<PAGE> 1
AIM CONSTELLATION FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1997
<PAGE> 2
-------------------------------------
AIM CONSTELLATION FUND
For shareholders
who seek capital appreciation
through investments in
common stocks, with
emphasis on medium-size
and smaller emerging
growth companies.
-------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o The Fund's average annual total returns, including sales charges, for
periods ended 9/30/97, the most recent calendar quarter-end, were as
follows: one year, 17.84% (24.69% excluding sales charges); five years,
21.18%; 10 years, 17.04%.
o AIM Constellation Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed without a sales
charge. When sales charges are included, Fund performance reflects the
maximum 5.50% sales charge.
o Class C shares commenced sales August 4, 1997.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The
unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is
widely regarded by investors as representative of the stock market in
general. The Standard & Poor's Mid-Cap Index (S&P 400) is an unmanaged
index comprising common stocks of approximately 400 mid-capitalization
companies.
o The Consumer Price Index is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
o The NASDAQ (National Association of Securities Dealers Automated Quotation
System) Composite Index is a group of more than 4,500 unmanaged over-the-
counter securities widely regarded by investors to be representative of the
small- and medium-size company stock universe.
o The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded primarily industrial stocks.
o The Europe, Australia, Far East (EAFE) Index is a group of unmanaged
securities. The index is compiled by Morgan Stanley Capital International.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUTITES, AND OTHER INVESTMENTS
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
The fiscal year ended October 31 experienced no let-up in the
[PHOTO OF volatility in equity markets, and it closed on an unsettling
Charles T. note. In late October, in the wake of a currency crisis in
Bauer Southeast Asia, the stock market experienced its first 10%
Chairman of correction since 1991. On Monday, October 27, the New York
the Board of Stock Exchange closed to deal with market volatility for the
THE FUND first time in its history when the Dow Jones Industrial
APPEARS HERE] Average fell 554 points, the index's largest point decline
ever. It is important to note that in percentage terms, this
was a drop of 7.18%, far smaller than the 22.61% decline that
occurred October 19, 1987. Fortunately, this time the market
snapped back, and the Dow regained 337 points the next day.
As of this writing, markets continue to recover.
Many investment managers, including AIM, had cautioned
that a correction was inevitable, that the relentless rise in
benchmarks like the Dow could not continue. In less than 12
months, the Dow had climbed from 6010 on October 14, 1996, to
reach its all-time high of 8259 on August 6, 1997.
When markets become overvalued, no one knows what will precipitate a decline.
No one foresaw that a currency devaluation by Thailand beginning during the
summer would lead to worldwide stock market turmoil.
Despite recent activities, the fiscal year ended October 31 brought domestic
equity investors excellent returns: The Dow was up almost 26%; the broader S&P
500, more than 32%; the NASDAQ small-cap index, 30.46%. International
investments, while positive, weren't as robust; the EAFE Index rose 4.63%. On
the following pages, your Fund managers discuss how your Fund performed in this
market context and their outlook for the future.
REALISTIC EXPECTATIONS
The 1100-point decline in the Dow between early August and late October was the
latest in a series of market breaks. Between mid-March and mid-April of this
year, for example, the Dow dropped almost 10%.
Many investors, including professional fund managers, have become accustomed
to buying on these market breaks because the market has bounced back quickly.
From its 1997 low of 6391 on April 11, the Dow took less than four months to
rise almost 2000 points to its all-time high.
However, this time could be different. Many investors have developed two
unrealistic expectations: first, a belief that stocks can rise more than 20% a
year indefinitely; and second, confidence that the market always rebounds
swiftly from a decline.
Neither notion is historically correct. History tells us that over the long
term, average annual total return for stocks is about 10%, not 20%. And those
of us who have been in this business for many years remember the bear market of
the 1970s, when the market experienced a series of declines and recovery was
very slow.
