to
current shareholders).............. $ 3,081 $ 1,906
Seminars............................. $ 6,161 $ 3,812
Compensation to Underwriters......... $70,844 $51,466
Compensation to Dealers.............. $ 0 $ 0
</TABLE>
The Plans require AIM Distributors to provide the Board of Directors at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of the Company and who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans ("Qualified
Directors"). In approving the Plans in accordance with the requirements of Rule
12b-1, the directors considered various factors and determined that there is a
reasonable likelihood that the Plans would benefit each class of the Fund and
its respective shareholders.
The Plans do not obligate the Fund to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms,
the Class B Plan continues in effect until June 30, 1996, and thereafter, both
Plans continue as long as such continuance is specifically approved at least
annually by the Board of Directors, including a majority of the Qualified
Directors.
The Plans may be terminated by the vote of a majority of the Qualified
Directors, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the directors, including a majority of the Qualified
Directors, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Directors is committed to the discretion of the
Qualified Directors. In the event the Class A Plan is amended in a manner which
the Board of Directors determines would materially increase the charges paid
under the Class A Plan, the Class B shares of the Fund will no longer convert
into Class A shares of the Fund unless the Class B shares, voting separately,
approve such amendment. If the Class B shareholders do not approve such
amendment, the Board of Directors will (i) create a new class of shares of the
Fund which is identical in all material respects to the Class A shares as they
existed prior to the implementation of the amendment, and (ii)
36
<PAGE> 75
ensure that the existing Class B shares of the Fund will be exchanged or
converted into such new class of shares no later than the date the Class B
shares were scheduled to convert into Class A shares.
The principal differences between the Class A Plan and the Class B Plan
are: (i) the Class A Plan allows payment to AIM Distributors or to dealers or
financial institutions of up to .35% of average daily net assets of Blue Chip
and Capital Development, .30% of average daily net assets of Charter, Weingarten
and Constellation's Class A shares and up to .25% of average daily net assets of
Aggressive Growth's Class A shares as compared to 1.00% of such assets of
Charter and Weingarten's Class B shares; (ii) the Class B Plan obligates the
Class B shares to continue to make payments to AIM Distributors following
termination of the Class B shares Distribution Agreement with respect to Class B
shares sold by or attributable to the distribution efforts of AIM Distributors
unless there has been a complete termination of the Class B Plan (as defined in
such Plan); and (iii) the Class B Plan expressly authorizes AIM Distributors to
assign, transfer or pledge its rights to payments pursuant to the Class B Plan.
Shares of the BBC Fund were distributed by Baird pursuant to a
distribution agreement between Baird and the BBC Fund. The BBC Fund also adopted
a distribution plan pursuant to Rule 12b-1 under the 1940 Act. The plan provided
that Baird was entitled to receive the lesser of .45% per annum of the average
daily net assets of the BBC Fund, as applicable, or the total costs incurred by
Baird for its distribution efforts. During the fiscal year ended September 30,
1995, the BBC Fund paid Baird a fee of $170,044 pursuant to the distribution
plan and the related distribution agreement. During such year Baird incurred
distribution expenses of $170,046, of which $5,090 was related to the printing
of the BBC Fund's IRA materials and prospectuses and $164,596 was compensation
to sales personnel.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
the Funds' shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement with AIM Distributors relating to the Class A
shares of the Funds was approved by the Board of Directors on July 19, 1993, and
has subsequently been amended to cover additional Funds. A Master Distribution
Agreement with AIM Distributors relating to the Class B shares of Charter and
Weingarten was also approved by the Board of Directors on May 9, 1995. Both such
Master Distribution Agreements are hereinafter collectively, referred to as the
"Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to public offerings
made by AIM Distributors pursuant to the Distribution Agreements (other than
those prospectuses and statements of additional information distributed to
existing shareholders of the Funds), and any promotional or sales literature
used by AIM Distributors or furnished by AIM Distributors to dealers in
connection with the public offering of the Funds' shares, including expenses of
advertising in connection with such public offerings. AIM Distributors has not
undertaken to sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of Charter and
Weingarten at the time of such sales. Payments with respect to Class B shares
will equal 4.0% of the purchase price of the Class B shares sold by the dealer
or institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portion of the payments to
AIM Distributors under the Class B Plan which constitutes an asset-based sales
charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it will require a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares.
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<PAGE> 76
In the future, if multiple distributors serve Charter or Weingarten,
each such distributor (or its assignee or transferee) would receive a share of
the payments under the Class B Plan based on the portion of such Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
The Company (on behalf of any class of the Funds) or AIM Distributors
may terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate automatically in the
event of their assignment. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset-based distribution fees in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors; provided, however,
that a complete termination of the Class B Plan (as defined in such Plan) would
terminate all payments to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not effect the obligations of Class B shareholders
to pay Contingent Deferred Sales Charges.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Charter.................. $ 9,068,400 $ 1,316,019 $10,252,200 $1,386,255 $13,707,760 $2,444,337
Weingarten............... 11,992,225 1,767,515 10,398,176 1,494,020 40,790,427 7,477,924
Constellation............ 88,958,038 13,097,651 42,593,206 6,482,169 51,092,042 7,847,614
Aggressive Growth*....... 57,745,243 8,232,597 11,846,706 1,975,968 4,184,518 576,011
</TABLE>
* Sales charges paid and amounts retained by AIM Distributors in connection
with the sale of Class A shares for Aggressive Growth were for the ten-month
period ended October 31, 1993.
The following chart reflects the contingent deferred sales charges paid
by Class B shareholders for the period June 26, 1995 (inception date of Class B
shares) through October 31, 1995.
<TABLE>
<CAPTION>
1995
----
<S> <C>
Charter............................... $55
Weingarten............................ 60
</TABLE>
Shares of the BBC Fund were sold at a public offering price which
included a sales charge. The BBC Fund waived its sales charge in connection with
sales to specified types of investors and on purchases of $1,000,000 or more,
but imposed a contingent deferred sales charge upon the redemption of certain
shares so purchased, which contingent deferred sales charge was paid to Baird.
During the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, Baird received approximately $126,853, $109,000 and
$201,000, respectively in front-end sales commissions in connection with the
sales of BBC Fund shares, all of which it retained. During the fiscal years
ended September 30, 1995, September 30, 1994 and September 30, 1993, Baird
received $346, $141 and $460 in deferred sales commissions in connection with
sales of BBC Fund shares, respectively, all of which it retained.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may
be purchased appears in the Prospectus under the caption "How to Purchase
Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the
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<PAGE> 77
distribution of such shares. Since there is little expense associated with
unsolicited orders placed directly with AIM Distributors by persons, who because
of their relationship with the Funds or with AIM and its affiliates, are
familiar with the Funds, or whose programs for purchase involve little expense
(e.g., because of the size of the transaction and shareholder records required),
AIM Distributors believes that it is appropriate and in the Funds' best
interests that such persons be permitted to purchase Class A shares of the Funds
through AIM Distributors without payment of a sales charge. The persons who may
purchase Class A shares of the Funds without a sales charge are shown in the
Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in the Prospectus under the caption "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the caption "How to Redeem Shares." In addition to the
Funds' obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone orders
to the order desk of the Fund telephone: (713) 626-1919, Extension 5001 (in
Houston) or (800) 347-4246 (elsewhere) and guarantee delivery of all required
documents in good order. A repurchase is effected at the net asset value of the
Fund next determined after such order is received. Such arrangement is subject
to timely receipt by A I M Fund Services, Inc. of all required documents in good
order. If such documents are not received within a reasonable time after the
order is placed, the order is subject to cancellation. While there is no charge
imposed by the Funds or by AIM Distributors (other than any applicable CDSC)
when shares are redeemed or repurchased, dealers may charge a fair service fee
for handling the transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange is restricted, as
determined by applicable rules and regulations of the SEC, (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings,
(c) the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of the
close of trading of the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern Time) on each business day of the Fund. In the event the NYSE closes
early (i.e., before 4:00 p.m. Eastern Time) on a particular day, the net asset
value of a Fund share is determined as of the close of the NYSE on such day. For
purposes of determining net asset value per share, futures and options contract
closing prices which are available fifteen (15) minutes after the close of
trading on the NYSE will generally be used. The net asset values per share of
the Retail Classes and the Institutional Class will differ because different
expenses are attributable to each class. The income or loss and the expenses
common to all classes of a Fund are allocated to each class on the basis of the
net assets of the Fund allocable to each such class, calculated as of the close
of business on the previous business day, as adjusted for the current day's
shareholder activity of each class. In addition to certain common expenses which
are allocated to all classes of a Fund, certain expenses, such as those related
to the distribution of shares of a class, are allocated only to the class to
which such expenses relate. The net asset value per share of a class is
determined by subtracting the liabilities (e.g., the expenses) of the Fund
allocated to the class from the assets of the Fund allocated to the class and
dividing the result by the total number of shares outstanding of such class.
Determination of each Fund's net asset value per share is made in accordance
with generally accepted accounting principles.
Except as provided in the next sentence, a security listed or traded on
an exchange is valued at its last sales price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security is
valued at the mean between the closing bid and asked prices on that day.
Exchange listed convertible bonds are valued based at the mean between the
closing bid and asked prices obtained from a broker-dealer. Each security traded
in the over-the-counter market (but not including securities reported on
39
<PAGE> 78
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 lacking a last sale, at
the mean between the last bid and asked price on that day; securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Company's officers
in a manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having sixty (60) days or less to maturity are valued at
amortized cost, which approximates market value. (See also "How to Purchase
Shares," "How to Redeem Shares" and "Determination of Net Asset Value" in the
Prospectus.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of a Fund's shares are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. 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 NYSE which will not be reflected
in the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in shares of another AIM Fund, subject to the
terms and conditions set forth in the Prospectus under the caption "Special
Plans - Automatic Dividend Investment Plan." If a shareholder's account does not
have any shares in it on a dividend or capital gains distribution payment date,
the dividend or distribution will be paid in cash whether or not the shareholder
has elected to have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, each Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other
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<PAGE> 79
requirements of the Code that are described below. Distributions by a Fund made
during the taxable year or, under specified circumstances, within twelve months
after the close of the taxable year, will be considered distributions of income
and gains of the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"), and (b) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forward contracts, will not be
characterized as Short-Short Gain if they are directly related to the regulated
investment company's principal business of investing in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, a Fund may
have to limit the sale of appreciated securities that it has held for less than
three months. However, the Short-Short Gain Test will not prevent a Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded. Interest (including
original issue discount) received by a Fund at maturity or upon the disposition
of a security held for less than three months will not be treated as gross
income derived from the sale or other disposition of a security within the
meaning of the Short-Short Gain Test. However, any other income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract or of foreign currency itself, will generally
be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (b) the
asset is otherwise held by the Fund as part of a "straddle", or (c) the asset is
stock and the Fund grants certain call options with respect thereto. However,
for purposes of the Short-Short Gain Test, the holding period of the asset
disposed of is reduced only in the case described in clause (a) above. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by certain of the Funds (such as
futures contracts and options on stock indexes and futures contracts) will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the
41
<PAGE> 80
taxable year, regardless of whether a taxpayer's obligations (or rights) under
such contracts have terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. The net amount of such gain or loss
for the entire taxable year from transactions involving Section 1256 contracts
(including gain or loss arising as a consequence of the year-end deemed sale of
Section 1256 contracts) is treated as 60% long-term capital gain or loss and 40%
short-term capital gain or loss. A Fund may elect not to have this special tax
treatment apply to Section 1256 contracts that are part of a "mixed straddle"
with other investments of the Fund that are not Section 1256 contracts. The
Internal Revenue Service has held in several private rulings that gains arising
from Section 1256 contracts will be treated for purposes of the Short-Short Gain
Test as being derived from securities held for not less than three months if the
gains arise as a result of a constructive sale under Code Section 1256.
In addition to satisfying the requirement described above, each Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of each Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the
companies, and securities of other issuers, the Fund has not invested more than
5% of the value of the Fund's total assets in securities of such issuer and as
to which the Fund does not hold more than 10% of the outstanding voting
securities of such issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies),
or in two or more issuers which the Fund controls and which are engaged in the
same or similar trades or businesses.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(a) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year, and (b) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends
42
<PAGE> 81
for federal income tax purposes, but they will qualify for the 70% dividends
received deduction for corporations only to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. Conversely, if a Fund elects to retain its net capital
gain, the Fund will be taxed thereon (except to the extent of any available
capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to
retain its net capital gain, it is expected that the Fund also will elect to
have shareholders treated as if each received a distribution of its pro rata
share of such gain, with the result that each shareholder will be required to
report its pro rata share of such gain on its tax return as long-term capital
gain, will receive a refundable tax credit for its share of tax paid by the Fund
on the gain, and will increase the tax basis for its shares by an amount equal
to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3)and(4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend, and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, has granted certain options to
buy or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (b) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (c) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends received deduction for a corporate shareholder may be disallowed or
reduced (a) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund, or (b) by application of
Code Section 246(b) which in general limits the dividends received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
In addition, under the Superfund Amendments and Reauthorization Act of 1986, a
tax is imposed for taxable years beginning after 1986 and before 1996 at the
rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined without
regard to the deduction for this tax and the AMT net operating loss deduction)
over $2 million. The corporate dividends received deduction is not itself an
item of tax preference that must be added back to taxable income or is otherwise
disallowed in determining a corporation's AMTI. However, corporate shareholders
will generally be required to take the full amount of any dividend received from
the Fund into account (without a dividend received deduction) in determining
their adjusted current earnings, which are used in computing an additional
corporate preference item (i.e., 75% of the excess of a corporate taxpayer's
adjusted current earnings over its AMTI (determined without regard to this item
and the AMTI net operating loss deduction)) that is includable in AMTI.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such
43
<PAGE> 82
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of any such Fund's assets to be invested in various
countries is not known.
Distributions by a Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
In addition, if the net asset value at the time a shareholder purchases
shares of a Fund reflects undistributed net investment income or recognized
capital gain net income, or unrealized appreciation in the value of the assets
of the Fund, distributions of such amounts will be taxable to the shareholder in
the manner described above, although such distributions economically constitute
a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Funds will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (a) who has
provided either an incorrect tax identification number or no number at all, (b)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (c) who has
failed to certify to a Fund that it is not subject to backup withholding or that
it is a corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within thirty (30) days before or after the
sale or redemption. In general, any gain or loss arising from (or treated as
arising from) the sale or redemption of shares of a Fund will be considered
capital gain or loss and will be long-term capital gain or loss if the shares
were held for longer than one year. However, any capital loss arising from the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on such shares. For this purpose, the special holding period rules of
Code Section 246(c)(3) and (4) (discussed above in connection with the dividends
received deduction for corporations) generally will apply in determining the
holding period of shares. Long-term capital gains of non-corporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of
ordinary income.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less then 91 days after they are acquired, and (c)
subsequently acquires shares of the Fund or another Fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
44
<PAGE> 83
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
a Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder. If the income from a Fund is not effectively connected with a
U.S. trade or business carried on by a foreign shareholder, dividends and return
of capital distributions (other than capital gain dividends) will be subject to
U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross
amount of the distribution. Such a foreign shareholder would generally be exempt
from U.S. federal income tax on gains realized on the sale of shares of a Fund,
capital gain dividends and amounts retained by a Fund that are designated as
undistributed net capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale or redemption of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Funds.
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
45
<PAGE> 84
AUDIT REPORTS
The Board of Directors will issue semi-annual reports of the
transactions of the Funds to the shareholders. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG Peat Marwick LLP
700 Louisiana, NationsBank Building, Houston, Texas 77002, has served as the
auditors for Aggressive Growth, Charter, Constellation and Weingarten for the
fiscal year ended October 31, 1995. KPMG Peat Marwick LLP currently serves as
the auditors for Blue Chip and Capital Development. Price Waterhouse LLP served
as the auditors for Baird Blue Chip Fund, Inc., the predecessor of Blue Chip,
for its fiscal year ended September 30, 1995.
LEGAL MATTERS
Legal matters for the Company have been passed upon by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc., 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173 (the "Transfer Agent"), acts as transfer
and dividend disbursing agent for the Funds. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets. The Funds pay the Custodian and the Transfer
Agent such compensation as may be agreed upon from time to time.
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, serves as Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has
entered into an agreement with the Company (and certain other AIM Funds), The
Shareholder Services Group, Inc. and Financial Data Services, Inc., pursuant to
which MLPF&S has agreed to perform certain shareholder sub-accounting services
for its customers who beneficially own shares of the Fund(s).
PRINCIPAL HOLDERS OF SECURITIES
BLUE CHIP
As of May 1, 1996, there were no shareholders of Blue Chip.
CHARTER
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding shares of the Retail Classes of
Charter as of May 1, 1996, and the Institutional Class of Charter as of May 1,
1996, and the amount of the outstanding shares held of record and beneficially
owned by such holders are set forth below:
46
<PAGE> 85
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
RETAIL CLASS A SHARES
---------------------
MERRILL LYNCH PIERCE FENNER & SMITH 13.79%
AIDS/STREET ACCOUNT
MUTUAL FUND OPERATIONS
ATTN PRIVATE CLIENT GROUP
P O BOX 45286
JACKSONVILLE FL 32232-5286
GREAT-WEST LIFE AND ANNUITY 7.83%
INSURANCE CO
FINANCIAL CONTROL
401 (K) 6T1
8505 E ORCHARD
ENGLEWOOD CO 80111
RETAIL CLASS B SHARES
---------------------
MERRILL LYNCH PIERCE FENNER & SMITH 11.38%
AIDS/STREET ACCOUNT
MUTUAL FUND OPERATIONS
ATTN PRIVATE CLIENT GROUP
P O BOX 45286
JACKSONVILLE FL 32232-5286
INSTITUTIONAL CLASS
-------------------
Commonwealth of Massachusetts 90.00%**
Deferred Compensation Plan
One Ashburton Place, 12th Floor
Boston, MA 02108
First Interstate Bank of California 5.40%
PO Box 9800
Mutual Funds A88-4
Calabasas, CA 91302-9800
WEINGARTEN
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding shares of the Retail Classes of
Weingarten as of May 1, 1996, and the Institutional Class of Weingarten as of
May 1, 1996, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
RETAIL CLASS A SHARES
---------------------
MERRILL LYNCH PIERCE FENNER & SMITH 20.23%
AIDS/STREET ACCOUNT
MUTUAL FUND OPERATIONS
ATTN PRIVATE CLIENT GROUP
P O BOX 45286
JACKSONVILLE FL 32232-5286
RETAIL CLASS B SHARES
---------------------
MERRILL LYNCH PIERCE FENNER & SMITH 12.54%
AIDS/STREET ACCOUNT
MUTUAL FUND OPERATIONS
ATTN PRIVATE CLIENT GROUP
P O BOX 45286
JACKSONVILLE FL 32232-5286
INSTITUTIONAL CLASS
-------------------
Commonwealth of Massachusetts 64.00%**
Deferred Compensation Plan
One Ashburton Place, 12th Floor
Boston, MA 02108
Union Planters National Bank 15.00%
PO Box 387
Memphis, TN 38147
Muchmore and Co./Summit Trust 10.00%
750 Walnut St.
Cranford, NJ 07016-1205
City of Milwaukee Deferred Comp. 5.50%
PO Box 2054
Milwaukee, WI 53201
CONSTELLATION
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding shares of the Retail Classes of
Constellation as of May 1, 1996, and of the Institutional Class of Constellation
as of May 1, 1996, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
- --------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
47
<PAGE> 86
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
RETAIL CLASS A SHARES
---------------------
MERRILL LYNCH PIERCE FENNER & SMITH 19.08%
AIDS/STREET ACCOUNT
MUTUAL FUND OPERATIONS
ATTN PRIVATE CLIENT GROUP
P O BOX 45286
JACKSONVILLE FL 32232-5286
INSTITUTIONAL CLASS
-------------------
City of New York Compensation Plan 52.00%**
40 Rector St. 3rd Floor
NY, NY 10006
Nationwide 18.00%
PO Box 182029
C/O IPO Portfolio Acct.
Columbus, OH 43218-2029
Commonwealth of Massachusetts 11.00%
Deferred Compensation Plan
One Ashburton Place, 12th Floor
Boston, MA 02108
West One of Idaho 5.60%
A/C Idaho Power 19213985
101 S. Capitol Blvd. Rm. 315
PO Box 7928
Boise, ID 83707
AGGRESSIVE GROWTH
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding Class A shares of Aggressive Growth
as of May 1, 1996, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
RETAIL CLASS A SHARES
---------------------
MERRILL LYNCH PIERCE FENNER & SMITH 22.60%
AIDS/STREET ACCOUNT
MUTUAL FUND OPERATIONS
ATTN PRIVATE CLIENT GROUP
P O BOX 45286
JACKSONVILLE FL 32232-5286
CAPITAL DEVELOPMENT
As of May 1, 1996, there were no shareholders of Capital Development.
As of May 1, 1996, the directors/trustees and officers of the Company
as a group owned beneficially less than 1% of the outstanding shares of each of
any class of Charter, Weingarten, Aggressive Growth and Constellation.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Company
has filed with the SEC under the Securities Act of 1933 and reference is hereby
made to the Registration Statement for further information with respect to the
Funds and the securities offered hereby. The Registration Statement is available
for inspection by the public at the SEC in Washington, D.C.
- --------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
48
<PAGE> 87
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S
Commercial paper rated by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well-established, and the issuer has a
strong position within the industry. The reliability and quality of management
are unquestioned. The relative strength or weakness of the above factors
determines whether the issuer's Commercial Paper is rated A-1 or A-2. A-1
indicates the degree of safety regarding time of payment is very strong. A-2
indicates that the capacity for timely payment is strong, but that the relative
degree of safety is not as overwhelming as for issues designated A-1.
MOODY'S
Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by
Moody's in assigning ratings are the following: (a) evaluation of the management
of the issuer; (b) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (c) evaluation of the issuer's products in relation to competition and
customer acceptance; (d) liquidity; (e) amount and quality of long-term debt;
(f) trend of earnings over a period of ten years; (g) financial strength of a
parent company and the relationships which exist with the issuer; and (h)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or Prime-2.
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
MOODY'S
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
49
<PAGE> 88
FINANCIAL STATEMENTS
Following are (i) audited financial statements of the Company (except
for Blue Chip or Capital Development) for the fiscal year ended October 31,
1995 and the Independent Auditors' Report thereon of KPMG Peat Marwick LLP,
(ii) audited financial statements of the BBC Fund for the fiscal year ended
September 30, 1995 and the Report of Independent Accountants thereon of
Price Waterhouse LLP.
FS
<PAGE> 89
REPORT OF INDEPENDENT ACCOUNTANTS
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
(Price Waterhouse LLP Logo)
To the Shareholders and Board of Directors
of Baird Blue Chip Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Baird Blue Chip Fund, Inc. (the ''Fund'') at September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the eight years in the period then ended and for the period from December
31, 1986 (commencement of operations) to September 30, 1987, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
October 25, 1995
FS-1
<PAGE> 90
BAIRD BLUE CHIP FUND, INC.
STATEMENT OF NET ASSETS
September 30, 1995
COMMON STOCKS 95.3% (a)<F2>
<TABLE>
<CAPTION>
Shares Cost Quoted Market Value
---- -------------------
<S> <C> <C> <C>
AEROSPACE - 2.4%
24,800 Boeing Co. $ 1,271,755 $ 1,692,600
BEVERAGES/SOFT DRINKS - 2.5 %
26,400 The Coca-Cola Company 343,329 1,821,600
BUSINESS SERVICES & SUPPLIES - 8.6 %
35,100 Alco Standard Corp. 1,498,946 2,974,725
26,900 Manpower Inc. 721,458 780,100
60,900 Olsten Corp. 1,580,814 2,367,487
---------- -----------
3,801,218 6,122,312
CHEMICALS - 5.0%
21,400 Air Products and Chemicals, Inc. 1,200,112 1,115,475
17,400 E.I du Pont de Nemours & Co. 832,590 1,196,250
26,300 PPG Industries, Inc. 823,428 1,222,950
---------- ------------
2,856,130 3,534,675
CONGLOMERATES - 2.0%
24,900 Minnesota Mining & Manufacturing Co. 785,859 1,406,850
Cosmetics - 4.3%
28,000 Gillette Company
1,023,260 1,333,500
36,000 International Flavors & Fragrances Inc. 718,925 1,737,000
----------- ------------
1,742,185 3,070,500
DRUGS & HOSPITAL SUPPLIES - 11.6%
59,700 Abbott Laboratories 1,453,398 2,544,713
27,600 Johnson & Johnson 667,080 2,045,850
34,600 Medtronic, Inc. 1,290,234 1,859,750
32,500 Merck & Co., Inc. 588,354 1,820,000
----------- ------------
3,999,066 8,270,313
ELECTRICAL CONNECTORS - 6.0%
52,000 AMP Inc. 1,245,008 2,002,000
68,906 Molex Inc. Cl A 1,682,980 2,308,351
---------- ------------
2,927,988 4,310,351
ELECTRICAL EQUIPMENT - 7.2%
33,300 Emerson Electric Co. 1,640,866 2,380,950
43,200 General Electric Co. (U.S.) 1,067,310 2,754,000
---------- ------------
2,708,176 5,134,950
ELECTRONICS - 5.1%
47,500 Motorola, Inc. 991,194 3,627,812
ENTERTAINMENT & RESTAURANTS - 3.3%
62,400 McDonald's Corp. 937,180 2,386,800
FINANCIAL SERVICES - 3.0%
12,200 MGIC Investment Corp. 366,134 698,450
35,700 State Street Boston Corp. 1,299,900 1,428,000
---------- ------------
1,666,034 2,126,450
FOOD MERCHANDISING - 1.5%
32,100 Albertson's, Inc. 790,061 1,095,412
FOODS - 2.4%
58,000 Sara Lee Corp. 628,716 1,725,500
HOUSEHOLD PRODUCTS - 3.6%
33,100 Procter & Gamble Co. 1,523,512 2,548,700
</TABLE>
FS-2
<PAGE> 91
<TABLE>
<CAPTION>
Shares Cost Quoted Market Value
---- -------------------
<S> <C> <C> <C>
INDUSTRIAL EQUIPMENT - 1.6%
18,500 W. W. Grainger, Inc. 496,671 1,116,937
INFORMATION PROCESSING - 2.9%
22,800 Microsoft Corp.*<F1> 907,725 2,063,400
INSURANCE - 5.0%
25,200 American International Group, Inc. 1,044,299 2,142,000
14,700 The Chubb Corp. 1,187,095 1,411,200
------------ ------------
2,231,394 3,553,200
MERCHANDISING - 5.2%
32,100 Nordstrom, Inc. 1,163,625 1,340,175
25,000 Viking Office Products, Inc.*<F1> 672,625 1,043,750
52,900 Wal-Mart Stores, Inc. 671,807 1,315,888
------------ ------------
2,508,057 3,699,813
OIL/INTERNATIONAL - 3.2%
18,800 Royal Dutch Petroleum Co. ADR 1,377,105 2,307,700
OIL/SERVICE - 3.1%
34,300 Schlumberger Ltd. 2,090,805 2,238,075
POLLUTION CONTROL - 1.7%
43,900 WMX Technologies, Inc. 1,113,143 1,251,150
PUBLISHING & PRINTING - 4.1%
19,000 Gannett Co., Inc. 847,820 1,037,875
35,300 Reuters Holdings PLC ADR 1,313,898 1,866,488
------------ ------------
2,161,718 2,904,363
------------ ------------
Total common stocks 39,859,021 68,009,463
SHORT-TERM INVESTMENTS 4.6% (a)<F2>
VARIABLE RATE DEMAND NOTES
$ 80,000 General Mills, Inc. 80,000 80,000
300,000 Pitney Bowes Credit Corp. 300,000 300,000
502,608 Southwestern Bell Telephone Co. 502,608 502,608
685,000 Warner-Lambert Company 685,000 685,000
1,700,000 Wisconsin Electric Power Co. 1,700,000 1,700,000
------------ ------------
Total short-term investments 3,267,608 3,267,608
------------ ------------
Total investments $ 43,126,629 71,277,071
============ ============
Cash and receivables,
less liabilities - 0.1% (a)<F2> 47,009
------------
NET ASSETS $ 71,324,080
============
Net Asset Value Per Share
($0.01 par value 20,000,000 shares authorized), redemption price
($71,324,080 divided by 2,993,421 shares outstanding) $ 23.83
============
Maximum Offering Price Per Share
(net asset value plus 6.10% of the net asset value or 5.75% of
the offering price calculated as $23.83 x 100 divided by 94.25 $ 25.28
============
</TABLE>
*<F1>Non-income producing security.
(a)<F2>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral
part of this statement.
FS-3
<PAGE> 92
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C>
INCOME:
Dividends $ 1,165,107
Interest 102,008
-----------
Total income 1,267,115
-----------
EXPENSES:
Management fee 469,802
Distributor fees 170,044
Transfer agent fees 49,665
Administrative services 46,743
Printing and postage expense 31,125
Professional fees 24,512
Custodian fees 14,448
Registration fees 13,650
Other expenses 12,030
-----------
Total expenses 832,019
-----------
NET INVESTMENT INCOME 435,096
-----------
NET REALIZED GAIN ON INVESTMENTS 3,508,717
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 11,889,076
-----------
NET GAIN ON INVESTMENTS 15,397,793
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,832,889
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
FS-4
<PAGE> 93
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 435,096 $ 475,657
Net realized gain on investments 3,508,717 2,189,350
Net increase in unrealized appreciation on investments 11,889,076 1,901,828
----------- ------------
Net increase in net assets resulting from operations 15,832,889 4,566,835
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.1165 and $0.2075 per share, respectively) (358,084) (701,264)
Distributions from net realized gains
($0.4637 and $0.8528 per share, respectively) (1,424,952) (2,880,754)
----------- ------------
Total distributions (1,783,036)**<F4> (3,582,018)*<F3>
----------- ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(235,753 and 293,425 shares, respectively)
4,808,974 5,456,430
Net asset value of shares issued in
distributions (43,313 and 87,934 shares, respectively) 809,149 1,614,066
Cost of shares redeemed (414,147 and
700,661 shares, respectively) (8,458,795) (13,052,831)
----------- ------------
Net decrease in net assets derived from Fund share activities (2,840,672) (5,982,335)
----------- ------------
TOTAL INCREASE (DECREASE) 11,209,181 (4,997,518)
NET ASSETS AT THE BEGINNING OF THE YEAR 60,114,899 65,112,417
----------- ------------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment income
of $403,996 and $340,558, respectively) $71,324,080 $ 60,114,899
=========== ============
</TABLE>
*<F3>Total distributions include $800,986 of ordinary income, of which 100% is
eligible for the corporate dividends received deduction.
**<F4>Total distributions include $404,637 of ordinary income, of which 100%
is eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of this
statement.
FS-5
<PAGE> 94
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987+<F8>
------ ------ ------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period $19.22 $18.89 $18.24 $16.77 $13.60 $13.82 $11.48 $13.10 $10.00
Income from investment
operations:
Net investment income 0.14 0.15 0.19 0.20 0.23 0.25 0.24 0.12 0.01
Net realized and
unrealized gains
(losses) on
investments 5.05 1.24 0.63 1.48 3.19 (0.20) 2.25 (1.68) 3.09
Total from investment
operations 5.19 1.39 0.82 1.68 3.42 0.05 2.49 (1.56) 3.10
Less distributions:
Dividends from net
investment income (0.12) (0.21) (0.17) (0.21) (0.25) (0.27) (0.15) (0.02) -
Distributions
from net realized gains (0.46) (0.85) - - - - - (0.04) -
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from distributions (0.58) (1.06) (0.17) (0.21) (0.25) (0.27) (0.15) (0.06) -
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $23.83 $19.22 $18.89 $18.24 $16.77 $13.60 $13.82 $11.4 $13.10
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN***<F7> 27.8% 7.7% 4.5% 10.1% 25.5% 0.3% 22.0% (11.8%) 13.5%*<F5>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's $) 71,324 60,115 65,112 61,601 46,958 31,706 21,170 18,681 16,917
Ratio of expenses to
average net assets**<F6> 1.3% 1.4% 1.3% 1.4% 1.5% 1.6% 1.7% 2.2% 2.6%*<F5>
Ratio of net
investment income
to average net assets 0.7% 0.8% 1.0% 1.2% 1.6% 2.0% 1.9% 3.3% 0.2%*<F5>
Portfolio turnover rate 16.7% 12.7% 24.9% 5.4% 8.8% 12.2% 14.8% 14.8% 9.0%
</TABLE>
+<F8>For the period from December 31, 1986 (commencement of operations) to
September 30, 1987.
*<F5>Annualized.
**<F6>Includes a maximum .75% distribution fee from December 31, 1986 through
September 30, 1988 and a maximum .45% distribution fee beginning October 1,
1988.
***<F7>Total return does not include the sales load.
The accompanying notes to financial statements are an integral part of this
statement.
FS-6
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of
significant accounting policies of the Baird Blue Chip Fund, Inc.
(the ''Fund''), which is registered under the Investment Company Act of 1940.
The Fund was incorporated under the laws of Wisconsin on October 16, 1986.
(a) Each security, excluding short-term investments, is valued at the
last sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price. Securities
which are traded over-the-counter are valued at the latest bid price.
Securities for which quotations are not readily available are valued at fair
value as determined by the investment adviser under the supervision of the
Board of Directors. Short-term investments are valued at amortized cost
which approximates quoted market value. Investment transactions are recorded
no later than the first business day after the trade date.
(b) Net realized gains and losses on common stock are computed on the
basis of the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes,
which are unsecured instruments. The Fund may be susceptible to credit risk
with respect to these notes to the extent the issuer defaults on its payment
obligation. The Fund's policy is to monitor the creditworthiness of the
issuer and does not anticipate nonperformance by these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital stock.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES - The Fund has a management agreement with Robert W. Baird & Co.
Incorporated (''RWB''), with whom certain officers and directors of the Fund
are affiliated, to serve as investment adviser and manager. Under the terms of
the agreement, the Fund will pay RWB a monthly management fee at the annual
rate of 0.74% of the daily net assets of the Fund.
The Fund has adopted a Distribution Plan (the ''Plan''), pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan provides that the Fund may
incur certain costs which may not exceed the lesser of a monthly amount equal to
0.45% per year of the Fund's daily net assets or the actual distribution costs
incurred by RWB during the year. Amounts paid under the Plan are paid monthly
to RWB for any activities or expenses primarily intended to result in the sale
of shares of the Fund.
FS-7
<PAGE> 96
During the year ended September 30, 1995, the Fund was advised that RWB received
$126,853 from investors representing commissions on sales of Fund shares and no
brokerage fees on the execution of purchases and sales of portfolio securities
were paid by the Fund to RWB.
(3) DISTRIBUTION TO SHAREHOLDERS - Net investment income and net realized
gains are distributed to shareholders. On October 25, 1995, a dividend from net
investment income of $403,996 ($0.1352 per share) was declared. In addition, the
Fund distributed $516,885 ($0.1730 per share) from net short-term realized
capital gains and $2,893,705 from net long-term realized capital gains ($0.9684
per share). The distributions will be paid on October 26, 1995, to shareholders
of record on October 24, 1995. The percentage of ordinary income which is
eligible for the corporate dividends received deduction for this income
distribution is 100%.
(4) INVESTMENT TRANSACTIONS - For the year ended September 30, 1995, purchases
and proceeds of sales of investment securities (excluding short-term
investments) were $10,287,754 and $15,546,942, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - As of September 30, 1995,
liabilities of the Fund included the following:
Payable to shareholders for redemptions.................. $62,101
Payable to RWB for management fees and
distribution fees..................................... 58,836
Other liabilities........................................ 25,434
(6) SOURCES OF NET ASSETS - As of September 30, 1995, the sources of net
assets were as follows:
Fund shares issued and outstanding .................. $39,359,052
Net unrealized appreciation on investments .......... 28,150,442
Accumulated net realized gains on investments ....... 3,410,590
Undistributed net investment income ................. 403,996
-----------
$71,324,080
===========
Aggregate net unrealized appreciation as of September 30, 1995, consisted of the
following:
Aggregate gross unrealized appreciation ............. $28,235,079
Aggregate gross unrealized depreciation ............. (84,637)
-----------
Net unrealized appreciation.......................... $28,150,442
===========
BAIRD
BLUE CHIP FUND
ANNUAL REPORT
SEPTEMBER 30, 1995
[Baird Logo]
[Baird Logo]
A NORTHWESTERN
MUTUAL COMPANY
Robert W. Baird & Co. Incorporated
777 E. Wisconsin Avenue, Milwaukee WI 53202
Phone 414 765-3500 - Toll Free 1-800-RW-BAIRD
Copyright 1995 Robert W. Baird & Co. Incorporated
FS-8
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Charter Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Charter Fund (a portfolio of AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1995, the related statement of operations for
the year then ended, and the statement of changes in net assets and financial
highlights for each of the years in the two-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Charter Fund as of October 31, 1995, the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights for
each of the years in the two-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
FS-9
<PAGE> 98
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS - 75.72%
ADVERTISING/BROADCASTING - 0.37%
120,000 Omnicom Group, Inc. $ 7,665,000
- ---------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.71%
240,000 Boeing Co. (The) 15,750,000
- ---------------------------------------------------------------------
160,000 Rockwell International Corp. 7,120,000
- ---------------------------------------------------------------------
140,000 United Technologies Corp. 12,425,000
- ---------------------------------------------------------------------
35,295,000
- ---------------------------------------------------------------------
APPLIANCES - 0.47%
240,000 Newell Co. 5,790,000
- ---------------------------------------------------------------------
84,300 Premark International, Inc. 3,898,875
- ---------------------------------------------------------------------
9,688,875
- ---------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS) - 1.03%
280,000 Chrysler Corp. 14,455,000
- ---------------------------------------------------------------------
240,000 Ford Motor Co. 6,900,000
- ---------------------------------------------------------------------
21,355,000
- ---------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.24%
140,000 Echlin Inc. 5,005,000
- ---------------------------------------------------------------------
BANKING - 0.34%
240,000 Norwest Corp. 7,080,000
- ---------------------------------------------------------------------
BANKING (MONEY CENTER) - 1.57%
180,000 BankAmerica Corp. 10,350,000
- ---------------------------------------------------------------------
160,000 Chemical Banking Corp. 9,100,000
- ---------------------------------------------------------------------
200,000 Citicorp 12,975,000
- ---------------------------------------------------------------------
32,425,000
- ---------------------------------------------------------------------
BEVERAGES - 1.28%
500,000 PepsiCo Inc. 26,375,000
- ---------------------------------------------------------------------
BUILDING MATERIALS - 0.87%
200,000 Black & Decker Corp. (The) 6,775,000
- ---------------------------------------------------------------------
400,000 Masco Corp. 11,250,000
- ---------------------------------------------------------------------
18,025,000
- ---------------------------------------------------------------------
BUSINESS SERVICES - 1.28%
160,000 Diebold, Inc. 8,480,000
- ---------------------------------------------------------------------
320,000 Equifax, Inc. 12,480,000
- ---------------------------------------------------------------------
200,000 Manpower Inc. 5,425,000
- ---------------------------------------------------------------------
26,385,000
- ---------------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 99
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CHEMICALS - 0.87%
140,000 Dow Chemical Co. $ 9,607,500
- ---------------------------------------------------------------------
140,000 Eastman Chemical Co. 8,330,000
- ---------------------------------------------------------------------
17,937,500
- ---------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 1.01%
200,000 Grace (W.R.) & Co. 11,150,000
- ---------------------------------------------------------------------
140,000 IMC Global, Inc. 9,800,000
- ---------------------------------------------------------------------
20,950,000
- ---------------------------------------------------------------------
COMPUTER MAINFRAMES - 0.94%
200,000 International Business Machines Corp. 19,450,000
- ---------------------------------------------------------------------
COMPUTER MINI/PCS - 2.22%
200,000 COMPAQ Computer Corp.(a) 11,150,000
- ---------------------------------------------------------------------
240,000 Dell Computer Corp.(a) 11,190,000
- ---------------------------------------------------------------------
120,000 Hewlett Packard Co. 11,115,000
- ---------------------------------------------------------------------
160,000 Sun Microsystems, Inc.(a) 12,480,000
- ---------------------------------------------------------------------
45,935,000
- ---------------------------------------------------------------------
COMPUTER NETWORKING - 1.20%
120,000 Cabletron Systems, Inc.(a) 9,435,000
- ---------------------------------------------------------------------
120,000 Cisco Systems, Inc.(a) 9,300,000
- ---------------------------------------------------------------------
320,000 ECI Telecommunications Ltd. 6,080,000
- ---------------------------------------------------------------------
24,815,000
- ---------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.85%
240,000 Adaptec, Inc.(a) 10,680,000
- ---------------------------------------------------------------------
200,000 Read-Rite Corp.(a) 6,975,000
- ---------------------------------------------------------------------
17,655,000
- ---------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.94%
240,000 BMC Software, Inc.(a) 8,550,000
- ---------------------------------------------------------------------
500,000 Computer Associates International, Inc. 27,500,000
- ---------------------------------------------------------------------
200,000 NetManage, Inc.(a) 4,075,000
- ---------------------------------------------------------------------
40,125,000
- ---------------------------------------------------------------------
CONGLOMERATES - 0.37%
180,000 Allied-Signal Inc. 7,650,000
- ---------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.30%
120,000 Duracell International, Inc. 6,285,000
- ---------------------------------------------------------------------
</TABLE>
FS-11
<PAGE> 100
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COSMETICS & TOILETRIES - 1.52%
120,000 Gillette Co. (The) $ 5,805,000
- --------------------------------------------------------------------------
240,000 Procter & Gamble Co. 19,440,000
- --------------------------------------------------------------------------
140,000 Tambrands Inc. 6,265,000
- --------------------------------------------------------------------------
31,510,000
- --------------------------------------------------------------------------
ELECTRIC POWER - 2.28%
200,000 Baltimore Gas & Electric Co. 5,350,000
- --------------------------------------------------------------------------
160,000 Carolina Power & Light Co. 5,240,000
- --------------------------------------------------------------------------
120,000 Duke Power Co. 5,370,000
- --------------------------------------------------------------------------
160,000 FPL Group, Inc. 6,700,000
- --------------------------------------------------------------------------
240,000 General Public Utilities Corp. 7,500,000
- --------------------------------------------------------------------------
120,000 Houston Industries, Inc. 5,565,000
- --------------------------------------------------------------------------
120,000 Northern States Power Co. 5,670,000
- --------------------------------------------------------------------------
240,000 Southern Co. 5,730,000
- --------------------------------------------------------------------------
47,125,000
- --------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 3.03%
320,000 AMP Inc. 12,560,000
- --------------------------------------------------------------------------
160,000 General Electric Co. 10,120,000
- --------------------------------------------------------------------------
120,000 Honeywell, Inc. 5,040,000
- --------------------------------------------------------------------------
200,000 Parker-Hannifin Corp. 6,750,000
- --------------------------------------------------------------------------
240,000 Philips Electronics N.V.-New York Shares-ADR 9,270,000
- --------------------------------------------------------------------------
160,000 Tektronix, Inc. 9,480,000
- --------------------------------------------------------------------------
280,000 Teradyne, Inc.(a) 9,345,000
- --------------------------------------------------------------------------
62,565,000
- --------------------------------------------------------------------------
ELECTRONIC/DEFENSE - 0.82%
240,000 Loral Corp. 7,110,000
- --------------------------------------------------------------------------
160,000 Sundstrand Corp. 9,800,000
- --------------------------------------------------------------------------
16,910,000
- --------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS - 1.37%
200,756 Arrow Electronics, Inc.(a) 10,188,367
- --------------------------------------------------------------------------
240,000 Avnet, Inc. 12,090,000
- --------------------------------------------------------------------------
140,000 Wyle Electronics 5,967,500
- --------------------------------------------------------------------------
28,245,867
- --------------------------------------------------------------------------
</TABLE>
FS-12
<PAGE> 101
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT) - 1.26%
280,000 Merrill Lynch & Co., Inc. $ 15,540,000
- ---------------------------------------------------------------------
120,000 Morgan Stanley Group, Inc. 10,440,000
- ---------------------------------------------------------------------
25,980,000
- ---------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 4.27%
240,000 American Express Co. 9,750,000
- ---------------------------------------------------------------------
400,000 Countrywide Credit Industries, Inc. 8,850,000
- ---------------------------------------------------------------------
160,000 Federal Home Loan Corp. 11,080,000
- ---------------------------------------------------------------------
140,000 Federal National Mortgage Association 14,682,500
- ---------------------------------------------------------------------
126,100 Firstar Corp. 4,460,788
- ---------------------------------------------------------------------
300,000 Green Tree Financial Corp. 7,987,500
- ---------------------------------------------------------------------
240,000 Household International, Inc. 13,500,000
- ---------------------------------------------------------------------
320,000 MBNA Corp. 11,800,000
- ---------------------------------------------------------------------
320,000 Mercury Finance Co. 6,160,000
- ---------------------------------------------------------------------
88,270,788
- ---------------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.31%
240,000 Greenpoint Financial Corp. 6,480,000
- ---------------------------------------------------------------------
FOOD/PROCESSING - 0.68%
220,000 Nabisco Holdings Corp. 5,912,500
- ---------------------------------------------------------------------
240,000 Quaker Oats Co. 8,190,000
- ---------------------------------------------------------------------
14,102,500
- ---------------------------------------------------------------------
HOMEBUILDING - 0.25%
160,000 Centex Corp. 5,240,000
- ---------------------------------------------------------------------
HOTELS/MOTELS - 0.25%
140,000 Marriott International, Inc. 5,162,500
- ---------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 2.57%
220,000 Aetna Life & Casualty Co. 15,482,500
- ---------------------------------------------------------------------
320,000 Allstate Financial Corp. 11,760,000
- ---------------------------------------------------------------------
160,000 CIGNA Corp. 15,860,000
- ---------------------------------------------------------------------
200,000 Travelers Group, Inc. 10,100,000
- ---------------------------------------------------------------------
53,202,500
- ---------------------------------------------------------------------
LEISURE & RECREATION - 0.36%
320,000 Carnival Corp. 7,440,000
- ---------------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 102
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
MACHINERY (HEAVY) - 0.96%
140,000 Case Corp. $ 5,337,500
- --------------------------------------------------------------------------
260,000 Caterpillar Inc. 14,592,500
- --------------------------------------------------------------------------
19,930,000
- --------------------------------------------------------------------------
MEDICAL (DRUGS) - 8.16%
240,000 American Home Products Corp. 21,270,000
- --------------------------------------------------------------------------
240,000 Glaxo Wellcome PLC-ADR 6,510,000
- --------------------------------------------------------------------------
400,000 Johnson & Johnson 32,600,000
- --------------------------------------------------------------------------
160,000 Lilly (Eli) & Co. 15,460,000
- --------------------------------------------------------------------------
600,000 Pfizer Inc. 34,425,000
- --------------------------------------------------------------------------
120,000 Rhone-Poulenc Rorer, Inc. 5,655,000
- --------------------------------------------------------------------------
400,000 Schering-Plough Corp. 21,450,000
- --------------------------------------------------------------------------
300,000 SmithKline Beecham PLC-ADR 15,562,500
- --------------------------------------------------------------------------
400,000 Teva Pharmaceuticals Industries Ltd.-ADR 15,700,000
- --------------------------------------------------------------------------
168,632,500
- --------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 1.33%
200,000 Columbia/HCA Healthcare Corp. 9,825,000
- --------------------------------------------------------------------------
200,000 Horizon/CMS Healthcare Corp.(a) 4,050,000
- --------------------------------------------------------------------------
200,000 Integrated Health Services, Inc. 4,575,000
- --------------------------------------------------------------------------
160,000 U.S. Healthcare Corp. 6,160,000
- --------------------------------------------------------------------------
100,846 Vencor, Inc.(a) 2,798,477
- --------------------------------------------------------------------------
27,408,477
- --------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 0.10%
100,000 De Rigo S.p.A.-ADR(a) 2,062,500
- --------------------------------------------------------------------------
METALS (MISCELLANEOUS) - 0.54%
220,000 Aluminum Co. of America 11,220,000
- --------------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.67%
360,000 Williams Companies, Inc. 13,905,000
- --------------------------------------------------------------------------
OFFICE AUTOMATION - 2.01%
320,000 Xerox Corp. 41,520,000
- --------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.21%
240,000 USX-Marathon Group 4,260,000
- --------------------------------------------------------------------------
OIL & GAS SERVICES - 0.52%
500,000 Occidental Petroleum Corp. 10,750,000
- --------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 0.32%
160,000 Halliburton Co. 6,640,000
- --------------------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 103
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS - 1.58%
240,000 Albany International Corp.-Class A $ 4,980,000
- -------------------------------------------------------------------
140,000 Champion International Corp. 7,490,000
- -------------------------------------------------------------------
120,000 Kimberly-Clark Corp. 8,715,000
- -------------------------------------------------------------------
200,000 Mead Corp. (The) 11,525,000
- -------------------------------------------------------------------
32,710,000
- -------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.24%
200,000 Patriot American Hospitality, Inc.(a) 4,875,000
- -------------------------------------------------------------------
RESTAURANTS - 0.55%
200,000 Outback Steakhouse, Inc.(a) 6,275,000
- -------------------------------------------------------------------
260,000 Wendy's International, Inc. 5,167,500
- -------------------------------------------------------------------
11,442,500
- -------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.55%
240,000 Safeway Inc.(a) 11,340,000
- -------------------------------------------------------------------
RETAIL (STORES) - 2.77%
120,000 Circuit City Stores, Inc. 4,005,000
- -------------------------------------------------------------------
160,000 Gap, Inc. (The) 6,300,000
- -------------------------------------------------------------------
1,200,000 Intimate Brands, Inc.(a) 20,100,000
- -------------------------------------------------------------------
400,000 Limited (The), Inc. 7,350,000
- -------------------------------------------------------------------
98,600 Pep Boys - Manny, Moe & Jack 2,156,875
- -------------------------------------------------------------------
300,000 Sears, Roebuck & Co. 10,200,000
- -------------------------------------------------------------------
200,000 Shopko Stores, Inc. 2,150,000
- -------------------------------------------------------------------
100,000 Tandy Corp. 4,937,500
- -------------------------------------------------------------------
57,199,375
- -------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 0.60%
240,000 Varian Associates, Inc. 12,330,000
- -------------------------------------------------------------------
SEMICONDUCTORS - 7.22%
200,000 Analog Devices, Inc.(a) 7,225,000
- -------------------------------------------------------------------
500,000 Applied Materials, Inc.(a) 25,062,500
- -------------------------------------------------------------------
240,000 Intel Corp. 16,770,000
- -------------------------------------------------------------------
400,000 Micron Technology Inc. 28,250,000
- -------------------------------------------------------------------
200,000 National Semiconductor Corp.(a) 4,875,000
- -------------------------------------------------------------------
900,000 Texas Instruments, Inc. 61,425,000
- -------------------------------------------------------------------
240,000 VLSI Technology, Inc.(a) 5,640,000
- -------------------------------------------------------------------
149,247,500
- -------------------------------------------------------------------
</TABLE>
FS-15
<PAGE> 104
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
TELECOMMUNICATIONS - 3.03%
500,000 A T & T Corp. $ 32,000,000
- -------------------------------------------------------------------------------
300,000 DSC Communications Corp.(a) 11,100,000
- -------------------------------------------------------------------------------
100,000 Nokia Corp.-Class A-ADR 5,575,000
- -------------------------------------------------------------------------------
400,000 Telefonaktiebolaget L.M. Ericsson-ADR 8,543,760
- -------------------------------------------------------------------------------
160,000 Tellabs, Inc.(a) 5,440,000
- -------------------------------------------------------------------------------
62,658,760
- -------------------------------------------------------------------------------
TELEPHONE - 2.74%
200,000 Ameritech Corp. 10,800,000
- -------------------------------------------------------------------------------
160,000 BellSouth Corp. 12,240,000
- -------------------------------------------------------------------------------
200,000 Cincinnati Bell, Inc. 5,875,000
- -------------------------------------------------------------------------------
320,000 GTE Corp. 13,200,000
- -------------------------------------------------------------------------------
260,000 SBC Communications, Inc. 14,527,500
- -------------------------------------------------------------------------------
56,642,500
- -------------------------------------------------------------------------------
TEXTILES - 0.28%
205,500 Liz Claiborne, Inc. 5,831,061
- -------------------------------------------------------------------------------
TOBACCO - 3.51%
800,000 Philip Morris Companies Inc. 67,600,000
- -------------------------------------------------------------------------------
160,000 RJR Nabisco Holdings Corp. 4,920,000
- -------------------------------------------------------------------------------
72,520,000
- -------------------------------------------------------------------------------
Total Common Stocks 1,565,460,703
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 11.33%
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.49%
$10,000,000 Magna International Inc., Conv. Sub. Deb., 5.00%,
10/15/02 10,150,000
- -------------------------------------------------------------------------------
BUSINESS SERVICES - 0.42%
4,000,000 Career Horizons Inc., Conv. Bonds, 7.00%,
11/01/02(b)
(Acquired 10/16/95-10/27/95; cost $4,015,000) 4,060,000
- -------------------------------------------------------------------------------
4,000,000 Olsten Corp., Conv. Sub. Deb., 4.875%, 05/15/03 4,692,000
- -------------------------------------------------------------------------------
8,752,000
- -------------------------------------------------------------------------------
CHEMICALS - 0.26%
6,000,000 Sandoz Capital BVI Ltd., Sr. Conv. Deb., 2.00%,
10/06/02(b)
(Acquired 09/28/95; cost $4,947,600) 5,310,000
- -------------------------------------------------------------------------------
</TABLE>
FS-16
<PAGE> 105
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
COMPUTER NETWORKING - 0.75%
$ 8,000,000 Bay Networks Inc., Conv. Sub. Deb., 5.25%,
05/15/03(b)
(Acquired 09/26/95-10/02/95; cost $8,407,500) $ 9,020,000
- -------------------------------------------------------------------------------
4,000,000 3Com Corp., Conv. Sub. Notes, 10.25%, 11/10/01(b)
(Acquired 11/08/94; cost $4,000,000) 6,410,000
- -------------------------------------------------------------------------------
15,430,000
- -------------------------------------------------------------------------------
COMPUTER PERIPHERALS - 1.03%
10,000,000 EMC Corp., Conv. Sub. Notes, 4.25%, 01/01/01 10,000,000
- -------------------------------------------------------------------------------
5,000,000 Sanmina Corp., Conv. Sub. Notes, 5.50%,
08/15/02(b)
(Acquired 08/10/95-09/22/95; cost $5,064,375) 5,750,000
- -------------------------------------------------------------------------------
5,000,000 Seagate Technology Inc., Conv. Sub. Deb., 6.75%,
05/01/12 5,625,000
- -------------------------------------------------------------------------------
21,375,000
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.83%
20,000,000 Silicon Graphics Inc., Sr. Conv. Sub. Deb.,
4.15%, 11/02/13(b)(c)
(Acquired 10/26/93-09/22/95; cost $9,835,480) 11,143,000
- -------------------------------------------------------------------------------
20,000,000 SoftKey International Inc., Conv. Notes, 5.50%,
11/01/00(b)
(Acquired 10/17/95-10/30/95; cost $19,788,820) 16,900,000
- -------------------------------------------------------------------------------
6,000,000 Sterling Software Inc., Conv. Sub. Deb., 5.75%,
02/01/03 9,882,000
- -------------------------------------------------------------------------------
37,925,000
- -------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.79%
4,000,000 Checkpoint Systems Inc., Conv. Sub. Deb., 5.25%,
11/01/05(b)
(Acquired 10/17/95-10/27/95; cost $4,005,625) 4,060,000
- -------------------------------------------------------------------------------
5,000,000 Dovatron International, Inc., Conv. Sub. Notes,
6.00%, 10/15/02(b)
(Acquired 10/06/95-10/09/95; cost $5,108,750) 5,137,500
- -------------------------------------------------------------------------------
7,500,000 Integrated Device Technology, Inc., Conv. Sub.