Nevertheless, there is reason for optimism, including sound fiscal policy
steadily shrinking the federal deficit, stable interest rates, and a strong
economy unharmed by inflation. Despite recent events in Asia, it is difficult
to be pessimistic about the U.S. economy and, indeed, about most of the
developed economies in the world.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have any questions or
comments. Don't forget that automated information about your AIM account is
available 24 hours a day on the AIM Investor Line, 800-246-5463. Or visit our
Web site, at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
---------------------------------------------------------
Despite recent activities,
the fiscal year
ended October 31
brought domestic equity investors
excellent returns.
---------------------------------------------------------
<PAGE> 4
The Managers' Overview
FUND CAPITALIZES ON BROADENING OF THE MARKET, PRODUCES SOLID RETURNS
A roundtable discussion with the Fund management team for AIM Constellation
Fund for the fiscal year ended October 31, 1997.
- -------------------------------------------------------------------------------
Q. HOW DID AIM CONSTELLATION FUND PERFORM DURING THE FISCAL YEAR COVERED BY
THIS REPORT?
A. We are pleased to report that, during the final half of the fiscal year,
the Fund produced a dramatic rebound from the -2.41% total return reported
in our April 30 report to shareholders. For the six months ended October
31, 1997, the Fund's Class A shares produced an impressive total return of
21.79%, bringing total return for the fiscal year as a whole to 18.86%, a
return in keeping with AIM Constellation Fund's long-term performance.
Class C shares commenced sales 8/4/97.
================================================================================
NET ASSETS UNDER MANAGEMENT
- --------------------------------------------------------------------------------
10/31/96 $11.55 billion
10/31/97 $14.34 billion
================================================================================
Q. WHAT EXPLAINS THE BIG DIFFERENCE IN THE TWO HALVES OF THE YEAR?
A. During the latter six months, the market broadened, which makes for a more
favorable environment for a mutual fund as diversified as AIM Constellation
Fund, which had 368 holdings as of the fiscal year-end.
We discussed the "narrow market" phenomenon in our last report. For much
of 1996 and for the first few months of 1997, investors focused on
relatively few large-company stocks sometimes dubbed "the new Nifty Fifty"
in reference to the stocks that dominated the markets back in the 1960s and
early 1970s.
During the latter half of the fiscal year, investors began to look
beyond these stocks. From May through the end of the fiscal year, small- and
mid-sized company stocks paced or outpaced larger-company stocks. During the
six months ended October 31, the large-cap S&P 500 rose 15.16% while the
small-cap NASDAQ Composite was up 26.4%.
Q. DID YOU MAKE ANY MAJOR CHANGES TO THE PORTFOLIO DURING THE FISCAL YEAR?
A. Probably the most significant change was a sizable increase in energy
sector holdings, much of which occurred during the last six months of the
fiscal year. For example, as of October 31, 1997, we had almost 8% of the
portfolio in oil and gas drilling and equipment companies, up from 3.44%
six months earlier. These holdings include companies such as Baker Hughes,
Inc. and Cooper Cameron Corp., both of which reported substantial earnings
growth during the fiscal year. The energy sector, especially oil and gas,
looks healthy after more than a decade of restructuring. Though oil and gas
prices have been stable, energy demand is strong worldwide and likely will
remain so despite very recent economic shocks in Asia. Equipment suppliers
have become especially attractive, as an equipment shortage has raised
prices. And technological improvements have lowered the cost of finding
oil--the drilling success rate has improved from one out of five holes
drilled to one out of two.
Q. WERE THERE OTHER MAJOR CHANGES TO THE PORTFOLIO?
A. A few themes have remained constant: technology, retail, and health care.
The individual stocks we hold within these sectors will change over time,
and the mix of industries will vary, but we think these three sectors
represent excellent long-term growth potential.
Q. WHY IS TECHNOLOGY ATTRACTIVE?
A. Technology stocks still constitute more than a third of the portfolio, and
our tech holdings were increased during the fiscal year. The portfolio is
overweight in this sector compared to its benchmark S&P 400 index, which is
only about 12.5% tech stocks. Within the technology sector, the two largest
industry groups in the portfolio are computer software and services and
semiconductors.