Notes, 5.50%, 06/01/02 7,162,500
- -------------------------------------------------------------------------------
16,360,000
- -------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.42%
4,000,000 Thermo Electron Corp., Sr. Conv. Deb., 4.625%,
08/01/97(b)
(Acquired 09/28/94; cost $5,779,440) 8,653,000
- -------------------------------------------------------------------------------
MEDICAL (DRUGS) - 0.78%
10,000,000 ICN Pharmaceuticals Inc., Conv. Sub. Notes,
8.50%, 11/15/99 11,183,000
- -------------------------------------------------------------------------------
5,000,000 Ivax Corp., Conv. Deb., 6.50%, 11/15/01(b)
(Acquired 10/19/95-10/20/95; cost $5,095,000) 4,912,500
- -------------------------------------------------------------------------------
16,095,500
- -------------------------------------------------------------------------------
</TABLE>
FS-17
<PAGE> 106
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES) - 1.15%
$ 4,000,000 Genesis Health Ventures, Sr. Conv. Sub. Deb.,
6.00%, 11/30/03 $ 5,300,000
- -------------------------------------------------------------------------------
5,000,000 Healthsouth Rehabilitation Corp., Conv. Sub.
Deb., 5.00%, 04/01/01 7,446,750
- -------------------------------------------------------------------------------
6,000,000 Integrated Health Services Inc., Conv. Sub. Deb.,
6.00%, 01/01/03 5,698,800
- -------------------------------------------------------------------------------
5,000,000 Prime Hospitality Corp., Conv. Sub. Notes, 7.00%,
04/15/02 5,275,000
- -------------------------------------------------------------------------------
23,720,550
- -------------------------------------------------------------------------------
OFFICE AUTOMATION - 0.26%
4,000,000 Danka Business Systems, Conv. Sub. Deb., 6.75%,
04/01/02(b)
(Acquired 03/06/95; cost $4,000,000) 5,280,000
- -------------------------------------------------------------------------------
RETAIL (STORES) - 0.72%
5,000,000 Baby Superstore Inc., Conv. Sub. Notes, 4.875%,
10/01/00 5,187,500
- -------------------------------------------------------------------------------
10,000,000 Federated Department Stores, Conv. Notes, 5.00%,
10/01/03 9,800,000
- -------------------------------------------------------------------------------
14,987,500
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 2.43%
8,000,000 Altera Corp., Conv. Sub. Notes, 5.75%,
06/15/02(b)
(Acquired 06/16/95-10/05/95; cost $8,851,250) 10,780,000
- -------------------------------------------------------------------------------
2,000,000 LAM Research Corp., Conv. Sub. Deb., 6.00%,
05/01/03 4,905,000
- -------------------------------------------------------------------------------
2,500,000 LSI Logic Corp., Conv. Sub. Notes, 5.50%,
03/15/01(b)
(Acquired 03/30/94-10/11/95; cost $7,170,340) 9,737,500
- -------------------------------------------------------------------------------
20,000,000 Motorola Inc., Sub. Liquid Yield Option Notes,
2.25%, 09/27/13(c) 16,400,000
- -------------------------------------------------------------------------------
10,000,000 Solectron Corp., Conv. Liquid Yield Option Notes,
7.00%, 05/05/12(c) 8,400,000
- -------------------------------------------------------------------------------
50,222,500
- -------------------------------------------------------------------------------
Total Convertible Corporate Bonds 234,261,050
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 6.97%
AUTOMOBILE (MANUFACTURERS) - 0.52%
160,000 General Motors Corp.-Class C, $3.25 Dep. Conv.
Pfd. 10,720,000
- -------------------------------------------------------------------------------
BANKING (MONEY CENTER) - 0.52%
60,000 Citicorp-$5.375 Dep. Conv. Pfd. 10,671,780
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 0.56%
120,000 Ceridian Corp.-$2.75 Conv. Pfd. 11,700,000
- -------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 0.79%
150,000 American General Delaware-Series A, $3.00 Conv.
Pfd. 7,762,500
- -------------------------------------------------------------------------------
160,000 United Companies Finance LP-$2.97 Conv. Pfd.
PRIDES 8,560,000
- -------------------------------------------------------------------------------
16,322,500
- -------------------------------------------------------------------------------
</TABLE>
FS-18
<PAGE> 107
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT) - 0.88%
200,000 First USA-$1.9922 Conv. Pfd. $ 8,300,000
- -------------------------------------------------------------------------------
160,000 SunAmerica Inc.-Series E, $3.10 Dep. Conv. Pfd. 9,920,000
- -------------------------------------------------------------------------------
18,220,000
- -------------------------------------------------------------------------------
FUNERAL SERVICES - 0.85%
250,000 SCI Financial LLC-Series A, $3.125 Conv. Pfd. 17,625,000
- -------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 0.21%
100,000 Allstate Inc.-$2.30 Conv. Pfd. 4,350,000
- -------------------------------------------------------------------------------
LEISURE & RECREATION - 0.21%
400,000 Bally Entertainment Corp.-$0.89 Conv. Pfd. PRIDES 4,450,000
- -------------------------------------------------------------------------------
OFFICE PRODUCTS - 0.33%
80,000 Alco Standard Corp.-Series BB, $5.04 Dep. Conv.
Pfd. ACES 6,840,000
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.29%
160,000 Bowater Inc.-Series B, $1.645 Dep. Conv. Pfd.
PRIDES 6,000,000
- -------------------------------------------------------------------------------
POLLUTION CONTROL - 0.13%
80,000 Browning-Ferris Industries-$2.5828 Conv. Pfd.
ACES 2,630,000
- -------------------------------------------------------------------------------
PUBLISHING - 0.31%
200,000 Time Warner Financing-$1.24 Conv. Pfd. PERCS 6,400,000
- -------------------------------------------------------------------------------
RETAIL (STORES) - 0.24%
120,000 Best Buy Capital-$3.25 Conv. Pfd. 4,890,000
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 0.85%
200,000 National Semiconductors-$3.25 Conv. Pfd. 17,500,000
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.28%
120,000 LCI International, Inc.-$1.25 Exch. Conv. Pfd. 5,745,000
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks 144,064,280
- -------------------------------------------------------------------------------
</TABLE>
FS-19
<PAGE> 108
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
U.S. TREASURY NOTES - 3.81%
$ 6,500,000 7.25%, 11/30/96 $ 6,608,030
- -------------------------------------------------------------------------------
6,500,000 7.50%, 12/31/96 6,636,955
- -------------------------------------------------------------------------------
6,500,000 7.50%, 01/31/97 6,645,145
- -------------------------------------------------------------------------------
6,500,000 6.875%, 02/28/97 6,603,220
- -------------------------------------------------------------------------------
6,500,000 6.625%, 03/31/97 6,589,440
- -------------------------------------------------------------------------------
6,500,000 6.50%, 04/30/97 6,581,185
- -------------------------------------------------------------------------------
6,500,000 6.125%, 05/31/97 6,547,515
- -------------------------------------------------------------------------------
6,500,000 5.625%, 06/30/97 6,501,105
- -------------------------------------------------------------------------------
6,500,000 5.875%, 07/31/97 6,527,690
- -------------------------------------------------------------------------------
6,500,000 6.00%, 08/31/97 6,541,340
- -------------------------------------------------------------------------------
6,500,000 5.75%, 09/30/97 6,517,550
- -------------------------------------------------------------------------------
6,500,000 5.625%, 10/31/97 6,504,095
- -------------------------------------------------------------------------------
Total U.S. Treasury Notes 78,803,270
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.73%(d)
955,097 Daiwa Securities America Inc., 5.90%, 11/01/95(e) 955,097
- -------------------------------------------------------------------------------
35,000,000 Lehman Brothers Government Securities, Inc.,
5.92%, 11/01/95(f) 35,000,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements 35,955,097
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.56% 2,058,544,400
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.44% 9,002,438
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $2,067,546,838
===============================================================================
</TABLE>
Abbreviations:
ACES - Automatically Convertible Equity Securities
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depositary
Exch. - Exchangeable
Pfd. - Preferred
PERCS - Preferred Equity Redemptive Cumulative Stock
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Sr. - Senior
Sub. - Subordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31, 1995 was
$107,153,500, which represented 5.18% of the net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(e) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,641. Collateralized by $353,853,000 U.S. Treasury obligations,
8.375% due 08/15/08.
(f) Joint repurchase agreement entered into 10/31/95 with a maturity value of
$100,016,444. Collateralized by $92,004,000 U.S. Treasury obligations,
6.50% to 9.125% due 04/30/99 to 05/31/99.
See Notes to Financial Statements.
FS-20
<PAGE> 109
Financials
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,774,220,816) $ 2,058,544,400
- --------------------------------------------------------------------------
Receivables for:
Investments sold 80,911,499
- --------------------------------------------------------------------------
Capital stock sold 12,279,189
- --------------------------------------------------------------------------
Dividends and interest 5,525,541
- --------------------------------------------------------------------------
Investment for deferred compensation plan 13,493
- --------------------------------------------------------------------------
Other assets 73,648
- --------------------------------------------------------------------------
Total assets 2,157,347,770
- --------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 82,514,084
- --------------------------------------------------------------------------
Capital stock reacquired 4,814,964
- --------------------------------------------------------------------------
Deferred compensation 13,493
- --------------------------------------------------------------------------
Accrued advisory fees 1,110,756
- --------------------------------------------------------------------------
Accrued administrative services fees 8,544
- --------------------------------------------------------------------------
Accrued distribution fees 721,859
- --------------------------------------------------------------------------
Accrued transfer agent fees 343,072
- --------------------------------------------------------------------------
Accrued operating expenses 274,160
- --------------------------------------------------------------------------
Total liabilities 89,800,932
- --------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 2,067,546,838
==========================================================================
NET ASSETS:
Class A $ 1,974,417,019
==========================================================================
Class B $ 67,591,852
==========================================================================
Institutional Class $ 25,537,967
==========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------------------------
Outstanding 185,803,605
==========================================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------------------------
Outstanding 6,365,612
==========================================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------------------------
Outstanding 2,396,343
==========================================================================
CLASS A:
Net asset value and redemption price per share $10.63
==========================================================================
Offering price per share:
(Net asset value of $10.63 divided by 94.50%) $11.25
==========================================================================
CLASS B:
Net asset value and offering price per share $10.62
==========================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $10.66
==========================================================================
</TABLE>
See Notes to Financial Statements.
FS-21
<PAGE> 110
Financials
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 31,720,012
- ----------------------------------------------------------------------------
Interest 15,080,737
- ----------------------------------------------------------------------------
Total investment income 46,800,749
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 10,890,335
- ----------------------------------------------------------------------------
Administrative services fees 109,054
- ----------------------------------------------------------------------------
Custodian fees 150,968
- ----------------------------------------------------------------------------
Directors' fees 17,234
- ----------------------------------------------------------------------------
Distribution fees-Class A 5,007,160
- ----------------------------------------------------------------------------
Distribution fees-Class B 94,462
- ----------------------------------------------------------------------------
Transfer agent fees-Class A 2,906,528
- ----------------------------------------------------------------------------
Transfer agent fees-Class B 19,728
- ----------------------------------------------------------------------------
Transfer agent fees-Institutional Class 1,224
- ----------------------------------------------------------------------------
Other 623,804
- ----------------------------------------------------------------------------
Total expenses 19,820,497
- ----------------------------------------------------------------------------
Net investment income 26,980,252
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 179,469,513
- ----------------------------------------------------------------------------
Futures contracts (344,344)
- ----------------------------------------------------------------------------
179,125,169
- ----------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 202,231,210
- ----------------------------------------------------------------------------
Foreign currencies (8)
- ----------------------------------------------------------------------------
Futures contracts (1,250,000)
- ----------------------------------------------------------------------------
200,981,202
- ----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 380,106,371
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $407,086,623
- ----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-22
<PAGE> 111
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 26,980,252 $ 37,921,889
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies and futures
contracts 179,125,169 56,414,638
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities, foreign
currencies and futures contracts 200,981,202 (136,629,171)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 407,086,623 (42,292,644)
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income:
Class A (34,589,802) (28,712,940)
- ------------------------------------------------------------------------------
Class B (55,355) --
- ------------------------------------------------------------------------------
Institutional Class (536,096) (485,084)
- ------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investments:
Class A (57,274,888) (28,113,934)
- ------------------------------------------------------------------------------
Class B (12,593) --
- ------------------------------------------------------------------------------
Institutional Class (759,222) (384,536)
- ------------------------------------------------------------------------------
Net equalization credits (charges):
Class A (284,916) (147,034)
- ------------------------------------------------------------------------------
Class B 24,584 --
- ------------------------------------------------------------------------------
Institutional Class (13,270) 335
- ------------------------------------------------------------------------------
Share transactions-net:
Class A 86,486,354 (12,596,188)
- ------------------------------------------------------------------------------
Class B 66,768,426 --
- ------------------------------------------------------------------------------
Institutional Class (206,795) (1,032,133)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets 466,633,050 (113,764,158)
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,600,913,788 1,714,677,946
- ------------------------------------------------------------------------------
End of period $2,067,546,838 $1,600,913,788
- ------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,606,658,340 $1,453,610,355
- ------------------------------------------------------------------------------
Undistributed net investment income 102,563 8,577,166
- ------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies
and futures contracts 176,462,351 55,383,885
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities and futures contracts 284,323,584 83,342,382
- ------------------------------------------------------------------------------
$2,067,546,838 $1,600,913,788
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-23
<PAGE> 112
Financials
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of four diversified portfolios:
AIM Charter Fund, AIM Weingarten Fund, AIM Constellation Fund and AIM
Aggressive Growth Fund. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and the Institutional Class. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements.
A. Security Valuations - Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible bonds are valued
at the mean between the closing bid and asked prices obtained from a broker-
dealer. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the closing bid
and asked prices. Debt obligations that are issued or guaranteed by the U.S.
Treasury are valued on the basis of prices provided by an independent
pricing service. Prices provided by the pricing service may be determined
without exclusive reliance on quoted prices, and may reflect appropriate
factors such as yield, type of issue, coupon rate and maturity date.
Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations are not readily available are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
E. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
G. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
FS-24
<PAGE> 113
Financials
H. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and the change in the value of the contracts may not correlate with
changes in the value of the securities being hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees
paid by the Fund to AIM to the extent necessary to reduce the fees paid by the
Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of the Fund's average daily net assets
in excess of $150 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion. Under the terms of a master
sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM
Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
These agreements require AIM to reduce its fees or, if necessary, make payments
to the Fund to the extent required to satisfy any expense limitations imposed
by the securities laws or regulations thereunder of any state in which the
Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended October 31,
1995, AIM was reimbursed $109,054 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A and Class B shares. During the year
ended October 31, 1995, AFS was paid $1,568,721 for such services. During the
year ended October 31, 1995, the Fund paid A I M Institutional Fund Services,
Inc. ("AIFS") $587 for shareholder and transfer agency services with respect to
the Institutional Class. Effective July 1, 1995, AIFS became the exclusive
transfer agent for the Institutional Class of the Fund.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own Class A shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and
own Class B shares of the Fund. Any amounts not paid as a service fee under
such Plans would constitute an asset-based sales charge. The Plans also impose
a cap on the total sales charges, including asset-based sales charges, that may
be paid by the respective classes. AIM Distributors may, from time to time,
assign, transfer or pledge to one or more designees, its right to all or a
designated portion of (a) compensation received by AIM Distributors from the
Fund pursuant to the Class B Plan (but not AIM Distributors' duties and
obligations pursuant to the Class B Plan), and (b) any contingent deferred
sales charges received by AIM Distributors related to the Class B shares.
During the year ended October 31, 1995 for the Class A shares and the period
June 26, 1995 (date sales commenced) through October 31, 1995 for the Class B
shares, the Class A shares and the Class B shares paid AIM Distributors
$5,007,160 and $94,462, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,316,019 from sales of Class A
shares of the Fund during the year ended October 31, 1995. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the year ended October 31,
1995, AIM Distributors received commissions of $18,452 in contingent deferred
sales charges imposed on redemptions of Class A and Class B shares. Certain
officers and directors of the Company are officers and directors of AIM, AIM
Capital, AIM Distributors, AFS, AIFS and FMC.
FS-25
<PAGE> 114
Financials
During the year ended October 31, 1995, the Fund paid legal fees of $6,853
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $28,500,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. During the period July 20, 1995 (effective date of Credit
Agreement) through October 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended October 31,
1995 was $2,717,900,855 and $2,713,027,662, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1995, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $307,302,292
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (26,174,954)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $281,127,338
- ---------------------------------------------------------------------------
</TABLE>
Cost of investments for tax purposes is $1,777,417,062.
NOTE 6 - CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 40,727,782 $396,439,839 40,711,895 $363,174,892
- ---------------------- ----------- ------------ ----------- ------------
Class B* 6,409,868 67,237,422 -- --
- ---------------------- ----------- ------------ ----------- ------------
Institutional Class 335,121 3,269,772 280,235 2,507,705
- ---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of dividends:
Class A 10,283,705 77,653,310 4,862,946 43,539,217
- ---------------------- ----------- ------------ ----------- ------------
Class B* 5,996 64,162 -- --
- ---------------------- ----------- ------------ ----------- ------------
Institutional Class 134,103 1,130,381 83,958 753,348
- ---------------------- ----------- ------------ ----------- ------------
Reacquired:
Class A (42,561,203) (387,606,795) (46,996,269) (419,310,297)
- ---------------------- ----------- ------------ ----------- ------------
Class B* (50,252) (533,158) -- --
- ---------------------- ----------- ------------ ----------- ------------
Institutional Class (519,822) (4,606,948) (476,063) (4,293,186)
====================== =========== ============ =========== ============
14,765,298 $153,047,985 (1,533,298) $(13,628,321)
</TABLE>
* Class B shares commenced sales on June 26, 1995.
FS-26
<PAGE> 115
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the ten-year period ended October 31,
1995 and for a Class B share outstanding during the period June 26, 1995 (date
sales commenced) through October 31, 1995.
CLASS A:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55 $ 6.97 $ 5.40 $ 6.61 $ 8.18
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Income from investment
operations:
Net investment income 0.15 0.21 0.17 0.18 0.18 0.18 0.21 0.15 0.09
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Net gains (losses) on
securities (both
realized
and unrealized) 2.11 (0.45) 1.22 0.16 2.15 0.08 1.55 0.16 0.35
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Total from investment
operations 2.26 (0.24) 1.39 0.34 2.33 0.26 1.76 0.31 0.44
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.20) (0.16) (0.29) (0.17) (0.15) (0.26) (0.19) (0.12) (0.14)
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Distributions from
capital gains (0.33) (0.16) -- (0.23) (0.31) (0.42) -- (1.40) (1.87)
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Total distributions (0.53) (0.32) (0.29) (0.40) (0.46) (0.68) (0.19) (1.52) (2.01)
- ----------------------- ---------- ---------- ---------- ---------- -------- -------- ------- ------- -------
Net asset value, end of
period $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55 $ 6.97 $ 5.40 $ 6.61
======================= ========== ========== ========== ========== ======== ======== ======= ======= =======
Total return(b) 27.03% (2.55)% 16.92% 4.17% 37.65% 3.86% 33.68% 5.90% 6.72%
======================= ========== ========== ========== ========== ======== ======== ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $1,974,417 $1,579,074 $1,690,482 $1,256,151 $443,546 $102,499 $70,997 $65,799 $82,756
======================= ========== ========== ========== ========== ======== ======== ======= ======= =======
Ratio of expenses to
average net assets 1.17%(c) 1.17% 1.17% 1.17% 1.29% 1.35% 1.35% 1.46% 1.15%
======================= ========== ========== ========== ========== ======== ======== ======= ======= =======
Ratio of net investment
income to average net
assets 1.55%(c) 2.32% 1.89% 2.14% 2.14% 2.51% 3.73% 2.83% 1.57%
======================= ========== ========== ========== ========== ======== ======== ======= ======= =======
Portfolio turnover rate 161% 126% 144% 95% 144% 215% 131% 247% 225%
======================= ========== ========== ========== ========== ======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1986(a)
--------
<S> <C>
Net asset value,
beginning of period $ 6.83
- ------------------------ --------
Income from investment
operations:
Net investment income 0.16
- ------------------------ --------
Net gains (losses) on
securities (both
realized
and unrealized) 1.87
- ------------------------ --------
Total from investment
operations 2.03
- ------------------------ --------
Less distributions:
Dividends from net
investment income (0.17)
- ------------------------ --------
Distributions from
capital gains (0.51)
- ------------------------ --------
Total distributions (0.68)
- ------------------------ --------
Net asset value, end of
period $ 8.18
======================== ========
Total return(b) 31.59%
======================== ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $81,985
======================== ========
Ratio of expenses to
average net assets 1.21%
======================== ========
Ratio of net investment
income to average net
assets 1.91%
======================== ========
Portfolio turnover rate 75%
======================== ========
</TABLE>
(a) The Fund changed investment advisers on May 2, 1986.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $1,669,053,423.
FS-27
<PAGE> 116
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS--CONTINUED
CLASS B:
<TABLE>
<CAPTION>
1995
-------
<S> <C>
Net asset value, beginning of period $ 9.81
- ---------------------------------------------------- -------
Income from investment operations:
Net investment income 0.03
- ---------------------------------------------------- -------
Net gains (losses) on securities (both realized
and unrealized) 0.80
- ---------------------------------------------------- -------
Total from investment operations 0.83
- ---------------------------------------------------- -------
Less distributions:
Dividends from net investment income (0.02)
- ---------------------------------------------------- -------
Distributions from capital gains --
- ---------------------------------------------------- -------
Total distributions (0.02)
- ---------------------------------------------------- -------
Net asset value, end of period $ 10.62
==================================================== =======
Total return(a) 8.48%
==================================================== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $67,592
==================================================== =======
Ratio of expenses to average net assets 1.98%(b)
==================================================== =======
Ratio of net investment income to average net assets 0.74%(b)
==================================================== =======
Portfolio turnover rate 161%
==================================================== =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $26,935,502.