We expect the computer software and services industry to profit from
the so-called "millennium" problem. The special skills needed to reprogram
older computers to recognize the year 2000 already are in demand. Portfolio
holding Compuware Corp. is poised to profit from this situation. Another
bright spot in the sector's future is Europe's migration to a common
currency,
--------------------------------------------------
A few themes
have remained constant;
technology, retail, and health care.
--------------------------------------------------
See important fund and index disclosures inside front cover.
2
<PAGE> 5
The Managers' Overview
PORTFOLIO COMPOSITION
As of 10/31/97
<TABLE>
<CAPTION>
================================================================================================
NUMBER OF HOLDINGS: 368
TOP 10 INDUSTRIES TOP 10 COMMON STOCKS
- ------------------------------------------------------------------------------------------------
<S> <C>
1. Oil & Gas (Drilling & Equipment) 7.94% 1. Compuware Corp. 0.92%
2. Computer (Software/Services) 7.84 2. HEALTHSOUTH Corp. 0.91
3. Electronics (Semiconductors) 6.69 3. Health Management Associates, Inc. 0.87
4. Communications Equipment 4.81 4. MGIC Investment Corp. 0.83
5. Consumer Finance 3.60 5. Dell Computer Corp. 0.83
6. Retail (Specialty) 3.55 6. Tenet Healthcare Corp. 0.82
7. Computers (Hardware) 3.34 7. EMC Corp. 0.81
8. Electrical Equipment 2.85 8. Safeway, Inc. 0.80
9. Equipment (Semiconductors) 2.70 9. Household International, Inc. 0.78
10. Health Care (Hospital Management) 2.40 10. Compaq Computer Corp. 0.78
Please keep in mind that the Fund's portfolio composition is subject to change
and there is no guarantee it will continue to hold any particular securities.
================================================================================================
</TABLE>
which also will require large investments in information technology.
In semiconductors, we still lean toward makers of high-value,
noncommodity products, firms like Burr-Brown Corp., which enjoy a
competitive edge over makers of commodity products. And we still hold Dell
Computer Corp. and Compaq Computer Corp., which continue to capture more
market share.
Nevertheless, the technology sector is characterized by volatility and
ongoing price cutting, and it faces possible negative effects of the recent
turmoil in Asia. The portfolio's large weighting in technology is a
potential vulnerability. We will continue to seek out individual companies
whose earnings performance justifies our investment.
Q. WHY DOES THE FUND HAVE A LARGE STAKE IN THE RETAILING SECTOR?
A. Our holdings in retail were about 13% of the portfolio as of October 31,
not much changed since the fiscal year opened. A year ago, the portfolio
tended toward high-visibility brands; at fiscal year-end, discount stores
selling brand-name merchandise at reduced prices were very attractive.
Discounters in the portfolio include Ross Stores Inc., which is expecting
record earnings per share this year.
Other retailers doing well include those with a big emphasis on
computers and electronic equipment--for example, CompUSA, Inc.--and several
in the mail order industry, which finally appears to have established itself
as a successful participant in this sector.
Q. WHY DO YOU STILL HOLD A LARGE NUMBER OF HEALTH-CARE STOCKS?
A. One positive note in the health-care sector is the FDA's move toward more
rapid approval of drugs and medical devices, which should reduce costs for
the medical instrument and pharmaceutical industries. Portfolio holding
Quintile Transnational Corp., a contract research organization that
assesses the efficacy of medical devices, can be expected to capitalize on
this change.
Another positive is the economies of scale produced by continued
consolidation, especially in the patient care arena. However, we are
beginning to tread somewhat carefully. The steady growth of the companies
operating in this area has limited the ability of any one industry
participant to dictate prices or other business terms to any other
participant.
Nevertheless, as we have reiterated on a number of occasions,
demographic trends in the U.S. argue for continued growth in the health-care
sector for some time to come.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY IN GENERAL?