FS-28
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Weingarten Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Weingarten Fund (a portfolio of AIM Equity Funds, Inc.), including the schedule
of investments, as of October 31, 1995, the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the seven year period then ended, the ten months ended October 31,
1988, and the two year period ended December 31, 1987. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Weingarten Fund as of October 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the seven year period then ended, the ten months ended October 31, 1988, and
the two year period ended December 31, 1987, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
FS-29
<PAGE> 118
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 82.38%
AEROSPACE/DEFENSE - 0.89%
350,000 Boeing Co. $ 22,968,750
- --------------------------------------------------------------------
116,600 Raytheon Co. 5,086,675
- --------------------------------------------------------------------
150,000 United Technologies Corp. 13,312,500
- --------------------------------------------------------------------
41,367,925
- --------------------------------------------------------------------
APPLIANCES - 0.87%
1,000,000 Newell Co. 24,125,000
- --------------------------------------------------------------------
350,000 Premark International Inc. 16,187,500
- --------------------------------------------------------------------
40,312,500
- --------------------------------------------------------------------
AUTOMOBILE(MANUFACTURERS) - 0.25%
225,000 Chrysler Corp. 11,615,625
- --------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.61%
800,000 Echlin Inc. 28,600,000
- --------------------------------------------------------------------
BANKING - 2.38%
455,000 Chase Manhattan Corp. 25,935,000
- --------------------------------------------------------------------
1,250,000 CoreStates Financial Corp. 45,468,750
- --------------------------------------------------------------------
463,600 Norwest Bank Corp. 13,676,200
- --------------------------------------------------------------------
1,000,000 Southern National Corp. 25,750,000
- --------------------------------------------------------------------
110,829,950
- --------------------------------------------------------------------
BEVERAGES - 1.02%
900,000 PepsiCo Inc. 47,475,000
- --------------------------------------------------------------------
BUILDING MATERIALS - 0.89%
548,900 Black & Decker Corp. 18,593,988
- --------------------------------------------------------------------
275,000 Georgia-Pacific Corp. 22,687,500
- --------------------------------------------------------------------
41,281,488
- --------------------------------------------------------------------
BUSINESS SERVICES - 2.21%
330,000 Equifax, Inc. 12,870,000
- --------------------------------------------------------------------
684,800 Healthcare COMPARE Corp.(a) 25,337,600
- --------------------------------------------------------------------
1,000,000 Manpower Inc. 27,125,000
- --------------------------------------------------------------------
712,000 Olsten Corp. 27,412,000
- --------------------------------------------------------------------
368,900 ServiceMaster L.P. 10,467,538
- --------------------------------------------------------------------
103,212,138
- --------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.45%
375,000 W.R. Grace & Co. 20,906,250
- --------------------------------------------------------------------
</TABLE>
FS-30
<PAGE> 119
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER MAINFRAMES - 0.73%
350,000 International Business Machines Corp. $ 34,037,500
- --------------------------------------------------------------------
COMPUTER MINI/PCS - 3.61%
900,000 COMPAQ Computer Corp.(a) 50,175,000
- --------------------------------------------------------------------
1,000,000 Dell Computer Corp. 46,625,000
- --------------------------------------------------------------------
250,000 Digital Equipment Corp.(a) 13,531,250
- --------------------------------------------------------------------
456,600 Hewlett-Packard Co. 42,292,575
- --------------------------------------------------------------------
200,000 Sun Microsystems Inc.(a) 15,600,000
- --------------------------------------------------------------------
168,223,825
- --------------------------------------------------------------------
COMPUTER NETWORKING - 3.51%
725,000 Bay Networks Inc.(a) 48,031,250
- --------------------------------------------------------------------
250,000 Cabletron Systems, Inc.(a) 19,656,250
- --------------------------------------------------------------------
750,000 Cisco Systems, Inc.(a) 58,125,000
- --------------------------------------------------------------------
800,000 3Com Corp.(a) 37,600,000
- --------------------------------------------------------------------
163,412,500
- --------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.92%
500,000 Adaptec Inc.(a) 22,250,000
- --------------------------------------------------------------------
464,600 Seagate Technology Inc.(a) 20,790,850
- --------------------------------------------------------------------
43,040,850
- --------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 4.98%
347,700 Adobe Systems, Inc. 19,818,900
- --------------------------------------------------------------------
1,000,000 BMC Software, Inc.(a) 35,625,000
- --------------------------------------------------------------------
1,050,000 Cadence Design Systems, Inc.(a) 33,862,500
- --------------------------------------------------------------------
1,000,000 Computer Associates International, Inc. 55,000,000
- --------------------------------------------------------------------
489,300 FTP Software, Inc.(a) 13,211,100
- --------------------------------------------------------------------
675,000 Mentor Graphics Corp.(a) 14,175,000
- --------------------------------------------------------------------
115,000 Microsoft Corp.(a) 11,500,000
- --------------------------------------------------------------------
433,000 Policy Management Systems Corp.(a) 20,405,125
- --------------------------------------------------------------------
417,500 SoftKey International Inc.(a) 13,151,250
- --------------------------------------------------------------------
332,900 Sterling Software, Inc.(a) 15,355,013
- --------------------------------------------------------------------
232,103,888
- --------------------------------------------------------------------
CONGLOMERATES - 1.26%
50,200 Dial Corp. (The) 1,223,625
- --------------------------------------------------------------------
200,000 Du Pont De Nemours 12,475,000
- --------------------------------------------------------------------
160,700 Federal Signal Corp. 3,595,663
- --------------------------------------------------------------------
180,000 Loews Corp. 26,392,500
- --------------------------------------------------------------------
250,100 Tyco International Ltd. 15,193,575
- --------------------------------------------------------------------
58,880,363
- --------------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 120
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CONTAINERS - 0.58%
523,100 Ball Corp. $ 14,450,638
- ------------------------------------------------------------------------
275,000 First Brands Corp. 12,581,250
- ------------------------------------------------------------------------
27,031,888
- ------------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.51%
256,600 Alberto-Culver Co. 6,928,200
- ------------------------------------------------------------------------
100,000 Gillette Co. (The) 4,837,500
- ------------------------------------------------------------------------
150,000 Procter & Gamble Co. 12,150,000
- ------------------------------------------------------------------------
23,915,700
- ------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 2.01%
622,800 Anixter International Inc.(a) 11,911,050
- ------------------------------------------------------------------------
49,900 AVX Corp. 1,553,138
- ------------------------------------------------------------------------
449,700 Tektronix, Inc. 26,644,725
- ------------------------------------------------------------------------
1,600,000 Teradyne, Inc.(a) 53,400,000
- ------------------------------------------------------------------------
93,508,913
- ------------------------------------------------------------------------
ELECTRONIC/DEFENSE - 0.26%
200,000 Sundstrand Corp. 12,250,000
- ------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS - 2.01%
850,000 Arrow Electronics, Inc.(a) 43,137,500
- ------------------------------------------------------------------------
1,000,000 Avnet, Inc. 50,375,000
- ------------------------------------------------------------------------
93,512,500
- ------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 1.03%
668,600 Finova Group, Inc. 30,254,150
- ------------------------------------------------------------------------
815,600 PaineWebber Group, Inc. 17,943,200
- ------------------------------------------------------------------------
48,197,350
- ------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 5.91%
300,000 American Express Co. 12,187,500
- ------------------------------------------------------------------------
1,196,800 Countrywide Credit Industries, Inc. 26,479,200
- ------------------------------------------------------------------------
450,000 Dean Witter Discover & Co. 22,387,500
- ------------------------------------------------------------------------
500,000 Federal Home Loan Mortgage Corp. 34,625,000
- ------------------------------------------------------------------------
33,700 Federal National Mortgage Association 3,534,288
- ------------------------------------------------------------------------
800,000 First USA, Inc. 36,800,000
- ------------------------------------------------------------------------
1,608,200 Green Tree Acceptance, Inc. 42,818,325
- ------------------------------------------------------------------------
1,088,200 MBNA Corp. 40,127,375
- ------------------------------------------------------------------------
650,000 Mercury Finance Co. 12,512,500
- ------------------------------------------------------------------------
252,300 PMI Group, Inc. (The) 12,110,400
- ------------------------------------------------------------------------
250,000 Student Loan Marketing Association 14,718,750
- ------------------------------------------------------------------------
51,400 SunAmerica, Inc. 3,199,650
- ------------------------------------------------------------------------
500,000 United Companies Financial Corp. 14,125,000
- ------------------------------------------------------------------------
275,625,488
- ------------------------------------------------------------------------
</TABLE>
FS-32
<PAGE> 121
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FINANCE (SAVINGS & LOAN) - 0.45%
783,800 Greenpoint Financial Corp. $ 21,162,600
- --------------------------------------------------------------------
FOOD PROCESSING - 0.73%
300,000 ConAgra, Inc. 11,587,500
- --------------------------------------------------------------------
651,600 Hudson Foods, Inc. 9,203,850
- --------------------------------------------------------------------
394,233 Lancaster Colony Corp. 13,108,247
- --------------------------------------------------------------------
33,899,597
- --------------------------------------------------------------------
FUNERAL SERVICES - 0.78%
61,200 Loewen Group, Inc. 2,450,870
- --------------------------------------------------------------------
840,200 Service Corp. International 33,713,025
- --------------------------------------------------------------------
36,163,895
- --------------------------------------------------------------------
HOTELS/MOTELS - 0.33%
600,000 La Quinta Motor Inns, Inc. 15,450,000
- --------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 1.59%
750,000 ACE, Ltd. 25,500,000
- --------------------------------------------------------------------
250,000 CIGNA Corp. 24,781,250
- --------------------------------------------------------------------
76,900 General Re Corp. 11,140,888
- --------------------------------------------------------------------
218,300 Mid Ocean Ltd. 7,722,363
- --------------------------------------------------------------------
236,600 Prudential Reinsurance Holdings(a) 4,820,725
- --------------------------------------------------------------------
73,965,226
- --------------------------------------------------------------------
LEISURE & RECREATION - 0.75%
1,003,900 Carnival Cruise Lines, Inc. 23,340,675
- --------------------------------------------------------------------
400,000 Mattel, Inc. 11,500,000
- --------------------------------------------------------------------
34,840,675
- --------------------------------------------------------------------
MACHINERY (HEAVY) - 0.25%
300,000 Case Corp. 11,437,500
- --------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 1.52%
1,600,000 American Standard Companies(a) 42,800,000
- --------------------------------------------------------------------
610,350 Thermo Electron Corp.(a) 28,076,100
- --------------------------------------------------------------------
70,876,100
- --------------------------------------------------------------------
MEDICAL (DRUGS) - 5.55%
600,000 Abbott Laboratories 23,850,000
- --------------------------------------------------------------------
425,000 American Home Products Corp. 37,665,625
- --------------------------------------------------------------------
590,000 AmeriSource Health Corp.(a) 16,077,500
- --------------------------------------------------------------------
357,700 Cardinal Health, Inc. 18,376,838
- --------------------------------------------------------------------
781,400 Mallinckrodt Group, Inc. 27,153,650
- --------------------------------------------------------------------
225,000 Merck & Co., Inc. 12,937,500
- --------------------------------------------------------------------
1,432,100 Mylan Laboratories, Inc. 27,209,900
- --------------------------------------------------------------------
</TABLE>
FS-33
<PAGE> 122
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Medical (Drugs) - continued
470,000 Pfizer, Inc. $ 26,966,250
- -------------------------------------------------------------------
7,500 Rhone-Poulenc Rorer Inc. 353,438
- -------------------------------------------------------------------
1,000,000 Schering-Plough Corp. 53,625,000
- -------------------------------------------------------------------
325,000 Watson Pharmaceuticals, Inc.(a) 14,543,750
- -------------------------------------------------------------------
258,759,451
- -------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 2.90%
325,000 Baxter International Inc. 12,553,125
- -------------------------------------------------------------------
200,000 Becton, Dickinson & Co. 13,000,000
- -------------------------------------------------------------------
744,600 Biomet, Inc.(a) 12,378,975
- -------------------------------------------------------------------
216,600 Boston Scientific Corp.(a) 9,124,275
- -------------------------------------------------------------------
100,000 Cordis Corp. (a) 11,050,000
- -------------------------------------------------------------------
601,300 Heart Technology Inc.(a) 17,137,050
- -------------------------------------------------------------------
406,400 Medtronic, Inc. 23,469,600
- -------------------------------------------------------------------
200,000 St. Jude Medical, Inc. 10,650,000
- -------------------------------------------------------------------
75,000 Stryker Corp. 3,384,375
- -------------------------------------------------------------------
525,000 Sybron International Corp.(a) 22,312,500
- -------------------------------------------------------------------
135,059,900
- -------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 3.49%
822,500 Apria Healthcare Group, Inc.(a) 17,786,563
- -------------------------------------------------------------------
500,000 Columbia/HCA Healthcare Corp. 24,562,500
- -------------------------------------------------------------------
510,000 Health Management Associates, Inc.(a) 10,965,000
- -------------------------------------------------------------------
500,000 Healthsource, Inc.(a) 26,500,000
- -------------------------------------------------------------------
1,800,000 Healthsouth Corp.(a) 47,025,000
- -------------------------------------------------------------------
600,000 Lincare Holdings, Inc.(a) 14,925,000
- -------------------------------------------------------------------
750,000 Vencor, Inc.(a) 20,812,500
- -------------------------------------------------------------------
162,576,563
- -------------------------------------------------------------------
OFFICE AUTOMATION - 0.96%
350,000 Xerox Corp. 45,412,500
- -------------------------------------------------------------------
OFFICE PRODUCTS - 0.65%
400,000 Avery Dennison Corp. 17,900,000
- -------------------------------------------------------------------
350,000 Reynolds & Reynolds Co. 12,468,750
- -------------------------------------------------------------------
30,368,750
- -------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 0.13%
148,300 Halliburton Co. 6,154,450
- -------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.60%
225,000 Champion International Corp. 12,037,500
- -------------------------------------------------------------------
279,800 Mead Corp. (The) 16,123,475
- -------------------------------------------------------------------
28,160,975
- -------------------------------------------------------------------
</TABLE>
FS-34
<PAGE> 123
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
PUBLISHING - 0.20%
235,500 Harcourt General, Inc. $ 9,331,688
- ------------------------------------------------------------------
RESTAURANTS - 0.27%
400,000 Outback Steakhouse Inc.(a) 12,550,000
- ------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 2.05%
1,000,000 Hannaford Bros. Co. 26,125,000
- ------------------------------------------------------------------
805,700 Kroger Co.(a) 26,890,238
- ------------------------------------------------------------------
900,000 Safeway Inc.(a) 42,525,000
- ------------------------------------------------------------------
95,540,238
- ------------------------------------------------------------------
RETAIL (STORES) - 3.99%
637,300 AutoZone, Inc.(a) 15,773,175
- ------------------------------------------------------------------
1,000,000 Circuit City Stores, Inc. 33,375,000
- ------------------------------------------------------------------
1,500,000 Consolidated Stores Corp.(a) 34,687,500
- ------------------------------------------------------------------
625,000 Gap Inc. 24,609,375
- ------------------------------------------------------------------
1,500,000 Intimate Brands, Inc.(a) 25,125,000
- ------------------------------------------------------------------
393,750 Staples, Inc.(a) 10,483,594
- ------------------------------------------------------------------
261,200 Tandy Corp. 12,896,750
- ------------------------------------------------------------------
648,800 Viking Office Products Inc.(a) 28,871,600
- ------------------------------------------------------------------
185,821,994
- ------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 1.10%
1,000,000 Varian Associates, Inc. 51,375,000
- ------------------------------------------------------------------
SEMICONDUCTORS - 12.94%
1,000,000 Analog Devices, Inc.(a) 36,125,000
- ------------------------------------------------------------------
2,000,000 Applied Materials, Inc.(a) 100,250,000
- ------------------------------------------------------------------
508,700 Atmel Corp.(a) 15,896,875
- ------------------------------------------------------------------
250,000 Cirrus Logic, Inc.(a) 10,531,250
- ------------------------------------------------------------------
600,000 Cypress Semiconductor Corp.(a) 21,150,000
- ------------------------------------------------------------------
1,000,000 Integrated Device Technology, Inc.(a) 19,000,000
- ------------------------------------------------------------------
150,000 Intel Corp. 10,481,250
- ------------------------------------------------------------------
651,000 KLA Instruments Corp.(a) 27,830,250
- ------------------------------------------------------------------
900,000 LAM Research Corp.(a) 54,787,500
- ------------------------------------------------------------------
450,000 Linear Technology Corp. 19,687,500
- ------------------------------------------------------------------
300,000 LSI Logic Corp.(a) 14,137,500
- ------------------------------------------------------------------
1,200,000 Micron Technology Inc. 84,750,000
- ------------------------------------------------------------------
175,000 Motorola, Inc. 11,484,375
- ------------------------------------------------------------------
400,000 National Semiconductor Corp.(a) 9,750,000
- ------------------------------------------------------------------
250,000 Novellus Systems, Inc.(a) 17,218,750
- ------------------------------------------------------------------
</TABLE>
FS-35
<PAGE> 124
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Semiconductors - (continued)
718,300 Solectron Corp.(a) $ 28,911,575
- -----------------------------------------------------------------------------
1,000,000 Texas Instruments Inc. 68,250,000
- -----------------------------------------------------------------------------
700,000 Vishay Intertechnology, Inc.(a) 24,675,000
- -----------------------------------------------------------------------------
500,000 VLSI Technology Inc.(a) 11,750,000
- -----------------------------------------------------------------------------
350,000 Xilinx, Inc.(a) 16,100,000
- -----------------------------------------------------------------------------
602,766,825
- -----------------------------------------------------------------------------
SHOES & RELATED APPAREL - 0.61%
500,000 NIKE, Inc. - Class B 28,375,000
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.41%
800,000 AT&T Corp. 51,200,000
- -----------------------------------------------------------------------------
429,000 Tellabs, Inc.(a) 14,586,000
- -----------------------------------------------------------------------------
65,786,000
- -----------------------------------------------------------------------------
TOBACCO - 1.99%
1,100,000 Philip Morris Companies, Inc. 92,950,000
- -----------------------------------------------------------------------------
TRANSPORTATION - MISCELLANEOUS - 0.25%
390,200 Stolt Nielsen S.A. 11,706,000
- -----------------------------------------------------------------------------
Total Domestic Common Stocks 3,839,832,568
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 1.65%
COMPUTER SOFTWARE/SERVICES - 0.18%
$ 9,580,000 SoftKey International Inc., Conv. Sr. Notes,
5.50%, 11/01/00(b)
(acquired 10/17/95; cost $9,580,000) 8,095,100
- -----------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.44%
15,215,000 Altera Corp., Conv. Sub. Notes, 5.75%,
06/15/02(b)
(acquired 7/27/95-10/17/95; cost
$20,134,139) 20,502,213
- -----------------------------------------------------------------------------
OFFICE AUTOMATION - 0.55%
19,500,000 Danka Business Systems PLC, Conv. Yankee Sub.
Notes, 6.75%, 04/01/02(b)
(acquired 10/26/95; cost $24,960,000) 25,740,000
- -----------------------------------------------------------------------------
RETAIL STORES - 0.48%
34,400,000 Office Depot Inc., Liquid Yield Option Notes,
4.00%, 11/01/08(c) 22,532,000
- -----------------------------------------------------------------------------
Total Convertible Corporate Bonds 76,869,313
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 0.22%
FINANCE (CONSUMER CREDIT) - 0.22%
165,000 SunAmerica Inc. - Series E, $3.10 Conv. Pfd. 10,230,000
- -----------------------------------------------------------------------------
Total Convertible Preferred Stocks 10,230,000
- -----------------------------------------------------------------------------
</TABLE>
FS-36
<PAGE> 125
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 10.98%
AUSTRALIA - 0.36%
1,255,832 Broken Hill Proprietary Co. Ltd. (Conglomerates) $ 17,008,450
- -----------------------------------------------------------------------------
CANADA - 0.54%
694,900 Northern Telecom Ltd. (Telecommunications) 25,016,400
- -----------------------------------------------------------------------------
DENMARK - 0.28%
290,000 Danisco A/S (Food Processing) 13,215,593
- -----------------------------------------------------------------------------
FINLAND - 0.55%
400,000 Nokia Corp. - ADR (Telecommunications) 22,300,000
- -----------------------------------------------------------------------------
55,450 Nokia Corp. (Telecommunications) 3,172,226
- -----------------------------------------------------------------------------
25,472,226
- -----------------------------------------------------------------------------
FRANCE - 0.28%
65,500 LVMH Moet Hennessy Louis Vuitton (Beverages) 13,032,760
- -----------------------------------------------------------------------------
GERMANY - 0.35%
30,400 Mannesmann A.G. (Machinery - Miscellaneous) 10,005,889
- -----------------------------------------------------------------------------
158,000 Veba A.G. (Electric Services) 6,486,800
- -----------------------------------------------------------------------------
16,492,689
- -----------------------------------------------------------------------------
HONG KONG - 1.05%
820,000 HSBC Holdings PLC (Banking) 11,931,399
- -----------------------------------------------------------------------------
3,077,000 Hutchison Whampoa Ltd. (Conglomerates) 16,953,208
- -----------------------------------------------------------------------------
2,505,000 Sun Hung Kai Properties Ltd. (Real Estate) 20,006,434
- -----------------------------------------------------------------------------
48,891,041
- -----------------------------------------------------------------------------
ISRAEL - 0.53%
625,000 Teva Pharmaceutical Industries Ltd. - ADR
(Medical - Drugs) 24,531,250
- -----------------------------------------------------------------------------
ITALY - 0.35%
167,000 Fila Holding S.p.A. - ADR (Retail Stores) 7,201,875
- -----------------------------------------------------------------------------
2,919,000 Telecom Italia Mobile S.p.A.(a)
(Telecommunications) 4,909,560
- -----------------------------------------------------------------------------
2,919,000 Telecom Italia S.p.A. (Telecommunications) 4,471,893
- -----------------------------------------------------------------------------
16,583,328
- -----------------------------------------------------------------------------
MALAYSIA - 0.58%
2,149,000 Malayan Banking Berhad (Banking) 17,337,465
- -----------------------------------------------------------------------------
1,600,000 United Engineers (Building Materials) 9,948,839
- -----------------------------------------------------------------------------
27,286,304
- -----------------------------------------------------------------------------
NETHERLANDS - 0.79%
550,000 Elsag Bailey Process Automation N.V. - ADR(a)
(Electronic Components/Miscellaneous) 14,987,500
- -----------------------------------------------------------------------------
276,100 Philips Electronics N.V. - New York Shares - ADR
(Electronics) 10,664,363
- -----------------------------------------------------------------------------
120,000 Wolters Kluwer N.V. (Publishing) 10,921,536
- -----------------------------------------------------------------------------
36,573,399
- -----------------------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 126
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
NEW ZEALAND - 0.22%
2,500,000 Telecom Corp. of New Zealand (Telecommunications) $ 10,380,222
- -------------------------------------------------------------------------------
SINGAPORE - 0.20%
1,513,000 City Developments Ltd. (Real Estate) 9,369,249
- -------------------------------------------------------------------------------
SWEDEN - 3.62%
250,000 ASEA AB-B Shares (Conglomerates) 24,658,916
- -------------------------------------------------------------------------------
712,200 ASTRA AB-A Shares (Medical - Drugs) 26,168,840
- -------------------------------------------------------------------------------
625,000 ASTRA AB-B Shares (Medical - Drugs) 22,588,320
- -------------------------------------------------------------------------------
958,900 Pharmacia AB-A Shares (Medical - Drugs) 33,356,308
- -------------------------------------------------------------------------------
719,100 Pharmacia Aktiebolaget SP - ADR (Medical - Drugs) 25,168,500
- -------------------------------------------------------------------------------
490,000 Skandia Forsakrings (Insurance - Multi-Line
Property) 12,433,364
- -------------------------------------------------------------------------------
1,141,976 Telefonaktiebolaget L.M.Ericsson - ADR
(Telecommunications) 24,391,922
- -------------------------------------------------------------------------------
168,766,170
- -------------------------------------------------------------------------------
SWITZERLAND - 0.71%
6,500 BBC Brown Boveri Ltd. (Conglomerates) 7,540,298
- -------------------------------------------------------------------------------
29,200 Ciba-Geigy Ltd. (Medical - Drugs) 25,282,833
- -------------------------------------------------------------------------------
32,823,131
- -------------------------------------------------------------------------------
UNITED KINGDOM - 0.57%
190,300 Danka Business Systems PLC - ADR (Office
Automation) 6,375,050
- -------------------------------------------------------------------------------
1,000,000 Granada Group PLC (Leisure & Recreation) 10,679,841
- -------------------------------------------------------------------------------
410,000 Thorn EMI PLC (Leisure & Recreation) 9,548,300
- -------------------------------------------------------------------------------
26,603,191
- -------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 512,045,403
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT - 0.03%(d)
$ 1,274,793 Daiwa Securities America Inc., 5.90%, 11/01/95(e) 1,274,793
- -------------------------------------------------------------------------------
Total Repurchase Agreement 1,274,793
- -------------------------------------------------------------------------------
TIME DEPOSIT - 4.40%
205,000,000 Cayman Time Deposit, 5.75%, 11/01/95 205,000,000
- -------------------------------------------------------------------------------
Total Time Deposit 205,000,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.66% 4,645,252,077
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.34% 16,046,672
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $4,661,298,749
===============================================================================
</TABLE>
FS-38
<PAGE> 127
Financials
Abbreviations:
ADR - American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted Security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of the securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31, 1995 was
$54,337,313 which represented 1.17% of the net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of original
issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the Investment Advisor.
(e) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,641. Collateralized by $353,853,000 U.S. Treasury Notes, 8.375%
due 08/15/08.
See Notes to Financial Statements.
FS-39
<PAGE> 128
Financials
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $3,692,990,886) $4,645,252,077
- -------------------------------------------------------------------------
Foreign currencies, at market value (cost $19,248,298) 18,855,785
- -------------------------------------------------------------------------
Receivables for:
Investments sold 81,804,922
- -------------------------------------------------------------------------
Capital stock sold 7,671,955
- -------------------------------------------------------------------------
Dividends and interest 2,040,054
- -------------------------------------------------------------------------
Investment for deferred compensation plan 59,337
- -------------------------------------------------------------------------
Other assets 111,757
- -------------------------------------------------------------------------
Total assets 4,755,795,887
- -------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 79,969,614
- -------------------------------------------------------------------------
Capital stock reacquired 8,329,522
- -------------------------------------------------------------------------
Deferred compensation 59,337
- -------------------------------------------------------------------------
Options repurchased 467,407
- -------------------------------------------------------------------------
Accrued advisory fees 2,411,107
- -------------------------------------------------------------------------
Accrued administrative service fees 33,042
- -------------------------------------------------------------------------
Accrued distribution fees 1,766,732
- -------------------------------------------------------------------------
Accrued transfer agent fees 474,454
- -------------------------------------------------------------------------
Accrued operating expenses 985,923
- -------------------------------------------------------------------------
Total liabilities 94,497,138
- -------------------------------------------------------------------------
Net assets applicable to shares outstanding $4,661,298,749
- -------------------------------------------------------------------------
NET ASSETS:
Class A $4,564,729,631
=========================================================================
Class B $ 42,237,610
=========================================================================
Institutional Class $ 54,331,508
=========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
=========================================================================
Outstanding 224,564,125
=========================================================================
Class B:
Authorized 750,000,000
=========================================================================
Outstanding 2,082,509
=========================================================================
Institutional Class:
Authorized 200,000,000
=========================================================================
Outstanding 2,652,632
=========================================================================
CLASS A:
Net asset value and redemption price per share $20.33
=========================================================================
Offering price per share:
(Net asset value of $20.33 divided by 94.50%) $21.51
=========================================================================
CLASS B:
Net asset value and offering price per share $20.28
=========================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $20.48
=========================================================================
</TABLE>
See Notes to Financial Statements.
FS-40
<PAGE> 129
Financials
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $693,812 foreign withholding tax) $ 38,215,389
- ------------------------------------------------------------------------
Interest 8,498,626
- ------------------------------------------------------------------------
Total investment income 46,714,015
- ------------------------------------------------------------------------
EXPENSES:
Advisory fees 26,291,625
- ------------------------------------------------------------------------
Administrative service fees 182,595
- ------------------------------------------------------------------------
Custodian fees 871,313
- ------------------------------------------------------------------------
Directors' fees 42,436
- ------------------------------------------------------------------------
Distribution fees-Class A 12,217,290
- ------------------------------------------------------------------------
Distribution fees-Class B 68,621
- ------------------------------------------------------------------------
Transfer agent fees-Class A 7,784,636
- ------------------------------------------------------------------------
Transfer agent fees-Class B 15,054
- ------------------------------------------------------------------------
Transfer agent fees-Institutional Class 2,913
- ------------------------------------------------------------------------
Other 1,340,482
- ------------------------------------------------------------------------
Total expenses 48,816,965
- ------------------------------------------------------------------------
Less fees waived by advisor (843,494)
- ------------------------------------------------------------------------
Net expenses 47,973,471
- ------------------------------------------------------------------------
Net investment income (loss) (1,259,456)
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTIONS
CONTRACTS:
Net realized gain on sales of:
Investment securities 610,490,585
- ------------------------------------------------------------------------
Foreign currencies 966,904
- ------------------------------------------------------------------------
Futures contracts 6,404,690
- ------------------------------------------------------------------------
Options contracts 2,779,330
- ------------------------------------------------------------------------
620,641,509
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 416,011,617
- ------------------------------------------------------------------------
Foreign currencies (751,970)
- ------------------------------------------------------------------------
Futures contracts (4,057,387)
- ------------------------------------------------------------------------
411,202,260
- ------------------------------------------------------------------------
Net gain on investment securities, foreign currencies,
futures and options contracts 1,031,843,769
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,030,584,313
- ------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-41
<PAGE> 130
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,259,456) $ 18,228,044
- -------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies, futures
and options contracts 620,641,509 387,037,586
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities, foreign
currencies, and futures contracts 411,202,260 (259,837,784)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,030,584,313 145,427,846
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment
income:
Class A (14,842,521) (29,907,523)
- -------------------------------------------------------------------------------
Class B -- --
- -------------------------------------------------------------------------------
Institutional Class (290,923) (363,799)
- -------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investment securities:
Class A (387,332,253) (89,314,780)
- -------------------------------------------------------------------------------
Class B -- --
- -------------------------------------------------------------------------------
Institutional Class (4,072,920) (724,291)
- -------------------------------------------------------------------------------
Net equalization credits (charges):
Class A 204,025 (10,126,574)
- -------------------------------------------------------------------------------
Class B 297,921 --
- -------------------------------------------------------------------------------
Institutional Class 71,195 1,640
- -------------------------------------------------------------------------------
Share transactions-net:
Class A (17,628,236) (1,048,548,626)
- -------------------------------------------------------------------------------
Class B 41,458,876 --
- -------------------------------------------------------------------------------
Institutional Class 6,504,480 96,085
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets 654,953,957 (1,033,460,022)
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,006,344,792 5,039,804,814
- -------------------------------------------------------------------------------
End of period $4,661,298,749 $ 4,006,344,792
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,070,552,699 $ 3,040,217,579
- -------------------------------------------------------------------------------
Undistributed net investment income 25,028,873 40,848,632
- -------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies,
futures and options contracts 613,833,040 384,596,704
- -------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, and
futures contracts 951,884,137 540,681,877
- -------------------------------------------------------------------------------
$4,661,298,749 $ 4,006,344,792
===============================================================================
</TABLE>
See Notes to Financial Statements.
FS-42
<PAGE> 131
Financials
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of four diversified portfolios:
AIM Weingarten Fund, AIM Charter Fund, AIM Constellation Fund and AIM
Aggressive Growth Fund. The Fund currently offers three different classes of
shares: the Class A shares (formerly "Retail Shares"), Class B shares and the
Institutional Class. Matters affecting each portfolio or class will be voted on
exclusively by such shareholders. The assets, liabilities and operations of
each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements.
A. Security Valuations - A security listed or traded on an exchange is valued
at its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security traded in the over-the-
counter market (but not including securities reported on the NASDAQ National
Market System) is valued at the mean between the last bid and asked prices
based upon quotes furnished by market makers for such securities. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined in good
faith by or under the supervision of the Company's officers in a manner
specifically authorized by the Board of Directors of the Company. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a currency contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the
U.S. dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in the value of the
contract may not correlate with changes in the securities being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last
sale price, or in the absence of a sale, the mean between the last bid and
asked prices on that day. If a written call option expires on the stipulated
expiration date, or if the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or a loss if the closing purchase transaction
exceeds the premium received when the option was written) without regard to
any unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised,
the Fund realizes a gain or a loss from the sale of the underlying security
and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for
FS-43
<PAGE> 132
Financials
capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the
price of the underlying security decline. During the option period, the Fund
may be required at any time to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time at which the Fund
effects a closing purchase transaction by purchasing (at a price which may
be higher than that received when the call option was written) a call option
identical to the one originally written. The Fund will not write a covered
call option if, immediately thereafter, the aggregate value of the
securities underlying all such options, determined as of the dates such
options were written, would exceed 25% of the net assets of the Fund.
F. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
G. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
H. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
I. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of
1.0% of the first $30 million of the Fund's average daily net assets, plus
0.75% of the Fund's average daily net assets in excess of $30 million to and
including $350 million, plus 0.625% of the Fund's average daily net assets in
excess of $350 million. AIM is currently voluntarily waiving a portion of its
advisory fees payable by the Fund to AIM to the extent necessary to reduce the
fees paid by the Fund at net asset levels higher than those currently
incorporated in the present advisory fee schedule. AIM will receive a fee
calculated at the annual rate of 1.0% of the first $30 million of the Fund's
average daily net assets, plus 0.75% of the Fund's average daily net assets in
excess of $30 million to and including $350 million, plus 0.625% of the Fund's
average daily net assets in excess of $350 million to and including $2 billion,
plus 0.60% of the Fund's average daily net assets in excess of $2 billion to
and including $3 billion, plus 0.575% of the Fund's average daily net assets in
excess of $3 billion to and including $4 billion, plus 0.55% of the Fund's
average daily net assets in excess of $4 billion. The waiver of fees is
entirely voluntary and the Board of Directors of the Company would be advised
of any decision by AIM to discontinue the waiver. During the year ended October
31, 1995, AIM waived fees of $843,494. Under the terms of a master sub-advisory
agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM
pays AIM Capital 50% of the amount paid by the Fund to AIM. These agreements
require AIM to reduce its fees or, if necessary, make payments to the Fund to
the extent required to satisfy any expense limitations imposed by the
securities laws or regulations thereunder of any state in which the Fund's
shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended October 31,
1995, AIM was reimbursed $182,595 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A shares and Class B shares. During the
year ended October 31, 1995, AFS was reimbursed $4,016,831 for such services.
During the year ended October 31, 1995, the Fund, pursuant to a transfer
agency and service agreement, paid A I M Institutional Fund Services, Inc.
("AIFS") $1,260 for shareholder and transfer agency services with respect to
the Institutional Class. Effective July 1, 1995, AIFS became the exclusive
transfer agent for the Institutional Class of the Fund.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own Class A shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and
own Class B shares of the Fund. Any amounts not paid as a service fee under
such Plans would constitute an asset-based sales charge. The Plans also impose
a cap on the total sales charges, including asset-based sales charges, that may
be paid by the respective classes. AIM Distributors may, from time to time,
assign, transfer or pledge to one or more designees, its rights to all or a
designated portion of (a) compensation received by AIM Distributors from the
Fund pursuant to the Class B Plan (but not AIM Distributors duties and
obligations pursuant to the Class B Plan) and (b) any contingent deferred sales
charges received by AIM Distributors related to the Class B shares. During the
year ended October 31, 1995 for the Class A shares and the period June 26, 1995
(date sales commenced) through October 31, 1995 for the Class B shares, the
Class A shares and the Class B shares paid AIM Distributors $12,217,290 and
$68,621, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,767,515 from sales of shares of
the Class A shares of the Fund during the year ended October 31, 1995. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of Class A shares. Certain officers and
directors of the Company are officers and directors of AIM, AIM Capital, AIM
Distributors, AFS, AIFS and FMC.
During the year ended October 31, 1995, the Fund paid legal fees of $13,238
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
FS-44
<PAGE> 133
Financials
NOTE 3 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended October 31, 1995 was
$5,516,271,702 and $5,871,965,081, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of October 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $980,791,723
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (39,012,965)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $941,778,758
===========================================================================
</TABLE>
Cost of investments for tax purposes is $3,703,473,319.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund has a $68,400,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 6 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year -- --
- -------------------------------------------------------------------------------
Written 29,413 $ 6,668,627
- -------------------------------------------------------------------------------
Closed (11,309) (3,032,287)
- -------------------------------------------------------------------------------
Exercised (4,833) (887,684)
- -------------------------------------------------------------------------------
Expired (13,271) (2,748,656)
- -------------------------------------------------------------------------------
End of year -- $ --
===============================================================================
</TABLE>
NOTE 7 - CAPITAL STOCK
Changes in the capital stock outstanding during the years ended October 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 32,034,901 $ 559,325,258 22,715,102 $ 385,995,119
- -----------------------------------------------------------------------------------
Class B* 2,180,033 43,415,613 -- --
- -----------------------------------------------------------------------------------
Institutional Class 559,557 10,092,219 466,667 7,928,748
- -----------------------------------------------------------------------------------
Issued as a reinvestment
of dividends:
Class A 24,460,017 361,036,594 4,979,521 84,004,521
- -----------------------------------------------------------------------------------
Class B* -- -- -- --
- -----------------------------------------------------------------------------------
Institutional Class 199,304 2,950,819 42,665 721,040
- -----------------------------------------------------------------------------------
Reacquired:
Class A (54,445,065) (937,990,088) (88,892,319) (1,518,548,266)
- -----------------------------------------------------------------------------------
Class B* (97,524) (1,956,737) -- --
- -----------------------------------------------------------------------------------
Institutional Class (363,327) (6,538,558) (503,154) (8,553,703)
- -----------------------------------------------------------------------------------
4,527,896 $ 30,335,120 (61,191,518) $(1,048,452,541)
===================================================================================
</TABLE>
*Class B shares commenced sales on June 26, 1995.
FS-45
<PAGE> 134
Financials
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the seven-year period ended October 31,
1995, the ten months ended October 31, 1988 and each of the years in the two-
year period ended December 31, 1987(a) and for a Class B share outstanding
during the period June 26, 1995 (date sales commenced) through October 31,
1995.
CLASS A:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(b)
---------- ---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 17.82 $ 17.62 $ 16.68 $ 15.76 $ 11.15 $ 12.32 $ 9.23 $ 8.36
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Income from
investment
operations:
Net investment
income -- 0.07 0.10 0.10 0.11 0.09 0.10 0.07
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Net gains
(losses) on
securities (both
realized and
unrealized) 4.36 0.57 0.93 0.98 4.80 (0.56) 3.10 0.80
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Total from
investment
operations 4.36 0.64 1.03 1.08 4.91 (0.47) 3.20 0.87
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Less
distributions:
Dividends from
net investment
income (0.07) (0.11) (0.09) (0.07) (0.09) (0.06) (0.11) --
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Distributions
from net
realized capital
gains (1.78) (0.33) -- (0.09) (0.21) (0.64) -- --
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Total
distributions (1.85) (0.44) (0.09) (0.16) (0.30) (0.70) (0.11) --
- ------------------ ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Net asset value,
end of period $ 20.33 $ 17.82 $ 17.62 $ 16.68 $ 15.76 $ 11.15 $ 12.32 $ 9.23
================== ========== ========== ========== ========== ========== ======== ======== ========
Total return(c) 28.20% 3.76% 6.17% 6.85% 44.88% (4.03)% 35.13% 10.41%
================== ========== ========== ========== ========== ========== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $4,564,730 $3,965,858 $4,999,983 $5,198,835 $2,534,331 $632,522 $393,320 $297,284
================== ========== ========== ========== ========== ========== ======== ======== ========
Ratio of expenses
to average net
assets 1.2%(d) 1.2% 1.1% 1.1% 1.2% 1.3% 1.2% 1.1%(f)
================== ========== ========== ========== ========== ========== ======== ======== ========
Ratio of net
investment income
to average net
assets 0.0%(d) 0.4% 0.6% 0.6% 0.7% 0.8% 1.0% 0.9%(f)
================== ========== ========== ========== ========== ========== ======== ======== ========
Portfolio turnover
rate 139% 136% 109% 37% 46% 79% 87% 93%
================== ========== ========== ========== ========== ========== ======== ======== ========
Borrowings for the
period:
Amount of debt
outstanding at
end of period
(000s omitted) -- -- -- -- -- -- $ 3,781 --
================== ========== ========== ========== ========== ========== ======== ======== ========
Average amount of
debt outstanding
during the period
(000s omitted)(e) $ 593 -- -- -- -- $ 485 $ 1,083 $ 229
================== ========== ========== ========== ========== ========== ======== ======== ========
Average number of
shares
outstanding
during the period
(000s omitted)(e) 229,272 249,351 314,490 246,273 102,353 44,770 31,275 33,031
================== ========== ========== ========== ========== ========== ======== ======== ========
Average amount of
debt per share
during the period $ 0.0026 -- -- -- -- $ 0.011 $ 0.035 $ 0.007
================== ========== ========== ========== ========== ========== ======== ======== ========
<CAPTION>
DECEMBER 31,
-------------------
1987 1986(b)
--------- ---------
<S> <C> <C>
Net asset value,
beginning of
period $ 8.82 $ 9.10
- -------------------- --------- ---------
Income from
investment
operations:
Net investment
income 0.07 0.09
- -------------------- --------- ---------
Net gains
(losses) on
securities (both
realized and
unrealized) 0.83 2.11
- -------------------- --------- ---------
Total from
investment
operations 0.90 2.20
- -------------------- --------- ---------
Less
distributions:
Dividends from
net investment
income (0.09) (0.09)
- -------------------- --------- ---------
Distributions
from net
realized capital
gains (1.27) (2.39)
- -------------------- --------- ---------
Total
distributions (1.36) (2.48)
- -------------------- --------- ---------
Net asset value,
end of period $ 8.36 $ 8.82
==================== ========= =========
Total return(c) 9.75% 25.06%
==================== ========= =========
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $286,453 $171,138
==================== ========= =========
Ratio of expenses
to average net
assets 1.0% 1.0%
==================== ========= =========
Ratio of net
investment income
to average net
assets 0.7% 0.8%
==================== ========= =========
Portfolio turnover
rate 108% 113%
==================== ========= =========
Borrowings for the
period:
Amount of debt
outstanding at
end of period
(000s omitted) $ 355 --
==================== ========= =========
Average amount of
debt outstanding
during the period
(000s omitted)(e) $ 509 $ 56
==================== ========= =========
Average number of
shares
outstanding
during the period
(000s omitted)(e) 25,825 18,519
==================== ========= =========
Average amount of
debt per share
during the period $ 0.020 $ 0.003
==================== ========= =========
</TABLE>
(a) Per share information has been restated to reflect a 2 for 1 stock split,
effected in the form of a dividend, on September 29, 1987.
(b) The Fund changed investment advisors on May 1, 1986, and on September 30,
1988.
(c) Does not deduct sales charges and, for periods less than one year, total
returns are not annualized.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees were 1.2% and
(0.04)%, respectively. Ratios are based on average net assets of
$4,072,429,878.
(e) Averages computed on a daily basis.
(f) Annualized.
FS-46
<PAGE> 135
Financials
CLASS B:
<TABLE>
<CAPTION>
1995
-------
<S> <C>
Net asset value, beginning of period $18.56
- -------------------------------------------------- -------
Income from investment operations:
Net investment income (loss) (0.03)
- -------------------------------------------------- -------
Net gains (losses) on securities (both realized
and unrealized) 1.75
- -------------------------------------------------- -------
Total from investment operations 1.72
- -------------------------------------------------- -------
Less distributions:
Dividends from net investment income --
- -------------------------------------------------- -------
Distributions from net realized capital gains --
- -------------------------------------------------- -------
Total distributions --
- -------------------------------------------------- -------
Net asset value, end of period $20.28
================================================== =======
Total return(a) 9.27%
================================================== =======
Ratios/supplemental data:
Net assets, end of period (000's omitted) $42,238
================================================== =======
Ratio of expenses to average net assets 1.91 %(b)
================================================== =======
Ratio of net investment income (loss) to average
net assets (0.76)%(b)
================================================== =======
Portfolio turnover rate 139%
================================================== =======
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) --
================================================== =======
Average amount of debt outstanding during the
period (000s omitted)(c) $ 3
================================================== =======
Average number of shares outstanding during the
period (000s omitted)(c) 1,036
================================================== =======
Average amount of debt per share during the period $0.0029
================================================== =======
</TABLE>
(a) Do not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Annualized. After waiver of advisory fees. Annualized ratios of expenses
and net investment income (loss) to average net assets prior to waiver of
advisory fees were 1.94% and (0.79)%, respectively. Ratios are based on
average net assets of $19,567,695.
(c) Averages computed on a daily basis.
FS-47
<PAGE> 136
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Aggressive Growth Fund (a portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1995, the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended and the financial
highlights for each of the years in the two-year period then ended and the ten
month period ended October 31, 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Aggressive Growth Fund as of October 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended and the financial highlights for each of the
years in the two-year period then ended and the ten month period ended October
31, 1993, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
FS-48
<PAGE> 137
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS - 87.67%
ADVERTISING/BROADCASTING - 0.55%
50,000 Clear Channel Communications, Inc.(a) $ 4,100,000
- -----------------------------------------------------------------------
150,000 Heritage Media Corp.-Class A(A) 4,162,500
- -----------------------------------------------------------------------
100,000 Meredith Corp. 3,575,000
- -----------------------------------------------------------------------
21,300 Sinclair Broadcast Group, Inc.-Class A(a) 441,975
- -----------------------------------------------------------------------
12,279,475
- -----------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES - 0.44%
150,000 Borg-Warner Automotive, Inc. 4,425,000
- -----------------------------------------------------------------------
300,000 Thompson PBE, Inc.(a) 5,475,000
- -----------------------------------------------------------------------
9,900,000
- -----------------------------------------------------------------------
BEVERAGES - 0.42%
195,000 Canandaigua Wine Co., Inc.-Class A(a) 9,360,000
- -----------------------------------------------------------------------
BUILDING MATERIALS - 0.10%
70,000 Danaher Corp. 2,170,000
- -----------------------------------------------------------------------
BUSINESS SERVICES - 0.79%
195,000 Alternative Resources Corp.(a) 6,045,000
- -----------------------------------------------------------------------
167,700 Brandon Systems Corp. 3,018,600
- -----------------------------------------------------------------------
159,500 Healthcare COMPARE Corp.(a) 5,901,500
- -----------------------------------------------------------------------
200,000 Sterling Healthcare Group(a) 2,750,000
- -----------------------------------------------------------------------
17,715,100
- -----------------------------------------------------------------------
CHEMICALS - 0.12%
175,000 Applied Extrusion Technologies, Inc.(a) 2,690,625
- -----------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.58%
355,500 Airgas Inc.(a) 9,465,188
- -----------------------------------------------------------------------
150,000 Mississippi Chemical Corp. 3,618,750
- -----------------------------------------------------------------------
13,083,938
- -----------------------------------------------------------------------
COMPUTER MINI/PCS - 0.28%
400,000 Rational Software Corp.(a) 6,250,000
- -----------------------------------------------------------------------
</TABLE>
FS-49
<PAGE> 138
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER NETWORKING - 4.93%
400,000 ALANTEC Corp.(a) $ 14,300,000
- ---------------------------------------------------------------------
160,000 Ascend Communications, Inc.(a) 10,400,000
- ---------------------------------------------------------------------
300,000 Auspex Systems, Inc.(a) 4,237,500
- ---------------------------------------------------------------------
125,000 Belden, Inc. 3,015,625
- ---------------------------------------------------------------------
350,000 Black Box Corp.(a) 5,687,500
- ---------------------------------------------------------------------
120,600 Cascade Communications Corp.(a) 8,592,750
- ---------------------------------------------------------------------
500,000 Cheyenne Software, Inc.(a) 10,437,500
- ---------------------------------------------------------------------
100,000 CIDCO, Inc.(a) 2,962,500
- ---------------------------------------------------------------------
315,000 DSP Group, Inc.(a) 5,118,750
- ---------------------------------------------------------------------
279,300 FORE Systems, Inc.(a) 14,802,900
- ---------------------------------------------------------------------
150,000 InterVoice, Inc.(a) 2,737,500
- ---------------------------------------------------------------------
100,000 Lannet Data Communications, Ltd.(a) 2,875,000
- ---------------------------------------------------------------------
230,000 Madge, N.V.(a) 9,631,250
- ---------------------------------------------------------------------
300,000 Microtest, Inc.(a) 4,650,000
- ---------------------------------------------------------------------
200,000 Network Equipment Technologies, Inc.(a) 6,525,000
- ---------------------------------------------------------------------
155,300 Optical Data Systems, Inc.(a) 4,639,588
- ---------------------------------------------------------------------
110,613,363
- ---------------------------------------------------------------------
COMPUTER PERIPHERALS - 3.79%
337,500 Alliance Semiconductor Corp.(a) 10,378,125
- ---------------------------------------------------------------------
210,000 Dialogic Corp.(a) 6,090,000
- ---------------------------------------------------------------------
100,000 Digi International, Inc.(a) 2,675,000
- ---------------------------------------------------------------------
135,000 Eltron International, Inc.(a) 4,387,500
- ---------------------------------------------------------------------
100,000 Filenet Corp.(a) 4,537,500
- ---------------------------------------------------------------------
210,250 Microchip Technology, Inc.(a) 8,344,297
- ---------------------------------------------------------------------
600,000 Mylex Corp.(a) 11,175,000
- ---------------------------------------------------------------------
310,000 Oak Technology, Inc.(a) 16,972,500
- ---------------------------------------------------------------------
190,000 Read-Rite Corp.(a) 6,626,250
- ---------------------------------------------------------------------
150,000 U.S. Robotics Corp.(a) 13,875,000
- ---------------------------------------------------------------------
85,061,172
- ---------------------------------------------------------------------
</TABLE>
FS-50
<PAGE> 139
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES - 14.90%
325,000 Acclaim Entertainment, Inc.(a) $ 7,678,125
- ---------------------------------------------------------------------
400,000 Activision, Inc.(a) 6,700,000
- ---------------------------------------------------------------------
39,000 Adobe Systems, Inc. 2,223,000
- ---------------------------------------------------------------------
225,000 Affiliated Computer Services, Inc.(a) 7,537,500
- ---------------------------------------------------------------------
190,000 Analysts International Corp. 5,628,750
- ---------------------------------------------------------------------
48,800 Astea International, Inc.(a) 878,400
- ---------------------------------------------------------------------
150,000 Atria Software, Inc.(a) 5,362,500
- ---------------------------------------------------------------------
78,500 Bell & Howell Co.(a) 1,962,500
- ---------------------------------------------------------------------
112,500 Cadence Design Systems, Inc.(a) 3,628,125
- ---------------------------------------------------------------------
212,100 Cerner Corp.(a) 5,620,650
- ---------------------------------------------------------------------
46,100 Checkfree Corp.(a) 973,863
- ---------------------------------------------------------------------
1,300,000 Computervision Corp.(a) 15,275,000
- ---------------------------------------------------------------------
39,800 Computron Software, Inc.(a) 676,600
- ---------------------------------------------------------------------
300,000 Corel Corp.(a) 5,137,500
- ---------------------------------------------------------------------
200,000 CyCare Systems, Inc.(a) 6,200,000
- ---------------------------------------------------------------------
18,000 DataWorks Corp.(a) 249,750
- ---------------------------------------------------------------------
200,000 Diamond Multimedia Systems, Inc.(a) 5,900,000
- ---------------------------------------------------------------------
20,000 Edmark Corp.(a) 860,000
- ---------------------------------------------------------------------
50,000 Electronics for Imaging, Inc.(a) 4,112,500
- ---------------------------------------------------------------------
325,000 Expert Software, Inc.(a) 6,743,750
- ---------------------------------------------------------------------
200,000 FTP Software, Inc.(a) 5,400,000
- ---------------------------------------------------------------------
100,000 HBO & Co. 7,075,000
- ---------------------------------------------------------------------
276,600 HCIA, Inc.(a) 7,537,350
- ---------------------------------------------------------------------
32,000 HPR Inc.(a) 832,000
- ---------------------------------------------------------------------
200,000 Hummingbird Communications Ltd.(a) 8,600,000
- ---------------------------------------------------------------------
160,000 Hyperion Software Corp.(a) 7,880,000
- ---------------------------------------------------------------------
215,200 Imnet Systems, Inc.(a) 5,460,700
- ---------------------------------------------------------------------
10,000 Integrated Measurement Systems, Inc.(a) 135,000
- ---------------------------------------------------------------------
250,000 Integrated Silicon Systems, Inc.(a) 7,343,750
- ---------------------------------------------------------------------
288,000 Integrated Systems, Inc.(a) 10,080,000
- ---------------------------------------------------------------------
365,500 Intersolv Inc.(a) 5,756,625
- ---------------------------------------------------------------------
20,500 Logic Works, Inc.(a) 312,625
- ---------------------------------------------------------------------
200,000 Macromedia, Inc.(a) 7,400,000
- ---------------------------------------------------------------------
</TABLE>
FS-51
<PAGE> 140
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Computer Software/Services - (continued)
270,000 Medic Computer Systems, Inc.(a) $ 14,377,500
- ----------------------------------------------------------------------
500,000 Mentor Graphics Corp.(a) 10,500,000
- ----------------------------------------------------------------------
305,000 Microcom, Inc.(a) 6,671,875
- ----------------------------------------------------------------------
140,000 NetManage, Inc.(a) 2,852,500
- ----------------------------------------------------------------------
350,000 Network General Corp.(a) 14,525,000
- ----------------------------------------------------------------------
40,500 ON Technology Corp.(a) 486,000
- ----------------------------------------------------------------------
340,000 PairGain Technologies, Inc.(a) 14,535,000
- ----------------------------------------------------------------------
75,000 PeopleSoft, Inc.(a) 6,450,000
- ----------------------------------------------------------------------
245,900 Phamis, Inc.(a) 6,208,975
- ----------------------------------------------------------------------
250,000 Pinnacle Systems, Inc.(a) 7,843,750
- ----------------------------------------------------------------------
200,000 Planar Systems Inc.(a) 3,475,000
- ----------------------------------------------------------------------
150,000 Platinum Technology, Inc.(a) 2,737,500
- ----------------------------------------------------------------------
50,000 Policy Management Systems Corp.(a) 2,356,250
- ----------------------------------------------------------------------
49,300 Premenos Technology Corp.(a) 1,935,025
- ----------------------------------------------------------------------
200,000 Project Software & Development, Inc.(a) 5,300,000
- ----------------------------------------------------------------------
85,000 Pure Software, Inc.(a) 3,123,750
- ----------------------------------------------------------------------
500,000 S3, Inc.(a) 8,562,500
- ----------------------------------------------------------------------
325,000 Shared Medical Systems Corp. 12,553,125
- ----------------------------------------------------------------------
30,100 Smith Micro Software, Inc.(a) 368,725
- ----------------------------------------------------------------------
290,000 Softdesk, Inc.(a) 6,742,500
- ----------------------------------------------------------------------
250,000 SoftKey International, Inc.(a) 7,875,000
- ----------------------------------------------------------------------
100,000 Sterling Software, Inc.(a) 4,612,500
- ----------------------------------------------------------------------
400,000 Symantec Corp.(a) 9,725,000
- ----------------------------------------------------------------------
10,500 Synopsys, Inc.(a) 393,750
- ----------------------------------------------------------------------
16,500 Unison Software, Inc.(a) 206,250
- ----------------------------------------------------------------------
31,300 Vantive Corp.(a) 500,800
- ----------------------------------------------------------------------
24,500 Verity, Inc.(a) 900,375
- ----------------------------------------------------------------------
170,000 Viasoft, Inc.(a) 2,210,000
- ----------------------------------------------------------------------
350,000 Wind River Systems, Inc.(a) 9,450,000
- ----------------------------------------------------------------------
334,640,213
- ----------------------------------------------------------------------
</TABLE>
FS-52
<PAGE> 141
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CONSUMER NON-DURABLES - 0.26%
121,600 Department 56, Inc.(a) $ 5,517,600
- -------------------------------------------------------------------------
15,900 USA Detergents, Inc.(a) 405,450
- -------------------------------------------------------------------------
5,923,050
- -------------------------------------------------------------------------
CONTAINERS - 0.18%
150,000 Sealed Air Corp.(a) 3,956,250
- -------------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.09%
101,800 Helen of Troy, Ltd.(a) 1,921,475
- -------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS - 5.39%
202,500 Aetrium, Inc.(a) 4,404,375
- -------------------------------------------------------------------------
200,000 Ametek, Inc. 3,525,000
- -------------------------------------------------------------------------
200,000 Amphenol Corp.(a) 4,325,000
- -------------------------------------------------------------------------
70,000 BMC Industries, Inc. 2,703,750
- -------------------------------------------------------------------------
150,000 Brooks Automation, Inc.(a) 2,700,000
- -------------------------------------------------------------------------
200,000 California Amplifier, Inc.(a) 5,400,000
- -------------------------------------------------------------------------
300,000 Electro Scientific Industries, Inc.(a) 9,300,000
- -------------------------------------------------------------------------
50,000 Franklin Electronic Publishers, Inc.(a) 2,068,750
- -------------------------------------------------------------------------
224,700 General Scanning, Inc.(a) 2,696,400
- -------------------------------------------------------------------------
126,000 Harman International Industries, Inc. 5,811,750
- -------------------------------------------------------------------------
175,000 Integrated Silicon Solution, Inc.(a) 5,479,688
- -------------------------------------------------------------------------
29,200 Mackie Designs, Inc.(a) 372,300
- -------------------------------------------------------------------------
125,000 Methode Electronics, Inc. 2,875,000
- -------------------------------------------------------------------------
46,875 Molex, Inc. 1,546,875
- -------------------------------------------------------------------------
52,800 Oak Industries, Inc.(a) 1,102,200
- -------------------------------------------------------------------------
200,000 Perceptron, Inc.(a) 5,350,000
- -------------------------------------------------------------------------
250,000 PRI Automation, Inc.(a) 9,250,000
- -------------------------------------------------------------------------
425,000 PSC, Inc.(a) 4,356,250
- -------------------------------------------------------------------------
225,000 Recoton Corp.(a) 5,006,250
- -------------------------------------------------------------------------
104,500 Semitool, Inc.(a) 1,698,125
- -------------------------------------------------------------------------
62,000 Smartflex Systems, Inc.(a) 906,750
- -------------------------------------------------------------------------
300,000 Symbol Technologies, Inc.(a) 10,462,500
- -------------------------------------------------------------------------
100,000 Tektronix, Inc. 5,925,000
- -------------------------------------------------------------------------
500,000 Telxon Corp. 11,562,500
- -------------------------------------------------------------------------
369,000 Teradyne, Inc.(a) 12,315,375
- -------------------------------------------------------------------------
121,143,838
- -------------------------------------------------------------------------
</TABLE>
FS-53
<PAGE> 142
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
ELECTRONIC/DEFENSE - 0.35%
200,000 Alpha Industries, Inc.(a) $ 3,100,000
- -----------------------------------------------------------------
100,000 Watkins-Johnson Co. 4,812,500
- -----------------------------------------------------------------
7,912,500
- -----------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS - 0.73%
250,000 Kent Electronics Corp.(a) 12,187,500
- -----------------------------------------------------------------
300,000 Pioneer-Standard Electronics, Inc. 4,162,500
- -----------------------------------------------------------------
16,350,000
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 2.87%
220,000 Aames Financial Corp. 5,500,000
- -----------------------------------------------------------------
100,000 CMAC Investment Corp. 4,750,000
- -----------------------------------------------------------------
200,050 Concord EFS, Inc.(a) 6,901,725
- -----------------------------------------------------------------
500,000 Credit Acceptance Corp.(a) 11,750,000
- -----------------------------------------------------------------
153,800 General Acceptance Corp.(a) 4,075,700
- -----------------------------------------------------------------
475,000 Medaphis Corp.(a) 15,081,250
- -----------------------------------------------------------------
225,000 Money Store Inc. (The) 9,000,000
- -----------------------------------------------------------------
150,000 PMT Services, Inc.(a) 4,031,250
- -----------------------------------------------------------------
40,500 WFS Financial, Inc.(a) 673,312
- -----------------------------------------------------------------
200,000 World Acceptance Corp.(a) 2,600,000
- -----------------------------------------------------------------
64,363,237
- -----------------------------------------------------------------
FINANCE (LEASING COMPANIES) - 0.26%
225,000 Oxford Resources Corp.(a) 5,906,250
- -----------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.20%
75,000 TCF Financial Corp. 4,406,250
- -----------------------------------------------------------------
FUNERAL SERVICES - 0.41%
32,500 Equity Corporation International(a) 682,500
- -----------------------------------------------------------------
250,000 Stewart Enterprises Inc.-Class A 8,437,500
- -----------------------------------------------------------------
9,120,000
- -----------------------------------------------------------------
GAMING - 0.25%
75,000 Grand Casinos, Inc.(a) 2,981,250
- -----------------------------------------------------------------
250,000 Players International, Inc.(a) 2,687,500
- -----------------------------------------------------------------
5,668,750
- -----------------------------------------------------------------
</TABLE>
FS-54
<PAGE> 143
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
HOTELS/MOTELS - 0.40%
175,000 La Quinta Motor Inns, Inc. $ 4,506,250
- ---------------------------------------------------------------------
450,000 Prime Hospitality Corp.(a) 4,443,750
- ---------------------------------------------------------------------
8,950,000
- ---------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.32%
100,000 American Travelers Corp.(a) 2,237,500
- ---------------------------------------------------------------------
175,000 United Companies Financial Corp. 4,943,750
- ---------------------------------------------------------------------
7,181,250
- ---------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 0.84%
60,000 Allied Group, Inc. 1,950,000
- ---------------------------------------------------------------------
319,500 HCC Insurance Holdings, Inc.(a) 11,102,625
- ---------------------------------------------------------------------
34,200 United Dental Care, Inc.(a) 1,043,100
- ---------------------------------------------------------------------
119,000 Vesta Insurance Group, Inc. 4,804,625
- ---------------------------------------------------------------------
18,900,350
- ---------------------------------------------------------------------
LEISURE & RECREATION - 1.67%
158,800 Avid Technology, Inc.(a) 6,947,500
- ---------------------------------------------------------------------
400,000 Cannondale Corp.(a) 6,400,000
- ---------------------------------------------------------------------
50,000 Coleman Co., Inc.(a) 1,712,500
- ---------------------------------------------------------------------
287,500 Guest Supply, Inc.(a) 5,426,562
- ---------------------------------------------------------------------
300,000 Moovies, Inc.(a) 4,912,500