A. There are a few cautionary signs: a tight labor market that could put
inflationary pressure on wages, a drop in consumer confidence measured by
The Conference Board, a slip in new vehicle sales.
Nevertheless, there is much evidence of a favorable economic
environment. Inflation is so well controlled many economists are more
concerned about deflation. Because of monetary crises overseas, few market
participants anticipate a rate hike by the Federal Reserve, at least for the
short term. And finally, corporate earnings continue to grow. As of the
third quarter of 1997, earnings for S&P 500 companies were up more than 12%
year over year, for example.
Q. WHAT IS YOUR OUTLOOK FOR THE MIDCAP MARKET SECTOR THE NEXT FEW MONTHS?
A. We continue to be optimistic for a number of reasons:
First, the relative valuations of mid-cap stocks are attractive compared
to large-company stocks, especially since the earnings growth rate for mid
caps is expected to be higher than for large caps.
Second, tax changes enacted during 1997 favored capital growth over
income. It seems intuitive to assume that investors will gravitate toward
growth-oriented investments such as mid-capitalization stocks, and that
should boost their performance.
Third, because of recent turmoil in foreign markets and its possible
negative impact on big multinational companies, investors may want to put
their assets in smaller, more domestically oriented companies.
-------------------------------------
We will continue to seek out
individual companies
whose earnings performance
justifies our investment.
--------------------------------------
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
THE AIM CONSTELLATION FUND GROWTH STORY
Growth of a $10,000 Investment: April 30, 1976-October 31, 1997
AIM Constellation Fund Class A Shares vs. Benchmark Indexes
The chart compares your Fund to benchmark indexes. It is important to
understand differences between your Fund and these indexes. An index measures
the performance of a hypothetical portfolio. A market index, such as the S&P
500 or the NASDAQ Composite Index is not managed; therefore there are no sales
charges, expenses, or fees. If you could buy all the securities that make up a
particular index, you would incur expenses that would affect the return on your
investment. Use of these indexes is intended to give you a general idea of how
your Fund performed compared to these benchmarks.
================================================================================
Average Annual Total Returns
For periods ended 10/31/97. Including sales charges.
CLASS A SHARES
Since Inception (4/30/76) 18.65%
20 Years 20.78
10 Years 20.75
5 Years 18.17
1 Year 12.34*
*18.86% excluding sales charges
Class C Shares
Since Inception (8/4/97) -4.72%
================================================================================
<TABLE>
<CAPTION>
==================================================================================================================================
4/30/76 1977 1978 1979 1980 1981 1982 1983 1984 1985
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Dividends Reinvested $ 0 155 0 0 0 851 0 0 0 0
Capital Gains Reinvested $ 0 0 0 0 0 2,362 2,632 0 2,443 0
Total Distributions Reinvested $ 0 155 0 00 0 3,213 2,632 0 2,443 0
Total Account Value $9,443 8,575 10,329 15,619 31,348 30,638 29,000 40,569 35,867 39,649
==================================================================================================================================
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AIM CONSTELLATION NASDAQ CONSUMER
FUND S&P 500 COMPOSITE INDEX PRICE INDEX
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4/30/76 $9,443 $10,000 $10,000 $10,000
12/76 9,876 10,890 10,866 10,374
12/77 9,526 10,107 11,662 11,070
12/78 11,541 10,766 13,097 12,068
12/79 20,405 12,752 16,778 13,672
12/80 35,599 16,890 22,462 15,383
12/81 29,392 16,066 21,741 16,756
12/82 33,729 19,520 25,800 17,397
12/83 42,015 23,904 30,928 18,057
12/84 35,635 25,391 27,459 18,770
12/85 45,784 33,426 36,071 19,483
12/86 58,861 39,648 38,724 19,697
12/87 60,540 41,702 36,686 20,570
12/88 70,430 48,582 42,338 21,479
12/89 97,212 63,928 50,490 22,478
12/90 93,232 61,937 41,501 23,850
12/91 158,876 80,726 65,091 24,581
12/92 182,763 86,868 75,150 25,294
12/93 214,366 95,584 86,234 25,989
12/94 217,149 96,882 83,477 26,684
12/95 294,140 133,159 116,799 27,362
12/96 341,995 163,652 143,320 28,271
12/97 395,745 204,793 176,910 28,734
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================================================
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 0 0 0 101 0 0 0 0 0 0 0
0 16,853 23,391 3,903 15,534 0 2,261 0 0 6,370 9,499 11,590
0 16,853 23,391 3,903 15,635 0 2,261 0 0 6,370 9,499 11,590
58,139 56,748 69,979 94,817 79,482 141,356 162,306 208,732 224,288 299,259 332,949 395,745
===========================================================================================================================
</TABLE>
Data shown are as of the Fund's fiscal year-end. Your Fund's total return
includes sales charges, expenses, and management fees. The performance of Class
C shares will differ from that of A shares due to differing fees and expenses.
For Fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover. Source: Towers Data Systems
HYPO--Registered Trademark--.
<PAGE> 8
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-89.37%
AEROSPACE/DEFENSE-0.35%
BE Aerospace, Inc.(a) 750,000 $ 21,093,750
- ---------------------------------------------------------------
Precision Castparts Corp. 500,000 29,406,250
- ---------------------------------------------------------------
50,500,000
- ---------------------------------------------------------------
AIR FREIGHT-0.39%
AirNet Systems, Inc.(a) 560,000 11,480,000
- ---------------------------------------------------------------
CNF Transportation Inc. 1,000,000 44,625,000
- ---------------------------------------------------------------
56,105,000
- ---------------------------------------------------------------
AIRLINES-0.11%
Southwest Airlines Co. 500,000 16,312,500
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.12%
Mark IV Industries, Inc. 689,062 16,709,754
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.28%
BankBoston Corp. 500,000 40,531,250
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.30%
AmSouth Bancorporation 750,000 36,046,875
- ---------------------------------------------------------------
North Fork Bancorporation, Inc. 250,000 7,359,375
- ---------------------------------------------------------------
43,406,250
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.08%
Curative Technologies, Inc.(a) 365,100 10,998,638
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.62%
Chancellor Media Corp.(a) 140,001 7,682,555
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 750,000 49,500,000
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 786,700 32,943,062
- ---------------------------------------------------------------
90,125,617
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.32%
ADC Telecommunications, Inc.(a) 3,000,000 99,375,000
- ---------------------------------------------------------------
Brightpoint, Inc.(a) 750,000 24,750,000
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 100,000 4,125,000
- ---------------------------------------------------------------
Digital Microwave Corp.(a) 35,000 1,260,000
- ---------------------------------------------------------------
DSC Communications Corp.(a) 2,800,000 68,250,000
- ---------------------------------------------------------------
Glenayre Technologies, Inc.(a) 1,000,000 13,000,000
- ---------------------------------------------------------------
Lucent Technologies, Inc. 500,000 41,218,750
- ---------------------------------------------------------------
MasTec, Inc.(a) 500,000 16,218,750
- ---------------------------------------------------------------
Motorola, Inc. 600,000 37,050,000
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a)(b) 1,500,000 42,375,000
- ---------------------------------------------------------------
REMEC, Inc.(a) 250,000 6,343,750
- ---------------------------------------------------------------
Scientific-Atlanta, Inc. 1,750,000 32,484,375
- ---------------------------------------------------------------
Tellabs, Inc.(a) 1,800,000 97,200,000
- ---------------------------------------------------------------
483,650,625
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-3.34%
Citrix Systems, Inc.(a) 250,000 $ 18,359,374
- ---------------------------------------------------------------
Comdisco, Inc. 1,250,000 39,453,125
- ---------------------------------------------------------------
Compaq Computer Corp.(a) 1,743,000 111,116,250
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 2,500,000 74,218,750
- ---------------------------------------------------------------
Data General Corp.(a) 250,000 4,812,500
- ---------------------------------------------------------------
Dell Computer Corp.(a) 1,500,000 120,187,500
- ---------------------------------------------------------------
IDX Systems Corp.(a) 756,900 25,545,375
- ---------------------------------------------------------------
Micron Electronics, Inc.(a) 1,050,000 14,568,750
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 2,250,000 77,062,500
- ---------------------------------------------------------------
485,324,124
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.31%
Bay Networks, Inc.(a) 3,000,000 94,875,000
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 650,000 53,320,313
- ---------------------------------------------------------------
3Com Corp.(a) 1,000,000 41,437,500
- ---------------------------------------------------------------