- ---------------------------------------------------------------------
250,000 Ride, Inc.(a) 6,031,250
- ---------------------------------------------------------------------
200,000 West Marine, Inc.(a) 6,100,000
- ---------------------------------------------------------------------
37,530,312
- ---------------------------------------------------------------------
MACHINE TOOLS - 0.47%
200,000 Acme-Cleveland Corp. 4,375,000
- ---------------------------------------------------------------------
100,000 Applied Power, Inc.-Class A 3,037,500
- ---------------------------------------------------------------------
100,000 Kennametal Inc. 3,112,500
- ---------------------------------------------------------------------
10,525,000
- ---------------------------------------------------------------------
MACHINERY (HEAVY) - 0.27%
34,000 AGCO Corp. 1,521,500
- ---------------------------------------------------------------------
285,000 Tractor Supply Co.(a) 4,488,750
- ---------------------------------------------------------------------
6,010,250
- ---------------------------------------------------------------------
</TABLE>
FS-55
<PAGE> 144
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
MACHINERY (MISCELLANEOUS) - 0.17%
100,000 Kulicke & Soffa Industries, Inc.(a) $ 3,500,000
- ---------------------------------------------------------------------------
37,500 TransPro, Inc. 412,500
- ---------------------------------------------------------------------------
3,912,500
- ---------------------------------------------------------------------------
MEDICAL (DRUGS) - 1.16%
100,000 Alpharma, Inc.-Class A 2,400,000
- ---------------------------------------------------------------------------
79,500 Arbor Drugs, Inc. 1,470,750
- ---------------------------------------------------------------------------
225,000 Cardinal Health, Inc. 11,559,375
- ---------------------------------------------------------------------------
75,000 Express Scripts, Inc.-Class A(a) 2,850,000
- ---------------------------------------------------------------------------
29,000 Gulf South Medical Supply, Inc.(a) 601,750
- ---------------------------------------------------------------------------
160,000 Watson Pharmaceuticals, Inc.(a) 7,160,000
- ---------------------------------------------------------------------------
26,041,875
- ---------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 8.79%
420,000 AHI Healthcare Systems, Inc.(a) 5,880,000
- ---------------------------------------------------------------------------
400,000 American Medical Response, Inc.(a) 11,550,000
- ---------------------------------------------------------------------------
400,000 Apria Healthcare Group, Inc.(a) 8,650,000
- ---------------------------------------------------------------------------
390,000 Arbor Health Care Co.(a) 6,630,000
- ---------------------------------------------------------------------------
300,000 Community Health Systems, Inc.(a) 9,525,000
- ---------------------------------------------------------------------------
145,800 Enterprise Systems, Inc.(a) 3,408,075
- ---------------------------------------------------------------------------
300,000 Genesis Health Ventures, Inc.(a) 8,662,500
- ---------------------------------------------------------------------------
350,000 Health Care and Retirement Corp.(a) 10,281,250
- ---------------------------------------------------------------------------
491,775 Health Management Associates, Inc.-Class A(a) 10,573,163
- ---------------------------------------------------------------------------
250,000 Healthsource, Inc.(a) 13,250,000
- ---------------------------------------------------------------------------
525,530 HEALTHSOUTH Corp.(a) 13,729,470
- ---------------------------------------------------------------------------
200,000 Horizon Healthcare Corp.(a) 4,050,000
- ---------------------------------------------------------------------------
150,000 Integrated Health Services, Inc. 3,431,250
- ---------------------------------------------------------------------------
425,000 Lincare Holdings, Inc.(a) 10,571,875
- ---------------------------------------------------------------------------
268,600 Living Centers of America, Inc.(a) 6,950,025
- ---------------------------------------------------------------------------
250,000 Multicare Companies, Inc. (The)(a) 4,687,500
- ---------------------------------------------------------------------------
27,800 Myraid Genetics, Inc.(a) 750,600
- ---------------------------------------------------------------------------
250,000 OrNda HealthCorp(a) 4,406,250
- ---------------------------------------------------------------------------
100,000 Oxford Health Plans, Inc.(a) 7,825,000
- ---------------------------------------------------------------------------
117,500 Pediatrix Medical Group, Inc.(a) 2,540,938
- ---------------------------------------------------------------------------
115,000 PhyCor, Inc.(a) 4,226,250
- ---------------------------------------------------------------------------
</TABLE>
FS-56
<PAGE> 145
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Medical (Patient Services) - (continued)
134,500 Physician Reliance Network, Inc.(a) $ 4,472,125
- ----------------------------------------------------------------------
400,000 Quorum Health Group, Inc.(a) 8,575,000
- ----------------------------------------------------------------------
400,000 Rotech Medical Corp.(a) 9,100,000
- ----------------------------------------------------------------------
120,000 Sierra Health Services, Inc.(a) 3,435,000
- ----------------------------------------------------------------------
250,000 Summit Care Corp.(a) 5,187,500
- ----------------------------------------------------------------------
239,400 TheraTx Inc.(a) 2,693,250
- ----------------------------------------------------------------------
200,000 Tokos Medical Corp.(a) 1,850,000
- ----------------------------------------------------------------------
99,500 Value Health, Inc.(a) 2,276,062
- ----------------------------------------------------------------------
300,000 Vencor, Inc.(a) 8,325,000
- ----------------------------------------------------------------------
197,493,083
- ----------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 3.46%
297,000 Conmed Corp.(a) 10,395,000
- ----------------------------------------------------------------------
52,300 Cordis Corp.(a) 5,779,150
- ----------------------------------------------------------------------
18,300 De Rigo S.p.A.-ADR(a) 377,437
- ----------------------------------------------------------------------
250,000 Empi Inc.(a) 5,562,500
- ----------------------------------------------------------------------
250,000 Haemonetics Corp.(a) 4,718,750
- ----------------------------------------------------------------------
69,800 Heart Technology, Inc.(a) 1,989,300
- ----------------------------------------------------------------------
150,000 MiniMed, Inc.(a) 1,387,500
- ----------------------------------------------------------------------
190,500 Nellcor Puritan Bennett, Inc.(a) 10,953,750
- ----------------------------------------------------------------------
250,000 Omnicare Inc. 9,062,500
- ----------------------------------------------------------------------
250,000 Patterson Dental Co.(a) 6,250,000
- ----------------------------------------------------------------------
200,000 ResMed, Inc.(a) 3,000,000
- ----------------------------------------------------------------------
300,000 Sybron International Corp.(a) 12,750,000
- ----------------------------------------------------------------------
70,000 Target Therapeutics, Inc.(a) 5,425,000
- ----------------------------------------------------------------------
77,650,887
- ----------------------------------------------------------------------
OFFICE AUTOMATION - 0.70%
200,000 Danka Business Systems PLC-ADR 6,700,000
- ----------------------------------------------------------------------
275,000 In Focus Systems, Inc.(a) 9,040,625
- ----------------------------------------------------------------------
15,740,625
- ----------------------------------------------------------------------
</TABLE>
FS-57
<PAGE> 146
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
POLLUTION CONTROL - 0.73%
185,000 Asyst Technologies, Inc.(a) $ 7,770,000
- -------------------------------------------------------------------
50,000 Sanifill, Inc.(a) 1,575,000
- -------------------------------------------------------------------
70,000 United Waste Systems, Inc.(a) 2,765,000
- -------------------------------------------------------------------
206,500 USA Waste Services, Inc.(a) 4,336,500
- -------------------------------------------------------------------
16,446,500
- -------------------------------------------------------------------
PUBLISHING - 0.08%
61,000 Media General, Inc.-Class A 1,692,750
- -------------------------------------------------------------------
RESTAURANTS - 1.74%
251,562 Apple South, Inc. 5,157,020
- -------------------------------------------------------------------
350,000 Buffets, Inc.(a) 4,375,000
- -------------------------------------------------------------------
300,000 Daka International, Inc.(a) 9,112,500
- -------------------------------------------------------------------
700,000 Landry's Seafood Restaurants, Inc.(a) 9,450,000
- -------------------------------------------------------------------
500,000 Sonic Corp.(a) 11,000,000
- -------------------------------------------------------------------
39,094,520
- -------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.36%
200,000 Big B, Inc. 2,950,000
- -------------------------------------------------------------------
220,000 Casey's General Stores, Inc. 5,060,000
- -------------------------------------------------------------------
8,010,000
- -------------------------------------------------------------------
RETAIL (STORES) - 6.01%
155,000 Baby Superstore, Inc.(a) 7,323,750
- -------------------------------------------------------------------
200,000 Bed Bath & Beyond, Inc.(a) 6,250,000
- -------------------------------------------------------------------
101,700 CDW Computer Centers, Inc.(a) 4,932,450
- -------------------------------------------------------------------
85,000 CompUSA, Inc.(a) 3,251,250
- -------------------------------------------------------------------
199,100 Corporate Express, Inc.(a) 5,201,488
- -------------------------------------------------------------------
300,000 Creative Computers, Inc.(a) 8,700,000
- -------------------------------------------------------------------
200,100 Duty Free International, Inc. 2,851,425
- -------------------------------------------------------------------
208,600 Eastbay, Inc.(a) 4,432,750
- -------------------------------------------------------------------
35,300 Gadzooks, Inc.(a) 653,050
- -------------------------------------------------------------------
250,000 Global DirectMail Corp.(a) 6,812,500
- -------------------------------------------------------------------
350,000 Gymboree Corp.(a) 7,918,750
- -------------------------------------------------------------------
375,000 Hollywood Entertainment Corp.(a) 10,031,250
- -------------------------------------------------------------------
100,000 Just for Feet, Inc.(a) 2,362,500
- -------------------------------------------------------------------
300,000 Men's Wearhouse, Inc. (The)(a) 11,700,000
- -------------------------------------------------------------------
</TABLE>
FS-58
<PAGE> 147
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Retail (Stores) - (continued)
265,800 Micro Warehouse, Inc.(a) $ 11,828,100
- --------------------------------------------------------------------
115,000 Movie Gallery, Inc.(a) 4,427,500
- --------------------------------------------------------------------
100,000 Oakley, Inc.(a) 3,450,000
- --------------------------------------------------------------------
150,000 Performance Food Group Co.(a) 3,487,500
- --------------------------------------------------------------------
285,000 Petco Animal Supplies, Inc.(a) 7,980,000
- --------------------------------------------------------------------
59,900 Proffitt's, Inc.(a) 1,400,162
- --------------------------------------------------------------------
20,000 Regis Corp.(a) 455,000
- --------------------------------------------------------------------
425,000 Sports Authority, Inc. (The)(a) 9,243,750
- --------------------------------------------------------------------
300,000 Sunglass Hut International, Inc.(a) 8,175,000
- --------------------------------------------------------------------
150,000 Zale Corp.(a) 2,212,500
- --------------------------------------------------------------------
135,080,675
- --------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 0.40%
100,000 Dynatech Corp.(a) 1,500,000
- --------------------------------------------------------------------
200,000 Input/Output, Inc.(a) 7,475,000
- --------------------------------------------------------------------
8,975,000
- --------------------------------------------------------------------
SEMICONDUCTORS - 14.34%
129,100 Advanced Technology Materials, Inc.(a) 1,403,963
- --------------------------------------------------------------------
190,000 Altera Corp.(a) 11,495,000
- --------------------------------------------------------------------
125,000 ASM Lithography Holding N.V.(a) 6,203,125
- --------------------------------------------------------------------
300,000 Atmel Corp.(a) 9,375,000
- --------------------------------------------------------------------
250,000 Burr-Brown Corp.(a) 8,125,000
- --------------------------------------------------------------------
300,000 Chips and Technologies, Inc.(a) 2,625,000
- --------------------------------------------------------------------
130,000 Cirrus Logic, Inc.(a) 5,476,250
- --------------------------------------------------------------------
500,000 Computer Products, Inc.(a) 5,812,500
- --------------------------------------------------------------------
225,000 Credence Systems Corp.(a) 8,409,375
- --------------------------------------------------------------------
350,000 Cypress Semiconductor Corp.(a) 12,337,500
- --------------------------------------------------------------------
265,000 Elantec Semiconductor, Inc.(a) 1,921,250
- --------------------------------------------------------------------
85,000 Electroglas, Inc.(a) 5,971,250
- --------------------------------------------------------------------
14,900 ESS Technology, Inc.(a) 447,000
- --------------------------------------------------------------------
250,000 Exar Corp.(a) 5,937,500
- --------------------------------------------------------------------
270,000 FSI International, Inc.(a) 6,412,500
- --------------------------------------------------------------------
95,000 GaSonics International Corp.(a) 3,135,000
- --------------------------------------------------------------------
220,000 HADCO Corp.(a) 6,160,000
- --------------------------------------------------------------------
</TABLE>
FS-59
<PAGE> 148
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Semiconductors - (continued)
250,000 Information Storage Devices, Inc.(a) $ 5,437,500
- -------------------------------------------------------------------
600,000 Integrated Device Technology, Inc.(a) 11,400,000
- -------------------------------------------------------------------
150,000 Integrated Process Equipment Corp.(a) 5,568,750
- -------------------------------------------------------------------
175,000 International Rectifier Corp.(a) 7,896,875
- -------------------------------------------------------------------
400,000 Jabil Circuit, Inc.(a) 6,750,000
- -------------------------------------------------------------------
275,000 KEMET Corp.(a) 9,487,500
- -------------------------------------------------------------------
150,000 KLA Instruments Corp.(a) 6,412,500
- -------------------------------------------------------------------
150,000 LAM Research Corp.(a) 9,131,250
- -------------------------------------------------------------------
214,800 Lattice Semiconductor Corp.(a) 8,430,900
- -------------------------------------------------------------------
200,000 Linear Technology Corp. 8,750,000
- -------------------------------------------------------------------
200,000 LSI Logic Corp.(a) 9,425,000
- -------------------------------------------------------------------
81,000 Maxim Integrated Products, Inc.(a) 6,054,750
- -------------------------------------------------------------------
400,000 MEMC Electronic Materials, Inc.(a) 12,800,000
- -------------------------------------------------------------------
142,200 Merix Corp.(a) 5,261,400
- -------------------------------------------------------------------
100,000 Novellus Systems, Inc.(a) 6,887,500
- -------------------------------------------------------------------
350,000 Paradigm Technology, Inc.(a) 7,700,000
- -------------------------------------------------------------------
97,500 Photronics, Inc.(a) 2,876,250
- -------------------------------------------------------------------
125,000 Sanmina Corp.(a) 6,750,000
- -------------------------------------------------------------------
336,400 SCI Systems, Inc.(a) 11,816,050
- -------------------------------------------------------------------
300,000 Sierra Semiconductor Corp.(a) 5,362,500
- -------------------------------------------------------------------
200,000 Silicon Valley Group, Inc.(a) 6,475,000
- -------------------------------------------------------------------
180,200 Tencor Instruments(a) 7,681,025
- -------------------------------------------------------------------
350,000 Tower Semiconductor Ltd.(a) 10,587,500
- -------------------------------------------------------------------
227,200 Triquint Semiconductor, Inc.(a) 5,168,800
- -------------------------------------------------------------------
350,000 Tylan General, Inc.(a) 5,600,000
- -------------------------------------------------------------------
203,200 Ultratech Stepper, Inc.(a) 8,128,000
- -------------------------------------------------------------------
400,000 Vitesse Semiconductor Corp.(a) 4,700,000
- -------------------------------------------------------------------
475,000 VLSI Technology, Inc.(a) 11,162,500
- -------------------------------------------------------------------
200,000 Zilog, Inc.(a) 7,100,000
- -------------------------------------------------------------------
322,048,763
- -------------------------------------------------------------------
</TABLE>
FS-60
<PAGE> 149
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SHOES & RELATED APPAREL - 0.36%
145,000 Maxwell Shoe Co., Inc. - Class A $ 652,500
- -------------------------------------------------------------------
250,000 Wolverine World Wide, Inc. 7,500,000
- -------------------------------------------------------------------
8,152,500
- -------------------------------------------------------------------
STEEL - 0.13%
34,100 J & L Specialty Steel, Inc. 558,388
- -------------------------------------------------------------------
112,500 Synalloy Corp. 2,306,250
- -------------------------------------------------------------------
2,864,638
- -------------------------------------------------------------------
TELECOMMUNICATIONS - 5.99%
140,000 ADC Telecommunications, Inc.(a) 5,600,000
- -------------------------------------------------------------------
150,000 Allen Group, Inc.(a) 3,675,000
- -------------------------------------------------------------------
200,000 Andrew Corp.(a) 8,450,000
- -------------------------------------------------------------------
225,000 Aspect Telecommunications Corp.(a) 7,734,375
- -------------------------------------------------------------------
406,250 Brightpoint, Inc.(a) 7,718,750
- -------------------------------------------------------------------
57,500 Brite Voice Systems, Inc.(a) 955,938
- -------------------------------------------------------------------
150,000 DSC Communications Corp.(a) 5,550,000
- -------------------------------------------------------------------
450,000 EIS International, Inc.(a) 8,325,000
- -------------------------------------------------------------------
75,000 Glenayre Technologies, Inc.(a) 4,818,750
- -------------------------------------------------------------------
285,000 Inter-Tel, Inc.(a) 4,239,375
- -------------------------------------------------------------------
160,000 LCI International, Inc.(a) 2,880,000
- -------------------------------------------------------------------
150,000 Microdyne Corp.(a) 4,162,500
- -------------------------------------------------------------------
300,000 Nera AS-ADR(a) 10,650,000
- -------------------------------------------------------------------
170,900 Octel Communications Corp.(a) 5,831,962
- -------------------------------------------------------------------
174,300 Periphonics Corp.(a) 4,270,350
- -------------------------------------------------------------------
75,000 Premisys Communications, Inc.(a) 6,712,500
- -------------------------------------------------------------------
150,000 StrataCom, Inc.(a) 9,225,000
- -------------------------------------------------------------------
223,800 Tekelec(a) 3,245,100
- -------------------------------------------------------------------
75,200 Tel-Save Holdings, Inc.(a) 1,043,400
- -------------------------------------------------------------------
100,000 Tellabs, Inc.(a) 3,400,000
- -------------------------------------------------------------------
300,000 Teltrend, Inc.(a) 8,850,000
- -------------------------------------------------------------------
175,000 TESSCO Technologies, Inc.(a) 4,593,750
- -------------------------------------------------------------------
200,000 Transaction Network Services, Inc.(a) 4,700,000
- -------------------------------------------------------------------
200,000 U.S. Long Distance Corp.(a) 2,575,000
- -------------------------------------------------------------------
300,000 VTEL Corp.(a) 5,400,000
- -------------------------------------------------------------------
134,606,750
- -------------------------------------------------------------------
</TABLE>
FS-61
<PAGE> 150
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
TEXTILES - 1.27%
100,000 Cutter & Buck, Inc.(a) $ 650,000
- --------------------------------------------------------------------------
225,000 Nautica Enterprises, Inc.(a) 7,706,250
- --------------------------------------------------------------------------
212,100 Quicksilver, Inc.(a) 6,575,100
- --------------------------------------------------------------------------
125,000 St. John's Knits, Inc. 5,984,375
- --------------------------------------------------------------------------
198,600 Tommy Hilfiger Corp.(a) 7,571,625
- --------------------------------------------------------------------------
28,487,350
- --------------------------------------------------------------------------
TRANSPORTATION - 0.12%
80,000 Fritz Companies, Inc.(a) 2,800,000
- --------------------------------------------------------------------------
Total Common Stocks 1,968,631,064
- --------------------------------------------------------------------------
PRINCIPAL
AMOUNT
U.S. TREASURY SECURITIES - 11.32%
U.S. TREASURY BILLS - 11.14%(b)
$ 68,000,000(e) 5.41%, 01/11/96 67,297,560
- --------------------------------------------------------------------------
185,000,000(e) 5.415%, 01/18/96 182,900,250
- --------------------------------------------------------------------------
250,197,810
- --------------------------------------------------------------------------
U.S. TREASURY NOTES - 0.18%
4,000,000 4.625%, 02/29/96 3,988,640
- --------------------------------------------------------------------------
Total U.S. Treasury Securities 254,186,450
- --------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.17%(c)
48,714,848 Daiwa Securities America Inc., 5.90%,
11/01/95(d) 48,714,848
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.16% 2,271,532,362
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (1.16%) (25,978,432)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $2,245,553,930
==========================================================================
</TABLE>
Abbreviations:
ADR - American Depository Receipts
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(d) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,601. Collateralized by $353,853,000 U.S. Treasury obligations,
8.375% due 08/15/08.
(e) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 6.
See Notes to Financial Statements.
FS-62
<PAGE> 151
Financials
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,831,391,083) $2,271,532,362
- ------------------------------------------------------------------
Foreign currencies, at market value (cost $1,871) 1,913
- ------------------------------------------------------------------
Receivables for:
Investments sold 3,491,766
- ------------------------------------------------------------------
Capital stock sold 7,728,042
- ------------------------------------------------------------------
Dividends and interest 153,869
- ------------------------------------------------------------------
Investment for deferred compensation plan 12,996
- ------------------------------------------------------------------
Other assets 163,005
- ------------------------------------------------------------------
Total assets 2,283,083,953
- ------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 27,426,798
- ------------------------------------------------------------------
Capital stock reacquired 6,342,346
- ------------------------------------------------------------------
Variation margin 1,282,500
- ------------------------------------------------------------------
Deferred compensation 12,996
- ------------------------------------------------------------------
Accrued advisory fees 1,190,410
- ------------------------------------------------------------------
Accrued administrative services fees 5,770
- ------------------------------------------------------------------
Accrued distribution fees 738,680
- ------------------------------------------------------------------
Accrued directors' fees 1,536
- ------------------------------------------------------------------
Accrued transfer agent fees 300,608
- ------------------------------------------------------------------
Accrued operating expenses 228,379
- ------------------------------------------------------------------
Total liabilities 37,530,023
- ------------------------------------------------------------------
Net assets applicable to shares outstanding $2,245,553,930
==================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Authorized 750,000,000
- ------------------------------------------------------------------
Outstanding 55,963,906
==================================================================
Net asset value and redemption price per share $ 40.13
==================================================================
Offering price per share:
(Net asset value of $40.13/94.50%) $ 42.47
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-63
<PAGE> 152
Financials
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 9,289,821
- ----------------------------------------------------------------------------
Dividends 1,512,937
- ----------------------------------------------------------------------------
Total investment income 10,802,758
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 7,763,206
- ----------------------------------------------------------------------------
Custodian fees 142,952
- ----------------------------------------------------------------------------
Directors' fees 13,172
- ----------------------------------------------------------------------------
Distribution fees 3,023,937
- ----------------------------------------------------------------------------
Administrative services fees 71,528
- ----------------------------------------------------------------------------
Transfer agent fees 2,258,078
- ----------------------------------------------------------------------------
Other 637,102
- ----------------------------------------------------------------------------
Total expenses 13,909,975
- ----------------------------------------------------------------------------
Less fees waived by advisor (788,943)
- ----------------------------------------------------------------------------
Net expenses 13,121,032
- ----------------------------------------------------------------------------
Net investment income (loss) (2,318,274)
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FUTURES CONTRACTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on sales of:
Investment securities 49,680,708
- ----------------------------------------------------------------------------
Futures contracts 2,612,770
- ----------------------------------------------------------------------------
Foreign currencies (3,040)
- ----------------------------------------------------------------------------
52,290,438
- ----------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 307,131,729
- ----------------------------------------------------------------------------
Futures contracts 7,624,500
- ----------------------------------------------------------------------------
Foreign currencies 42
- ----------------------------------------------------------------------------
314,756,271
- ----------------------------------------------------------------------------
Net gain on investment securities, futures contracts and for-
eign currencies 367,046,709
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $364,728,435
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-64
<PAGE> 153
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (2,318,274) $ (1,178,968)
- -------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities, futures contracts and foreign
currencies 52,290,438 (2,796,834)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, futures contracts and foreign
currencies 314,756,271 95,272,310
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 364,728,435 91,296,508
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains on investment securities -- (25,209)
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 1,193,587,768 378,710,145
- -------------------------------------------------------------------------------
Net increase in net assets 1,558,316,203 469,981,444
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 687,237,727 217,256,283
- -------------------------------------------------------------------------------
End of period $2,245,553,930 $687,237,727
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,748,790,238 $557,508,624
- -------------------------------------------------------------------------------
Undistributed net investment income (loss) (16,714) --
- -------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales
of investment securities and foreign
currencies 49,014,585 (3,280,447)
- -------------------------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 447,765,821 133,009,550
- -------------------------------------------------------------------------------
$2,245,553,930 $687,237,727
===============================================================================
</TABLE>
See Notes to Financial Statements.
FS-65
<PAGE> 154
Financials
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Growth Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of four diversified
portfolios: AIM Aggressive Growth Fund, AIM Weingarten Fund, AIM Charter Fund
and AIM Constellation Fund. The Fund has temporarily discontinued public sales
of its shares to new investors. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange is valued
at its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Securities for
which market quotations are not readily available are valued at fair value
as determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors of
the Company. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally,
trading in foreign securities is substantially completed each day at various
times prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1995,
$4,594 was reclassified from undistributed net realized gains to
undistributed net investment income (loss) as a result of differing book/tax
treatments of foreign currency transactions. In addition, $2,306,154 was
reclassified from net investment income (loss) to paid-in capital as a
result of a net operating tax loss. Net assets of the Fund were unaffected
by the reclassifications discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. 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.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts -- A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
FS-66
<PAGE> 155
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. This agreement
requires AIM to reduce its fees or, if necessary, make payments to the Fund to
the extent required to satisfy any expense limitations imposed by the
securities laws or regulations thereunder of any state in which the Fund's
shares are qualified for sale. During the year ended October 31, 1995, AIM
waived fees of $788,943. The master investment advisory agreement was amended
on November 14, 1994 with respect to the Fund. The amendment to the master
investment advisory agreement was approved by the Fund's shareholders at a
special meeting held on November 14, 1994. Of the 12,005,913 shares voted at
the meeting, 8,253,959 shares voted for the amendment, 3,243,846 voted against
the amendment, and 508,108 shares abstained. Under the previous terms, the Fund
paid an advisory fee to AIM at the annual rate of 0.60% of the first $200
million of the Fund's average daily net assets, plus 0.50% of the Fund's
average daily net assets in excess of $200 million to and including $500
million, plus 0.40% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended October 31,
1995, AIM was reimbursed $71,528 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 year ended October 31, 1995,
AFS was paid $1,198,145 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. The Company has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act
(the "Plan"), whereby the Fund pays AIM Distributors an annual rate of 0.25% of
the Fund's average daily net assets as compensation for services related to the
sales and distribution of the Fund's shares. The Plan provides that payments to
dealers and financial institutions that provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund, in amounts
of up to 0.25% of the average net assets of the Fund attributable to the
customers of such dealers or financial institutions, may be characterized as a
service fee. Any amounts not paid as a service fee under the Plan would
constitute an asset-based sales charge. The Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Company with respect to the Fund's shares. During the year ended
October 31, 1995, the Fund paid AIM Distributors $3,023,937 as compensation
under the Plan.
AIM Distributors received commissions of $8,232,597 from sales of shares of
the Fund's capital stock during the year ended October 31, 1995. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of capital stock. Certain officers and
directors of the Company are officers and directors of AIM, AFS and AIM
Distributors.
During the year ended October 31, 1995, the Fund paid legal fees of $4,657
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3 - AFFILIATED COMPANY TRANSACTIONS
Affiliated issuers, as defined in the 1940 Act, are issuers in which the Fund
held 5% or more of the outstanding voting securities. A summary of transactions
for each issuer who is or was an affiliate at or during the year ended October
31, 1995, were as follows:
<TABLE>
<CAPTION>
SHARE BALANCE REALIZED SHARE BALANCE MARKET VALUE
OCTOBER 31, PURCHASES SALES GAIN DIVIDEND OCTOBER 31, OCTOBER 31,
NAME OF ISSUER: 1994 COST COST (LOSS) INCOME 1995 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Arbor Health Care Co. -0- $7,817,338 $191,250 $(6,250) -0- 390,000 $6,630,000
- --------------------------------------------------------------------------------------------------------
Brightpoint Inc. -0- 6,938,635 -0- -0- -0- 406,250 7,718,750
- --------------------------------------------------------------------------------------------------------
Cannondale Corp. -0- 6,794,126 -0- -0- -0- 400,000 6,400,000
- --------------------------------------------------------------------------------------------------------
Daka International, Inc. -0- 8,952,002 -0- -0- -0- 300,000 9,112,500
- --------------------------------------------------------------------------------------------------------
General Acceptance Corp. -0- 3,547,890 -0- -0- -0- 153,800 4,075,700
- --------------------------------------------------------------------------------------------------------
General Scanning, Inc. -0- 2,932,596 -0- -0- -0- 224,700 2,696,400
- --------------------------------------------------------------------------------------------------------
Paradigm Technology,
Inc. -0- 10,111,543 -0- -0- -0- 350,000 7,700,000
- --------------------------------------------------------------------------------------------------------
Softdesk, Inc. 175,000 2,417,125 -0- -0- -0- 290,000 6,742,500
- --------------------------------------------------------------------------------------------------------
Tylan General, Inc. -0- 3,553,875 -0- -0- -0- 350,000 5,600,000
========================================================================================================
</TABLE>
FS-67
<PAGE> 156
Financials
NOTE 4 - BANK BORROWINGS
The Fund has a $14,900,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. During the period July 20, 1995 (effective date of Credit
Agreement) through October 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended October 31,
1995 was $1,518,659,088 and $556,317,049, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1995, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $485,803,064
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (45,844,209)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $439,958,855
===========================================================================
</TABLE>
Cost of investments for tax purposes is $1,831,573,507.
NOTE 6 - FUTURES CONTRACTS
On October 31, 1995, $10,003,000 U.S. Treasury bills were pledged as collateral
to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1995:
(Contracts - $500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
------------
<S> <C>
S&P 500 Index 900 contracts/Dec/buy $7,624,500
=================================================
</TABLE>
NOTE 7 - 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 8 - CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 53,971,580 $1,912,251,434 37,245,080 $ 938,440,033
- --------------------------------------------------------------------------------
Issued as reinvestment
of dividends -- -- 759 16,782
- --------------------------------------------------------------------------------
Reacquired (22,228,120) (718,663,666) (22,135,293) (559,746,670)
- --------------------------------------------------------------------------------
31,743,460 $1,193,587,768 15,110,546 $ 378,710,145
================================================================================
</TABLE>
FS-68
<PAGE> 157
Financials
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Fund
outstanding during each of the years in the two-year period ended October 31,
1995, the ten month period ended October 31, 1993 and each of the years in the
seven-year period ended December 31, 1992.
<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------------------
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Net asset value,
beginning of period $ 28.37 $ 23.85 $ 18.52
- ----------------------- ---------- -------- --------
Income from investment
operations:
Net investment income
(loss) (0.04) (0.05) (0.02)
- ----------------------- ---------- -------- --------
Net gains (losses) on
securities
(both realized and
unrealized) 11.80 4.57 5.35
- ----------------------- ---------- -------- --------
Total from investment
operations 11.76 4.52 5.33
- ----------------------- ---------- -------- --------
Less distributions:
Dividends from net
investment income -- -- --
- ----------------------- ---------- -------- --------
Distributions from
capital gains -- -- --
- ----------------------- ---------- -------- --------
Total distributions -- -- --
- ----------------------- ---------- -------- --------
Net asset value, end of
period $ 40.13 $ 28.37 $ 23.85
======================= ========== ======== ========
Total return(b) 41.45% 18.96% 28.78%
======================= ========== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $2,245,554 $687,238 $217,256
======================= ========== ======== ========
Ratio of expenses to
average net assets(c) 1.08%(e) 1.07% 1.00%(f)
======================= ========== ======== ========
Ratio of net investment
income (loss) to
average net assets(d) (0.19)%(e) (0.26)% (0.24)%(f)
======================= ========== ======== ========
Portfolio turnover rate 52% 75% 61%
======================= ========== ======== ========
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1992(a) 1991 1990 1989 1988 1987 1986
--------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.06 $ 11.85 $13.30 $ 11.07 $ 9.86 $ 12.10 $ 12.61
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Income from investment
operations:
Net investment income
(loss) (0.03) (0.04) 0.08 0.03 0.05 -- 0.01
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Net gains (losses) on
securities
(both realized and
unrealized) 3.41 7.29 (0.95) 2.28 1.21 (1.38) 0.05
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Total from investment
operations 3.38 7.25 (0.87) 2.31 1.26 (1.38) 0.06
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Less distributions:
Dividends from net
investment income -- -- (0.09) (0.03) (0.05) -- (0.08)
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Distributions from
capital gains (0.92) (3.04) (0.49) (0.05) -- (0.86) (0.49)
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Total distributions (0.92) (3.04) (0.58) (0.08) (0.05) (0.86) (0.57)
- ------------------------- --------- --------- -------- -------- -------- --------- --------
Net asset value, end of
period $ 18.52 $ 16.06 $11.85 $ 13.30 $ 11.07 $ 9.86 $ 12.10
========================= ========= ========= ======== ======== ======== ========= ========
Total return(b) 21.34% 63.90% (6.50)% 20.89% 12.77% (11.52)% 0.37%
========================= ========= ========= ======== ======== ======== ========= ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $38,238 $16,218 $9,234 $11,712 $12,793 $13,991 $18,547
========================= ========= ========= ======== ======== ======== ========= ========
Ratio of expenses to
average net assets(c) 1.25% 1.25% 1.25% 1.25% 1.22% 1.20% 1.19%
========================= ========= ========= ======== ======== ======== ========= ========
Ratio of net investment
income (loss) to
average net assets(d) (0.59)% (0.31)% 0.62% 0.24% 0.38% 0.01% 0.11%
========================= ========= ========= ======== ======== ======== ========= ========
Portfolio turnover rate 164% 165% 137% 69% 56% 118% 106%
========================= ========= ========= ======== ======== ======== ========= ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios of expenses to average net assets prior to reduction of advisory
fees and expense reimbursements were 1.15%, 1.09%, 1.17% (annualized),
1.65%, 1.83%, 1.99%, 1.80%, 1.56%, 1.29% and 1.32% for 1995-86,
respectively.
(d) Ratios of net investment income (loss) to average net assets prior to
reduction of advisory fees and expense reimbursements were (0.26)%,
(0.28)%, (0.41)% (annualized), (0.99)%, (0.89)%, (0.11)%, (0.31)%, 0.04%,
(0.08)% and (0.02)%, for 1995-86, respectively.
(e) Ratios are based on average net assets of $1,209,574,872.
(f) Annualized.
FS-69
<PAGE> 158
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Constellation Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Constellation Fund (a portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the seven-year period then ended, the ten
months ended October 31, 1988, and the year ended December 31, 1987. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Constellation Fund as of October 31, 1995, and the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the seven-year period then ended, the ten months ended October 31,
1988, and the year ended December 31, 1987, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
December 8, 1995
FS-70
<PAGE> 159
Financials
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-87.10%
ADVERTISING/BROADCASTING-0.35%
228,200 Belo (A.H.) Corp. $ 7,901,425
- --------------------------------------------------------------------
525,000 Infinity Broadcasting Corp.-Class A(a) 17,062,500
- --------------------------------------------------------------------
24,963,925
- --------------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS & TIRES-0.37%
400,000 Echlin Inc. 14,300,000
- --------------------------------------------------------------------
625,000 Mark IV Industries, Inc. 12,187,500
- --------------------------------------------------------------------
26,487,500
- --------------------------------------------------------------------
BEVERAGES-0.50%
750,000 Canandaigua Wine Co., Inc.-Class A(a) 36,000,000
- --------------------------------------------------------------------
BIOTECHNOLOGY-0.13%
102,400 Chiron Corp.(a) 9,318,400
- --------------------------------------------------------------------
BUILDING MATERIALS-0.11%
241,500 Black & Decker Corp. 8,180,812
- --------------------------------------------------------------------
BUSINESS SERVICES-1.73%
194,800 Equifax, Inc. 7,597,200
- --------------------------------------------------------------------
806,500 Healthcare COMPARE Corp.(a) 29,840,500
- --------------------------------------------------------------------
100,000 Interim Services Inc.(a) 2,975,000
- --------------------------------------------------------------------
1,300,000 Manpower Inc. 35,262,500
- --------------------------------------------------------------------
700,000 Olsten Corp. 26,950,000
- --------------------------------------------------------------------
900,691 Value Health, Inc.(a) 20,603,307
- --------------------------------------------------------------------
123,228,507
- --------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.35%
928,700 Airgas Inc.(a) 24,726,637
- --------------------------------------------------------------------
COMPUTER MINI/PCS-2.95%
1,050,000 COMPAQ Computer Corp.(a) 58,537,500
- --------------------------------------------------------------------
2,000,000 Dell Computer Corp.(a) 93,250,000
- --------------------------------------------------------------------
750,000 Sun Microsystems, Inc.(a) 58,500,000
- --------------------------------------------------------------------
210,287,500
- --------------------------------------------------------------------
COMPUTER NETWORKING-5.77%
500,000 ALANTEC Corp.(a) 17,875,000
- --------------------------------------------------------------------
200,000 Ascend Communications, Inc.(a) 13,000,000
- --------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Computer Networking-(continued)
1,000,000 Bay Networks, Inc.(a) $ 66,250,000
- ---------------------------------------------------------------------
550,000 Cabletron Systems, Inc.(a) 43,243,750
- ---------------------------------------------------------------------
900,000 Cheyenne Software, Inc.(a) 18,787,500
- ---------------------------------------------------------------------
500,000 CIDCO, Inc.(a) 14,812,500
- ---------------------------------------------------------------------
1,200,000 Cisco Systems, Inc.(a) 93,000,000
- ---------------------------------------------------------------------
812,800 FORE Systems, Inc.(a) 43,078,400
- ---------------------------------------------------------------------
500,000 Network Equipment Technologies, Inc.(a) 16,312,500
- ---------------------------------------------------------------------
336,800 Optical Data Systems, Inc.(a) 10,061,900
- ---------------------------------------------------------------------
1,600,000 3Com Corp.(a) 75,200,000
- ---------------------------------------------------------------------
411,621,550
- ---------------------------------------------------------------------
COMPUTER PERIPHERALS-4.77%
800,000 Adaptec Inc.(a) 35,600,000
- ---------------------------------------------------------------------
1,125,000 Alliance Semiconductor Corp.(a) 34,593,750
- ---------------------------------------------------------------------
615,500 Cerner, Inc.(a) 16,310,750
- ---------------------------------------------------------------------
600,000 Digi International, Inc.(a) 16,050,000
- ---------------------------------------------------------------------
200,000 Filenet Corp.(a) 9,075,000
- ---------------------------------------------------------------------
257,200 Komag, Inc.(a) 14,660,400
- ---------------------------------------------------------------------
800,000 Microchip Technology, Inc.(a) 31,750,000
- ---------------------------------------------------------------------
400,000 Oak Technology, Inc.(a) 21,900,000
- ---------------------------------------------------------------------
1,604,600 Oracle Systems Corp.(a) 70,000,675
- ---------------------------------------------------------------------
500,000 Read-Rite Corp.(a) 17,437,500
- ---------------------------------------------------------------------
600,000 Seagate Technology Inc.(a) 26,850,000
- ---------------------------------------------------------------------
500,000 U.S. Robotics Corp.(a) 46,250,000
- ---------------------------------------------------------------------
340,478,075
- ---------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-10.80%
1,025,000 Acclaim Entertainment, Inc.(a) 24,215,625
- ---------------------------------------------------------------------
505,900 Adobe Systems, Inc. 28,836,300
- ---------------------------------------------------------------------
1,000,000 BMC Software, Inc.(a) 35,625,000
- ---------------------------------------------------------------------
500,000 Broderbund Software, Inc.(a) 34,687,500
- ---------------------------------------------------------------------
1,125,000 Cadence Design Systems, Inc.(a) 36,281,250
- ---------------------------------------------------------------------
879,300 Ceridian Corp.(a) 38,249,550
- ---------------------------------------------------------------------
1,500,000 Computer Associates International, Inc. 82,500,000
- ---------------------------------------------------------------------
2,000,000 Computervision Corp.(a) 23,500,000
- ---------------------------------------------------------------------
550,000 Electronic Arts, Inc.(a) 20,143,750
- ---------------------------------------------------------------------
418,000 Fiserv, Inc.(a) 10,763,500
- ---------------------------------------------------------------------
741,200 FTP Software, Inc.(a) 20,012,400
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Computer Software/Services-(continued)
600,000 HBO & Co. $ 42,450,000
- -----------------------------------------------------------------------
200,000 Hyperion Software Corp.(a) 9,850,000
- -----------------------------------------------------------------------
1,200,000 Informix Corp.(a) 34,950,000
- -----------------------------------------------------------------------
300,000 Microsoft Corp.(a) 30,000,000
- -----------------------------------------------------------------------
642,900 Network General Corp.(a) 26,680,350
- -----------------------------------------------------------------------
700,000 PairGain Technologies, Inc.(a) 29,925,000
- -----------------------------------------------------------------------
800,000 Parametric Technology Corp.(a) 53,500,000
- -----------------------------------------------------------------------
300,000 Platinum Technology, Inc.(a) 5,475,000
- -----------------------------------------------------------------------
600,000 Policy Management Systems Corp.(a) 28,275,000
- -----------------------------------------------------------------------
500,000 Rational Software Corp.(a) 7,812,500
- -----------------------------------------------------------------------
737,300 SoftKey International Inc.(a) 23,224,950
- -----------------------------------------------------------------------
500,000 Sterling Software, Inc.(a) 23,062,500
- -----------------------------------------------------------------------
600,000 Sybase, Inc.(a) 23,550,000
- -----------------------------------------------------------------------
1,000,000 Symantec Corp.(a) 24,312,500
- -----------------------------------------------------------------------
1,415,700 Synopsys, Inc.(a) 53,088,750
- -----------------------------------------------------------------------
770,971,425
- -----------------------------------------------------------------------
CONGLOMERATES-0.18%
205,991 Tyco International Ltd. 12,513,953
- -----------------------------------------------------------------------
CONSUMER NON-DURABLES-0.16%
252,000 Department 56, Inc.(a) 11,434,500
- -----------------------------------------------------------------------
COSMETICS & TOILETRIES-0.47%
1,360,000 General Nutrition, Inc.(a) 33,830,000
- -----------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.46%
200,000 Ametek, Inc. 3,525,000
- -----------------------------------------------------------------------
600,000 Amphenol Corp.(a) 12,975,000
- -----------------------------------------------------------------------
146,200 AVX Corp. 4,550,475
- -----------------------------------------------------------------------
300,000 Methode Electronics, Inc. 6,900,000
- -----------------------------------------------------------------------
156,250 Molex, Inc. 5,156,250
- -----------------------------------------------------------------------
234,375 Molex, Inc.-Class A 7,207,031
- -----------------------------------------------------------------------
187,500 Parker-Hannifin Corp. 6,328,125
- -----------------------------------------------------------------------
300,000 Recoton Corp.(a) 6,675,000
- -----------------------------------------------------------------------
750,000 Symbol Technologies, Inc.(a) 26,156,250
- -----------------------------------------------------------------------
400,000 Tektronix, Inc. 23,700,000
- -----------------------------------------------------------------------
2,177,800 Teradyne, Inc.(a) 72,684,075
- -----------------------------------------------------------------------
175,857,206
- -----------------------------------------------------------------------
</TABLE>
FS-73
<PAGE> 162
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
ELECTRONIC/PC DISTRIBUTORS-0.89%
650,000 Arrow Electronics, Inc.(a) $ 32,987,500
- --------------------------------------------------------------------
600,000 Avnet, Inc. 30,225,000
- --------------------------------------------------------------------
63,212,500
- --------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.83%
500,000 ADVANTA Corp.-Class A 19,375,000
- --------------------------------------------------------------------
500,000 ADVANTA Corp.-Class B 17,875,000
- --------------------------------------------------------------------
1,100,000 Credit Acceptance Corp.(a) 25,850,000
- --------------------------------------------------------------------
650,000 First USA, Inc. 29,900,000
- --------------------------------------------------------------------
1,300,000 Green Tree Financial Corp. 34,612,500
- --------------------------------------------------------------------
1,600,000 MBNA Corp. 59,000,000
- --------------------------------------------------------------------
1,220,800 Medaphis Corp.(a) 38,760,400
- --------------------------------------------------------------------
2,500,000 Mercury Finance Co. 48,125,000
- --------------------------------------------------------------------
273,497,900
- --------------------------------------------------------------------
FUNERAL SERVICES-1.46%
814,100 Loewen Group, Inc. 32,602,181
- --------------------------------------------------------------------
1,366,400 Service Corp. International 54,826,800
- --------------------------------------------------------------------
500,000 Stewart Enterprises, Inc.-Class A 16,875,000
- --------------------------------------------------------------------
104,303,981
- --------------------------------------------------------------------
GAMING-0.69%
1,000,000 Mirage Resorts, Inc.(a) 32,750,000
- --------------------------------------------------------------------
750,000 Players International, Inc.(a) 8,062,500
- --------------------------------------------------------------------
476,200 Trump Hotels & Casino Resorts, Inc.(a) 8,095,400
- --------------------------------------------------------------------
48,907,900
- --------------------------------------------------------------------
HOME BUILDING-0.34%
750,000 Clayton Homes, Inc. 19,687,500
- --------------------------------------------------------------------
125,000 Oakwood Homes Corp. 4,687,500
- --------------------------------------------------------------------
24,375,000
- --------------------------------------------------------------------
HOTELS/MOTELS-0.88%
145,900 Doubletree Corp.(a) 3,209,800
- --------------------------------------------------------------------
600,000 Hospitality Franchise Systems, Inc.(a) 36,750,000
- --------------------------------------------------------------------
750,000 La Quinta Inns, Inc. 19,312,500
- --------------------------------------------------------------------
162,500 Promus Companies Inc.(a) 3,575,000
- --------------------------------------------------------------------
62,847,300
- --------------------------------------------------------------------
</TABLE>
FS-74
<PAGE> 163
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
INSURANCE (LIFE & HEALTH)-0.07%
150,000 Equitable of Iowa Companies $ 5,250,000
- ------------------------------------------------------------------
LEISURE & RECREATION-0.46%
429,300 Avid Technology, Inc.(a) 18,781,875
- ------------------------------------------------------------------
500,000 Mattel, Inc. 14,375,000
- ------------------------------------------------------------------
33,156,875
- ------------------------------------------------------------------
MACHINE TOOLS-0.17%
400,000 Kennametal Inc. 12,450,000
- ------------------------------------------------------------------
MACHINERY (HEAVY)-0.08%
131,000 AGCO Corp. 5,862,250
- ------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.39%
600,000 Thermo Electron Corp.(a) 27,600,000
- ------------------------------------------------------------------
MEDICAL (DRUGS)-1.28%
1,000,000 Cardinal Health, Inc. 51,375,000
- ------------------------------------------------------------------
125,800 Forest Laboratories, Inc.(a) 5,204,975
- ------------------------------------------------------------------
1,000,000 Mylan Laboratories, Inc. 19,000,000
- ------------------------------------------------------------------
350,000 Watson Pharmaceuticals, Inc.(a) 15,662,500
- ------------------------------------------------------------------
91,242,475
- ------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-3.00%
1,000,000 Biomet, Inc.(a) 16,625,000
- ------------------------------------------------------------------
910,400 Boston Scientific Corp.(a) 38,350,600
- ------------------------------------------------------------------
300,000 Cordis Corp.(a) 33,150,000
- ------------------------------------------------------------------
154,300 Heart Technology, Inc.(a) 4,397,550
- ------------------------------------------------------------------
500,800 Idexx Laboratories, Inc.(a) 20,407,600
- ------------------------------------------------------------------
689,000 Invacare Corp. 17,397,250
- ------------------------------------------------------------------
400,000 Medtronic Inc. 23,100,000
- ------------------------------------------------------------------
500,000 Nellcor, Inc.(a) 28,750,000
- ------------------------------------------------------------------
515,800 St. Jude Medical Inc.(a) 27,466,350
- ------------------------------------------------------------------
100,000 Stryker Corp. 4,512,500
- ------------------------------------------------------------------
214,156,850
- ------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-10.04%
400,000 American Medical Response, Inc.(a) 11,550,000
- ------------------------------------------------------------------
1,750,000 Apria Healthcare Group, Inc.(a) 37,843,750
- ------------------------------------------------------------------
1,128,000 Columbia/HCA Healthcare Corp. 55,413,000
- ------------------------------------------------------------------
900,000 Community Health Systems, Inc.(a) 28,575,000
- ------------------------------------------------------------------
</TABLE>
FS-75
<PAGE> 164
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Medical (Patient Services)-(continued)
500,000 Foundation Health Corp.(a) $ 21,187,500
- ---------------------------------------------------------------------------
700,000 Genesis Health Ventures, Inc.(a) 20,212,500
- ---------------------------------------------------------------------------
1,500,000 Health Care and Retirement Corp.(a) 44,062,500
- ---------------------------------------------------------------------------
1,792,125 Health Management Associates, Inc.-Class A(a) 38,530,688
- ---------------------------------------------------------------------------
732,600 Healthsource, Inc.(a) 38,827,800
- ---------------------------------------------------------------------------
2,500,000 Healthsouth Corp.(a) 65,312,500
- ---------------------------------------------------------------------------
1,250,000 Horizon Healthcare Corp.(a) 25,312,500
- ---------------------------------------------------------------------------
1,000,000 Integrated Health Services, Inc.(a) 22,875,000
- ---------------------------------------------------------------------------
1,300,000 Lincare Holdings Inc.(a) 32,337,500
- ---------------------------------------------------------------------------
600,000 Living Centers of America, Inc.(a) 15,525,000
- ---------------------------------------------------------------------------
1,250,000 Manor Care, Inc. 40,937,500
- ---------------------------------------------------------------------------
600,000 Omnicare Inc. 21,750,000
- ---------------------------------------------------------------------------
1,250,000 OrNda HealthCorp(a) 22,031,250
- ---------------------------------------------------------------------------
600,000 Oxford Health Plans, Inc.(a) 46,950,000
- ---------------------------------------------------------------------------
150,000 Pacificare Health Systems, Inc.-Class A(a) 10,575,000
- ---------------------------------------------------------------------------
150,000 Pacificare Health Systems, Inc.-Class B(a) 10,912,500
- ---------------------------------------------------------------------------
350,000 PhyCor, Inc.(a) 12,862,500
- ---------------------------------------------------------------------------
600,000 Quorum Health Group Inc.(a) 12,862,500
- ---------------------------------------------------------------------------
900,000 Sybron International Corp. 38,250,000
- ---------------------------------------------------------------------------
434,000 Theratx Inc.(a) 4,882,500
- ---------------------------------------------------------------------------
1,350,000 Vencor, Inc.(a) 37,462,500
- ---------------------------------------------------------------------------
717,041,488
- ---------------------------------------------------------------------------
OFFICE PRODUCTS-0.45%
300,000 Avery Dennison Corp. 13,425,000
- ---------------------------------------------------------------------------
517,100 Reynolds & Reynolds Co.-Class A 18,421,688
- ---------------------------------------------------------------------------
31,846,688
- ---------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.09%
400,000 Smith International, Inc.(a) 6,400,000
- ---------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.19%
250,000 Champion International Corp. 13,375,000
- ---------------------------------------------------------------------------
POLLUTION CONTROL-0.33%
225,000 Asyst Technologies, Inc.(a) 9,450,000
- ---------------------------------------------------------------------------
658,000 USA Waste Services, Inc.(a) 13,818,000
- ---------------------------------------------------------------------------
23,268,000
- ---------------------------------------------------------------------------
PUBLISHING-0.10%
187,900 Harcourt General, Inc. 7,445,538
- ---------------------------------------------------------------------------
</TABLE>
FS-76
<PAGE> 165
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
RESTAURANTS-0.74%
312,100 Applebee's International, Inc. $ 8,777,813
- ---------------------------------------------------------------------
850,000 Cracker Barrel Old Country Store, Inc. 14,450,000
- ---------------------------------------------------------------------
400,000 Morrison Restaurants Inc. 6,250,000
- ---------------------------------------------------------------------
750,000 Outback Steakhouse, Inc.(a) 23,531,250
- ---------------------------------------------------------------------
53,009,063
- ---------------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.46%
300,000 Casey's General Stores, Inc. 6,900,000
- ---------------------------------------------------------------------
652,500 Eckerd Corp.(a) 25,855,313
- ---------------------------------------------------------------------
1,000,000 Kroger Co.(a) 33,375,000
- ---------------------------------------------------------------------
800,000 Safeway, Inc.(a) 37,800,000
- ---------------------------------------------------------------------
103,930,313
- ---------------------------------------------------------------------
RETAIL (STORES)-7.35%
696,500 AutoZone, Inc.(a) 17,238,375
- ---------------------------------------------------------------------
410,100 Baby Superstore, Inc.(a) 19,377,225
- ---------------------------------------------------------------------
1,000,000 Bed Bath & Beyond, Inc.(a) 31,250,000
- ---------------------------------------------------------------------
18,900 CDW Computer Centers, Inc.(a) 916,650
- ---------------------------------------------------------------------
625,000 Circuit City Stores, Inc. 20,859,375
- ---------------------------------------------------------------------
1,000,000 Consolidated Stores Corp.(a) 23,125,000
- ---------------------------------------------------------------------
572,200 Corporate Express, Inc.(a) 14,948,725
- ---------------------------------------------------------------------
1,399,975 Dollar General Corp. 34,299,387
- ---------------------------------------------------------------------
500,000 Gap, Inc. 19,687,500
- ---------------------------------------------------------------------
900,000 Gymboree Corp.(a) 20,362,500
- ---------------------------------------------------------------------
800,200 Heilig-Meyers Co. 14,703,675
- ---------------------------------------------------------------------
558,000 Kohl's Corp.(a) 25,319,250
- ---------------------------------------------------------------------
400,000 MacFrugals Bargains Close-Outs, Inc.(a) 4,750,000
- ---------------------------------------------------------------------
600,100 Men's Wearhouse, Inc. (The)(a) 23,403,900
- ---------------------------------------------------------------------
837,900 Micro Warehouse Inc.(a) 37,286,550
- ---------------------------------------------------------------------
1,006,450 Office Depot, Inc.(a) 28,809,630
- ---------------------------------------------------------------------
150,000 Petco Animal Supplies, Inc.(a) 4,200,000
- ---------------------------------------------------------------------
153,900 PetSmart, Inc.(a) 5,155,650
- ---------------------------------------------------------------------
1,000,000 Sports Authority, Inc. (The)(a) 21,750,000
- ---------------------------------------------------------------------
1,850,000 Staples Inc.(a) 49,256,250
- ---------------------------------------------------------------------
750,000 Sunglass Hut International, Inc.(a) 20,437,500
- ---------------------------------------------------------------------
800,000 Talbots, Inc. 19,400,000
- ---------------------------------------------------------------------
255,700 Tandy Corp. 12,625,188
- ---------------------------------------------------------------------
1,246,300 Viking Office Products, Inc.(a) 55,460,350
- ---------------------------------------------------------------------
524,622,680
- ---------------------------------------------------------------------
</TABLE>
FS-77
<PAGE> 166
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<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
SCIENTIFIC INSTRUMENTS-0.82%
780,000 Millipore Corp. $ 27,592,500
- ----------------------------------------------------------------
600,000 Varian Associates, Inc. 30,825,000
- ----------------------------------------------------------------
58,417,500
- ----------------------------------------------------------------
SEMICONDUCTORS-16.86%
1,200,000 Altera Corp.(a) 72,600,000
- ----------------------------------------------------------------
1,325,000 Analog Devices, Inc.(a) 47,865,625
- ----------------------------------------------------------------
1,800,000 Applied Materials, Inc.(a) 90,225,000
- ----------------------------------------------------------------
2,200,000 Atmel Corp.(a) 68,750,000
- ----------------------------------------------------------------
800,000 Cirrus Logic Corp.(a) 33,700,000
- ----------------------------------------------------------------
501,450 Credence Systems Corp.(a) 18,741,694
- ----------------------------------------------------------------
1,000,000 Cypress Semiconductor Corp.(a) 35,250,000
- ----------------------------------------------------------------
300,000 Electroglas, Inc.(a) 21,075,000
- ----------------------------------------------------------------
150,000 Gasonics International Corp.(a) 4,950,000
- ----------------------------------------------------------------
2,500,000 Integrated Device Technology, Inc. 47,500,000
- ----------------------------------------------------------------
400,000 Intel Corp. 27,950,000
- ----------------------------------------------------------------
967,000 International Rectifier Corp.(a) 43,635,875
- ----------------------------------------------------------------
800,000 KLA Instruments Corp.(a) 34,200,000
- ----------------------------------------------------------------
850,000 LAM Research Corp.(a) 51,743,750
- ----------------------------------------------------------------
580,700 Lattice Semiconductor Corp.(a) 22,792,475
- ----------------------------------------------------------------
1,000,000 Linear Technology Corp. 43,750,000
- ----------------------------------------------------------------
1,700,000 LSI Logic Corp.(a) 80,112,500
- ----------------------------------------------------------------
313,800 Maxim Integrated Products, Inc.(a) 23,456,550
- ----------------------------------------------------------------
1,000,000 MEMC Electronic Materials, Inc.(a) 32,000,000
- ----------------------------------------------------------------
1,150,000 Micron Technology, Inc. 81,218,750
- ----------------------------------------------------------------
558,900 Novellus Systems, Inc.(a) 38,494,238
- ----------------------------------------------------------------
409,000 SCI Systems, Inc.(a) 14,366,125
- ----------------------------------------------------------------
600,000 Sierra Semiconductor Corp.(a) 10,725,000
- ----------------------------------------------------------------
400,000 Silicon Valley Group, Inc.(a) 12,950,000
- ----------------------------------------------------------------
1,000,000 Solectron Corp.(a) 40,250,000
- ----------------------------------------------------------------
333,400 Tencor Instruments(a) 14,211,175
- ----------------------------------------------------------------
770,000 Texas Instruments Inc. 52,552,500
- ----------------------------------------------------------------
32,200 Ultratech Stepper, Inc.(a) 1,288,000
- ----------------------------------------------------------------
430,000 Vishay Intertechnology, Inc.(a) 15,157,500
- ----------------------------------------------------------------
1,500,000 VLSI Technology, Inc.(a) 35,250,000
- ----------------------------------------------------------------
1,500,000 Xilinx, Inc.(a) 69,000,000
- ----------------------------------------------------------------
500,000 Zilog, Inc.(a) 17,750,000
- ----------------------------------------------------------------
1,203,511,757
- ----------------------------------------------------------------
</TABLE>
FS-78
<PAGE> 167
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SHOES & RELATED APPAREL-0.44%
500,000 Nine West Group, Inc.(a) $ 22,250,000
- -----------------------------------------------------------------
300,000 Wolverine World Wide, Inc. 9,000,000
- -----------------------------------------------------------------
31,250,000
- -----------------------------------------------------------------
TELECOMMUNICATIONS-3.00%
400,000 ADC Telecommunications, Inc.(a) 16,000,000
- -----------------------------------------------------------------
450,000 Allen Group Inc. 11,025,000
- -----------------------------------------------------------------
500,000 Andrew Corp.(a) 21,125,000
- -----------------------------------------------------------------
700,000 Aspect Telecommunications Corp.(a) 24,062,500
- -----------------------------------------------------------------
425,000 DSC Communications Corp.(a) 15,725,000
- -----------------------------------------------------------------
250,000 Glenayre Technologies, Inc.(a) 16,062,500
- -----------------------------------------------------------------
512,600 Octel Communications Corp.(a) 17,492,475
- -----------------------------------------------------------------
600,000 Scientific-Atlanta, Inc. 7,425,000
- -----------------------------------------------------------------
350,000 StrataCom, Inc.(a) 21,525,000
- -----------------------------------------------------------------
249,100 Tekelec(a) 3,611,950
- -----------------------------------------------------------------
750,000 Tellabs, Inc.(a) 25,500,000
- -----------------------------------------------------------------
112,500 TransPro, Inc. 1,237,500
- -----------------------------------------------------------------
400,000 U.S. Long Distance Corp.(a) 5,150,000
- -----------------------------------------------------------------
875,000 WorldCom, Inc.(a) 28,546,875
- -----------------------------------------------------------------
214,488,800
- -----------------------------------------------------------------
TELEPHONE-0.02%
55,700 Century Telephone Enterprises, Inc. 1,615,300
- -----------------------------------------------------------------
TEXTILES-0.47%
600,000 Nautica Enterprises, Inc.(a) 20,550,000
- -----------------------------------------------------------------
348,700 Tommy Hilfiger Corp.(a) 13,294,188
- -----------------------------------------------------------------
33,844,188
- -----------------------------------------------------------------
TRUCKING-0.10%
391,800 TNT Freightways Corp. 7,052,400
- -----------------------------------------------------------------
Total Domestic Common Stocks 6,217,881,736
- -----------------------------------------------------------------
</TABLE>
FS-79
<PAGE> 168
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.14%
AUSTRALIA-0.09%
480,832 Broken Hill Proprietary Co. Ltd. (Conglomerates) $ 6,512,182
- -------------------------------------------------------------------------------
CANADA-0.22%
900,000 Corel Corp. (Computer Software/Services)(a) 15,412,500
- -------------------------------------------------------------------------------
FINLAND-0.25%
23,170 Nokia Corp. (Telecommunications) 1,325,527
- -------------------------------------------------------------------------------
300,000 Nokia Corp.-ADR (Telecommunications) 16,725,000
- -------------------------------------------------------------------------------
18,050,527
- -------------------------------------------------------------------------------
FRANCE-0.23%
20,000 LVMH Moet Hennessy Louis Vuitton (Beverages-
Alcoholic) 3,979,469
- -------------------------------------------------------------------------------
50,580 Roussel-Uclaf (Medical-Drugs) 8,295,364
- -------------------------------------------------------------------------------
12,650 Sidel S.A. (Machinery-Miscellaneous) 4,392,487
- -------------------------------------------------------------------------------
16,667,320
- -------------------------------------------------------------------------------
GERMANY-0.06%
13,000 Mannesmann A.G. (Machinery-Miscellaneous) 4,278,834
- -------------------------------------------------------------------------------
HONG KONG-0.15%
1,000,000 Hutchison Whampoa Ltd. (Conglomerates) 5,509,655
- -------------------------------------------------------------------------------
628,000 Sun Hung Kai Properties Ltd. (Real Estate) 5,015,585
- -------------------------------------------------------------------------------
10,525,240
- -------------------------------------------------------------------------------
INDONESIA-0.06%
1,250,000 PT Bank International Indonesia (Banking) 4,375,826
- -------------------------------------------------------------------------------
IRELAND-0.13%
221,100 Elan Corp. PLC-ADR (Medical-Drugs)(a) 8,871,638
- -------------------------------------------------------------------------------
ISRAEL-0.22%
250,000 Lannet Data Communications Ltd. (Computer
Networking)(a) 7,187,500
- -------------------------------------------------------------------------------
225,000 Teva Pharmaceutical Industries Ltd.-ADR (Medical-
Drugs) 8,831,250
- -------------------------------------------------------------------------------
16,018,750
- -------------------------------------------------------------------------------
ITALY-0.05%
1,074,000 Telecom Italia Mobile S.p.A.