189,632,813
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.23%
Adaptec, Inc.(a) 2,000,000 96,875,000
- ---------------------------------------------------------------
EMC Corp.(a) 1,672,000 93,632,000
- ---------------------------------------------------------------
Iomega Corp.(a) 1,500,000 40,218,750
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 400,000 12,225,000
- ---------------------------------------------------------------
MicroTouch Systems, Inc.(a) 250,000 6,031,250
- ---------------------------------------------------------------
Quantum Corp.(a) 1,000,000 31,625,000
- ---------------------------------------------------------------
Smart Modular Technologies,
Inc.(a) 150,000 7,462,500
- ---------------------------------------------------------------
Storage Technology Corp.(a) 600,000 35,212,500
- ---------------------------------------------------------------
323,282,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-7.71%
America Online, Inc.(a) 200,000 15,400,000
- ---------------------------------------------------------------
Applied Voice Technology, Inc.(a) 250,000 6,500,000
- ---------------------------------------------------------------
Aspect Development, Inc.(a) 325,000 15,193,750
- ---------------------------------------------------------------
Autodesk, Inc. 500,000 18,500,000
- ---------------------------------------------------------------
Avant! Corp.(a) 750,000 19,687,500
- ---------------------------------------------------------------
BMC Software, Inc.(a) 1,750,000 105,656,250
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 1,750,000 93,187,500
- ---------------------------------------------------------------
Computer Associates
International, Inc. 1,000,000 74,562,500
- ---------------------------------------------------------------
Compuware Corp.(a) 2,014,200 133,188,975
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 1,000,000 33,875,000
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 300,000 14,025,000
- ---------------------------------------------------------------
HBO & Co. 2,500,000 108,750,000
- ---------------------------------------------------------------
McAfee Associates, Inc.(a) 200,000 9,950,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 824,200 107,146,000
- ---------------------------------------------------------------
Oracle Corp.(a) 2,000,000 71,562,500
- ---------------------------------------------------------------
Parametric Technology Co.(a) 1,600,000 70,600,000
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Security Dynamics
Technologies, Inc.(a) 1,000,000 $ 33,875,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 2,000,000 66,375,000
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 500,000 17,062,500
- ---------------------------------------------------------------
Sybase, Inc.(a) 517,500 8,441,719
- ---------------------------------------------------------------
Symantec Corp.(a) 1,000,000 21,875,000
- ---------------------------------------------------------------
Synopsys, Inc.(a) 1,500,000 58,312,500
- ---------------------------------------------------------------
Wind River Systems(a) 450,000 17,268,750
- ---------------------------------------------------------------
1,120,995,444
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.16%
Action Performance Companies,
Inc.(a) 400,000 10,250,000
- ---------------------------------------------------------------
Blyth Industries, Inc.(a) 525,000 13,059,375
- ---------------------------------------------------------------
23,309,375
- ---------------------------------------------------------------
CONSUMER FINANCE-3.60%
Aames Financial Corp.(b) 900,000 13,162,500
- ---------------------------------------------------------------
Capital One Financial Corp. 750,000 34,218,750
- ---------------------------------------------------------------
ContiFinancial Corp.(a) 500,000 14,218,750
- ---------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 500,000 27,500,000
- ---------------------------------------------------------------
Green Tree Financial Corp. 2,500,000 105,312,500
- ---------------------------------------------------------------
Household International, Inc. 1,000,000 113,250,000
- ---------------------------------------------------------------
IMC Mortgage Co.(a)(b) 1,500,000 26,062,500
- ---------------------------------------------------------------
MBNA Corp. 3,000,000 78,937,500
- ---------------------------------------------------------------