(Telecommunications)(a) 1,806,395
- -------------------------------------------------------------------------------
1,074,000 Telecom Italia S.p.A. (Telecommunications) 1,645,363
- -------------------------------------------------------------------------------
3,451,758
- -------------------------------------------------------------------------------
JAPAN-0.07%
120,000 Tokyo Electron Ltd. (Electronic
Components/Miscellaneous) 5,208,466
- -------------------------------------------------------------------------------
MALAYSIA-0.11%
938,000 Malayan Banking Berhad (Banking) 7,567,493
- -------------------------------------------------------------------------------
</TABLE>
FS-80
<PAGE> 169
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
NETHERLANDS-0.72%
400,000 ASM Lithography Holding N.V. (Semiconductors)(a) $ 19,850,000
- ------------------------------------------------------------------------------
400,000 Madge, N.V. (Computer Networking)(a) 16,750,000
- ------------------------------------------------------------------------------
270,500 Philips Electronics N.V.-New York Shares-ADR
(Electronic Components/Miscellaneous) 10,448,063
- ------------------------------------------------------------------------------
32,850 Ver Ned Uitgever Bezit (Publishing) 4,605,392
- ------------------------------------------------------------------------------
51,653,455
- ------------------------------------------------------------------------------
SPAIN-0.01%
8,100 Acerinox, S.A. (Metals-Miscellaneous) 852,771
- ------------------------------------------------------------------------------
SWEDEN-0.96%
140,000 Astra AB (Medical-Drugs) 5,059,784
- ------------------------------------------------------------------------------
60,500 Autoliv AB (Automobile/Trucks Parts & Tires) 3,471,147
- ------------------------------------------------------------------------------
2,811,600 Telefonaktiebolaget L.M. Ericsson-ADR
(Telecommunications) 60,054,089
- ------------------------------------------------------------------------------
68,585,020
- ------------------------------------------------------------------------------
SWITZERLAND-0.12%
3,500 BBC Brown Boveri Ltd. (Engineering &
Construction) 4,060,160
- ------------------------------------------------------------------------------
5,000 Ciba-Geigy Ltd. (Chemicals) 4,329,252
- ------------------------------------------------------------------------------
8,389,412
- ------------------------------------------------------------------------------
UNITED KINGDOM-0.69%
2,700,000 Burton Group PLC (Retail-Stores) 4,300,790
- ------------------------------------------------------------------------------
1,075,000 Danka Business Systems PLC-ADR (Office
Automation) 36,012,500
- ------------------------------------------------------------------------------
390,000 Granada Group PLC (Leisure & Recreation) 4,165,138
- ------------------------------------------------------------------------------
210,000 Thorn EMI PLC (Leisure & Recreation) 4,890,593
- ------------------------------------------------------------------------------
49,369,021
- ------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 295,790,213
- ------------------------------------------------------------------------------
</TABLE>
FS-81
<PAGE> 170
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C>
MASTER NOTE AGREEMENT-1.07%
$76,500,000 Citicorp Securities, Inc., 6.125%,
03/11/96(b) $ 76,500,000
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-4.27%(c)
43,781,167 Daiwa Securities America, Inc., 5.90%,
11/01/95(d) 43,781,167
- -------------------------------------------------------------------------------
261,000,000 Goldman, Sachs & Co. Inc., 5.90%, 11/01/95(e) 261,000,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements 304,781,167
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-3.77%
U.S. TREASURY BILLS-3.06%(f)
195,000,000(g) 5.48%, 11/16/95 194,561,135
- -------------------------------------------------------------------------------
25,000,000 5.22%, 06/27/96 24,132,000
- -------------------------------------------------------------------------------
218,693,135
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES-0.71%
15,000,000 5.50%, 04/30/96 15,000,900
- -------------------------------------------------------------------------------
35,000,000 7.625%, 04/30/96 35,357,000
- -------------------------------------------------------------------------------
50,357,900
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 269,051,035
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.35% 7,164,004,151
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.35)% (24,736,094)
- -------------------------------------------------------------------------------
NET ASSETS-100.00% $7,139,268,057
===============================================================================
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon notice to the issuer. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
October 31, 1995.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(d) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$401,494,641. Collateralized by $353,853,000 U.S. Treasury obligations,
8.375% due 08/15/08.
(e) Joint repurchase agreement entered into 10/31/95 with a maturing value of
$360,681,783. Collateralized by $341,411,000 U.S. Treasury obligations,
5.625% to 12.00% due 11/15/95 to 02/15/25.
(f) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(g) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 7.
See Notes to Financial Statements.
FS-82
<PAGE> 171
Financials
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $5,084,052,318) $7,164,004,151
- ------------------------------------------------------------------------
Foreign currencies, at market value (cost $13,642,266) 13,495,706
- ------------------------------------------------------------------------
Receivables for:
Investments sold 28,101,604
- ------------------------------------------------------------------------
Capital stock sold 50,215,325
- ------------------------------------------------------------------------
Dividends and interest 1,095,114
- ------------------------------------------------------------------------
Investment for deferred compensation plan 35,624
- ------------------------------------------------------------------------
Other assets 100,373
- ------------------------------------------------------------------------
Total assets 7,257,047,897
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 57,630,332
- ------------------------------------------------------------------------
Capital stock reacquired 50,907,595
- ------------------------------------------------------------------------
Variation margin 1,239,750
- ------------------------------------------------------------------------
Deferred compensation 35,624
- ------------------------------------------------------------------------
Accrued advisory fees 3,602,549
- ------------------------------------------------------------------------
Accrued administrative services fees 14,663
- ------------------------------------------------------------------------
Accrued directors' fees 3,850
- ------------------------------------------------------------------------
Accrued distribution fees 2,624,668
- ------------------------------------------------------------------------
Accrued transfer agent fees 439,464
- ------------------------------------------------------------------------
Accrued operating expenses 1,281,345
- ------------------------------------------------------------------------
Total liabilities 117,779,840
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $7,139,268,057
========================================================================
NET ASSETS:
Class A $7,000,350,013
========================================================================
Institutional Class $ 138,918,044
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------------------
Outstanding 295,483,948
========================================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------------------
Outstanding 5,775,803
========================================================================
CLASS A:
Net asset value and redemption price per share $23.69
========================================================================
Offering price per share:
(Net asset value of $23.69 divided by 94.50%) $25.07
========================================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption price per share $24.05
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-83
<PAGE> 172
Financials
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $322,914 foreign withholding tax) $ 14,062,451
- --------------------------------------------------------------------------
Interest 27,896,762
- --------------------------------------------------------------------------
Total investment income 41,959,213
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 31,803,884
- --------------------------------------------------------------------------
Administrative services fees 173,257
- --------------------------------------------------------------------------
Custodian fees 568,906
- --------------------------------------------------------------------------
Directors' fees 44,198
- --------------------------------------------------------------------------
Distribution fees-Class A 14,905,705
- --------------------------------------------------------------------------
Transfer agent fees-Class A 9,158,530
- --------------------------------------------------------------------------
Transfer agent fees-Institutional Class 5,273
- --------------------------------------------------------------------------
Other 2,078,095
- --------------------------------------------------------------------------
Total expenses 58,737,848
- --------------------------------------------------------------------------
Less fees waived by advisor (761,655)
- --------------------------------------------------------------------------
Net expenses 57,976,193
- --------------------------------------------------------------------------
Net investment income (loss) (16,016,980)
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain on sales of:
Investment securities 198,443,948
- --------------------------------------------------------------------------
Foreign currencies 225,354
- --------------------------------------------------------------------------
Futures contracts 38,758,395
- --------------------------------------------------------------------------
237,427,697
- --------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 1,310,161,937
- --------------------------------------------------------------------------
Foreign currencies (529,855)
- --------------------------------------------------------------------------
Futures contracts (2,597,985)
- --------------------------------------------------------------------------
1,307,034,097
- --------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 1,544,461,794
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,528,444,814
==========================================================================
</TABLE>
See Notes to Financial Statements.
FS-84
<PAGE> 173
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (16,016,980) $ (4,773,452)
- -----------------------------------------------------------------------------
Net realized gain on sales of investment
securities,
foreign currencies and futures contracts 237,427,697 113,271,698
- -----------------------------------------------------------------------------
Unrealized appreciation of investment
securities,
foreign currencies and futures contracts 1,307,034,097 137,121,005
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,528,444,814 245,619,251
- -----------------------------------------------------------------------------
Distributions to shareholders from net
realized gains on investment securities:
Class A (107,823,749) --
- -----------------------------------------------------------------------------
Institutional Class (1,218,145) --
- -----------------------------------------------------------------------------
Share transactions - net:
Class A 1,878,176,040 726,623,024
- -----------------------------------------------------------------------------
Institutional Class 75,813,810 24,797,834
- -----------------------------------------------------------------------------
Net increase in net assets 3,373,392,770 997,040,109
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,765,875,287 2,768,835,178
- -----------------------------------------------------------------------------
End of period $7,139,268,057 $3,765,875,287
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,828,771,443 $2,890,417,744
- -----------------------------------------------------------------------------
Undistributed net investment income (loss) (54,010) --
- -----------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currencies
and futures contracts 231,637,155 103,578,171
- -----------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 2,078,913,469 771,879,372
- -----------------------------------------------------------------------------
$7,139,268,057 $3,765,875,287
=============================================================================
</TABLE>
See Notes to Financial Statements.
FS-85
<PAGE> 174
Financials
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of four diversified portfolios:
AIM Constellation Fund, AIM Weingarten Fund, AIM Charter Fund and AIM
Aggressive Growth Fund. The Fund currently offers two different classes of
shares: the Class A shares (formerly "Retail Class") and the Institutional
Class. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange is valued
at its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Debt obligations that are issued or
guaranteed by the U.S. Treasury are valued on the basis of prices provided
by an independent pricing service. Prices provided by the pricing service
may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as yield, type of issue, coupon rate and
maturity date. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors of the Company. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1995,
$326,819 was reclassified from undistributed net realized gains to
undistributed net investment income (loss) as a result of differing book/tax
treatments of foreign currency transactions. In addition, $15,636,151 was
reclassified from net investment income (loss) to paid-in capital as a
result of a net operating tax loss. Net assets of the Fund were unaffected
by the reclassifications discussed above.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
G. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by
FS-86
<PAGE> 175
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
"marking to market" on a daily basis to reflect the market value of the
contracts at the end of each day's trading. Variation margin payments are made
or received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the possibility
of an illiquid market and the change in the value of the contracts may not
correlate with changes in the value of the securities being hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees
paid by the Fund to AIM to the extent necessary to reduce the fees paid by the
Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of the Fund's average daily net assets
in excess of $150 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion. During the year ended October
31, 1995, AIM waived fees of $761,655. The waiver is entirely voluntary and the
Board of Directors would be advised of any decision by AIM to discontinue the
waiver. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM. These agreements require AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations
thereunder of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended October 31,
1995, AIM was reimbursed $173,257 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Class A shares. During the year ended October 31, 1995, AFS was
paid $4,943,213 for such services. During the year ended October 31, 1995, the
Fund paid A I M Institutional Fund Services, Inc. ("AIFS") with respect to the
Institutional Class $2,790 for shareholder and transfer agency services.
Effective July 1, 1995, AIFS became the exclusive transfer agent for the
Institutional Class of the Fund.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Company
has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), with
respect to the Class A shares, whereby the Fund pays AIM Distributors an annual
rate of 0.30% of the Class A shares average daily net assets as compensation
for services related to the sales and distribution of the Class A shares. The
Plan provides that payments to dealers and financial institutions that provide
continuing personal shareholder services to their customers who purchase and
own shares of the Class A shares, in amounts of up to 0.25% of the average net
assets of the Class A shares attributable to the customers of such dealers or
financial institutions, may be characterized as a service fee. The Plan also
provides that payments in excess of service fees are characterized as an asset-
based sales charge under the Plan. The Plan also imposes a cap on the total
amount of sales charges, including asset-based sales charges, that may be paid
by the Company with respect to the Fund's Class A shares. During the year ended
October 31, 1995, the Class A shares paid AIM Distributors $14,905,705 as
compensation under the Plan.
AIM Distributors received commissions of $13,146,761 from Class A capital
stock transactions during the year ended October 31, 1995. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Capital, AIM Distributors, AFS,
AIFS and FMC.
During the year ended October 31, 1995 the Fund paid legal fees of $14,394
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3 - DIRECTORS' FEES
Director's fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
FS-87
<PAGE> 176
Financials
NOTE 4 - BANK BORROWINGS
The Fund has a $83,100,000 committed line of credit with a financial
institution syndicate with Chemical Bank of New York as the administrative
agent. Interest on borrowings under the line of credit is payable on maturity
or prepayment date. During the period July 20, 1995 (effective date of Credit
Agreement) through October 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's
commitment.
NOTE 5 - AFFILIATED COMPANY TRANSACTIONS
Affiliated issuers, as defined in the 1940 Act, are issuers in which the Fund
held 5% or more of the outstanding voting securities. A summary of transactions
for each issuer who is or was an affiliate at or during the year ended October
31, 1995, is as follows:
<TABLE>
<CAPTION>
SHARE SHARE MARKET
BALANCE BALANCE VALUE
OCTOBER 31, PURCHASES REALIZED DIVIDEND OCTOBER 31, OCTOBER 31,
NAME OF ISSUER: 1994 COST SALES COST GAIN INCOME 1995 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Roosevelt Financial
Group, Inc. 315,000 $0 $4,779,251 $392,937 $30,943 $0 $0
===============================================================================================
</TABLE>
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended October 31,
1995 was $4,071,335,941 and $2,213,924,196, respectively. The amount of
unrealized appreciation (depreciation) of investment securities as of October
31, 1995, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,178,971,166
- -----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (99,425,248)
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,079,545,918
=============================================================================
</TABLE>
Cost of investments for tax purposes is $5,084,458,233.
NOTE 7- FUTURES CONTRACT
On October 31, 1995, $9,668,000 U.S. Treasury bills were pledged as collateral
to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1995:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
<S> <C>
S&P 500 Index 370 contracts/Dec95/Buy $ 749,250
S&P 500 Index 500 contracts/Mar96/Buy (1,642,375)
=====================================================
</TABLE>
NOTE 8 - CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 5,036,915 $ 105,368,663 1,908,947 $ 33,070,778
- -----------------------------------------------------------------------------------
Class A 214,014,863 4,411,919,689 100,598,652 1,751,901,830
- -----------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 60,580 1,019,563 -- --
- -----------------------------------------------------------------------------------
Class A 6,006,043 99,940,399 -- --
- -----------------------------------------------------------------------------------
Reacquired:
Institutional Class (1,476,157) (30,574,416) (474,909) (8,272,944)
- -----------------------------------------------------------------------------------
Class A (128,002,913) (2,633,684,048) (58,902,798) (1,025,278,806)
- -----------------------------------------------------------------------------------
95,639,331 $ 1,953,989,850 43,129,892 $ 751,420,858
===================================================================================
</TABLE>
FS-88
<PAGE> 177
Financials
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the seven-year period ended October 31,
1995, the ten months ended October 31, 1988, and each of the years in the two-
year period ended December 31, 1987.(a)
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(b)
---------- ---------- ---------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $18.31 $17.04 $13.25 $11.72 $6.59 $9.40 $7.34 $6.35
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.02) (0.04) (0.04) (0.03) (0.03) 0.01 (0.03)
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Net gains (losses) on
securities (both
realized
and unrealized) 5.95 1.29 3.83 1.76 5.16 (1.23) 2.46 1.02
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Total from investment
operations 5.90 1.27 3.79 1.72 5.13 (1.26) 2.47 0.99
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net
investment income -- -- -- -- -- (0.01) -- --
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Distributions from
capital gains (0.52) -- -- (0.19) -- (1.54) (0.41) --
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Total distributions (0.52) -- -- (0.19) -- (1.55) (0.41) --
- ------------------------ ---------- ---------- ---------- -------- -------- ------- ------- -------
Net asset value, end of
period $23.69 $18.31 $17.04 $13.25 $11.72 $6.59 $9.40 $7.34
======================== ========== ========== ========== ======== ======== ======= ======= =======
Total return(c) 33.43 % 7.45 % 28.60 % 14.82 % 77.85 % (16.17)% 35.50% 15.59 %
======================== ========== ========== ========== ======== ======== ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $7,000,350 $3,726,029 $2,756,497 $966,472 $342,835 $83,304 $74,731 $78,272
======================== ========== ========== ========== ======== ======== ======= ======= =======
Ratio of expenses to
average net assets 1.2 %(d) 1.2 % 1.2 % 1.2 % 1.4 % 1.4 % 1.4% 1.3 %(e)
======================== ========== ========== ========== ======== ======== ======= ======= =======
Ratio of net investment
income (loss) to
average net assets (0.3)%(d) (0.2)% (0.3)% (0.4)% (0.4)% (0.4)% 0.1% (0.6)%(e)
======================== ========== ========== ========== ======== ======== ======= ======= =======
Portfolio turnover rate 45 % 79 % 70 % 62 % 109 % 192 % 149 % 131 %
======================== ========== ========== ========== ======== ======== ======= ======= =======
Borrowings for the
period:
Amount of debt
outstanding at end of
period (000s omitted) -- -- -- -- -- -- $9,610 $5,266
======================== ========== ========== ========== ======== ======== ======= ======= =======
Average amount of debt
outstanding during the
period (000s
omitted)(f) -- -- -- -- -- $2,344 $2,609 $2,148
======================== ========== ========== ========== ======== ======== ======= ======= =======
Average number of shares
outstanding during the
period (000s
omitted)(f) 244,731 182,897 124,101 55,902 21,205 11,397 10,050 10,845
======================== ========== ========== ========== ======== ======== ======= ======= =======
Average amount of debt
per share during the
period -- -- -- -- -- $0.21 $0.26 $0.20
======================== ========== ========== ========== ======== ======== ======= ======= =======
<CAPTION>
DECEMBER 31,
-------------------
1987 1986(b)
--------- ---------
<S> <C> <C>
Net asset value,
beginning of period $10.58 $10.90
- ------------------------- --------- ---------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.07)
- ------------------------- --------- ---------
Net gains (losses) on
securities (both
realized
and unrealized) 0.36 3.13
- ------------------------- --------- ---------
Total from investment
operations 0.31 3.06
- ------------------------- --------- ---------
Less distributions:
Dividends from net
investment income -- --
- ------------------------- --------- ---------
Distributions from
capital gains (4.54) (3.38)
- ------------------------- --------- ---------
Total distributions (4.54) (3.38)
- ------------------------- --------- ---------
Net asset value, end of
period $6.35 $10.58
========================= ========= =========
Total return(c) 2.85 % 28.56 %
========================= ========= =========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $71,418 $78,885
========================= ========= =========
Ratio of expenses to
average net assets 1.1 % 1.1 %
========================= ========= =========
Ratio of net investment
income (loss) to
average net assets (0.4)% (0.5)%
- ------------------------- --------- ---------
Portfolio turnover rate 135 % 107 %
========================= ========= =========
Borrowings for the
period:
Amount of debt
outstanding at end of
period (000s omitted) $109 $3,740
========================= ========= =========
Average amount of debt
outstanding during the
period (000s omitted)(f) $2,366 $3,188
========================= ========= =========
Average number of shares
outstanding during the
period (000s omitted)(f) 9,668 8,519
========================= ========= =========
Average amount of debt
per share during the
period $0.24 $0.37
========================= ========= =========
</TABLE>
(a) Per share information has been restated to reflect a 2 for 1 stock split,
effected in the form of a dividend, on June 19, 1987.
(b) The Fund changed investment advisors on September 30, 1988 and May 1, 1986.
(c) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(d) Ratios are based on average net assets of $4,968,568,278.
(e) Annualized.
(f) Averages computed on a daily basis.
FS-89