Money Store, Inc. 1,000,000 28,375,000
- ---------------------------------------------------------------
Providian Financial Corp. 500,000 18,500,000
- ---------------------------------------------------------------
SLM Holding Corp. 450,000 63,168,750
- ---------------------------------------------------------------
522,706,250
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.81%
Cardinal Health, Inc. 1,000,000 74,250,000
- ---------------------------------------------------------------
McKesson Corp. 400,000 42,925,000
- ---------------------------------------------------------------
117,175,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.85%
American Power Conversion
Corp.(a) 1,000,000 27,250,000
- ---------------------------------------------------------------
Avid Technology, Inc.(a) 500,000 14,281,250
- ---------------------------------------------------------------
AVX Corp. 1,000,000 28,250,000
- ---------------------------------------------------------------
Berg Electronics Corp.(a) 1,000,000 23,375,000
- ---------------------------------------------------------------
Black Box Corp.(a) 500,000 20,500,000
- ---------------------------------------------------------------
Hadco Corp.(a) 500,000 27,687,500
- ---------------------------------------------------------------
Kemet Corp.(a) 1,000,000 21,750,000
- ---------------------------------------------------------------
Molex, Inc.-Class A 292,968 10,272,191
- ---------------------------------------------------------------
Sanmina Corp.(a) 700,000 52,325,000
- ---------------------------------------------------------------
Sawtek Inc.(a) 400,000 13,600,000
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 2,250,000 99,000,000
- ---------------------------------------------------------------
Solectron Corp.(a) 1,000,000 39,250,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 900,000 35,775,000
- ---------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 17,100 409,331
- ---------------------------------------------------------------
413,725,272
- ---------------------------------------------------------------
ELECTRONIC (COMPONENT DISTRIBUTORS)-0.75%
Arrow Electronics, Inc.(a) 1,300,000 $ 36,887,500
- ---------------------------------------------------------------
Avnet, Inc. 750,000 47,203,125
- ---------------------------------------------------------------
Computer Products, Inc.(a) 250,000 6,812,500
- ---------------------------------------------------------------
Kent Electronics Corp.(a) 500,000 17,468,750
- ---------------------------------------------------------------
108,371,875
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.73%
Methode Electronics, Inc.-Class A 1,050,000 20,737,500
- ---------------------------------------------------------------
Perkin-Elmer Corp. 894,800 55,925,000
- ---------------------------------------------------------------
Tektronix, Inc. 500,000 29,562,500
- ---------------------------------------------------------------
106,225,000
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-6.43%
Altera Corp.(a) 1,600,000 71,000,000
- ---------------------------------------------------------------
Anadagics, Inc.(a) 321,600 11,899,200
- ---------------------------------------------------------------
Analog Devices, Inc.(a) 1,750,000 53,484,375
- ---------------------------------------------------------------
Atmel Corp.(a) 2,000,000 51,750,000
- ---------------------------------------------------------------
Burr-Brown Corp.(a) 750,000 22,687,500
- ---------------------------------------------------------------
Dallas Semiconductor Corp.(a) 800,000 39,100,000
- ---------------------------------------------------------------
Intel Corp. 1,000,000 77,000,000
- ---------------------------------------------------------------
Lattice Semiconductor Corp.(a) 400,000 20,025,000
- ---------------------------------------------------------------
Linear Technology Corp. 1,500,000 94,312,500
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 1,525,000 101,031,250
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 2,499,975 99,686,503
- ---------------------------------------------------------------
National Semiconductor Corp.(a) 2,500,000 90,000,000
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 500,000 13,187,500
- ---------------------------------------------------------------
Sipex Corp.(a) 100,000 3,287,500
- ---------------------------------------------------------------
Texas Instruments, Inc. 1,000,000 106,687,500
- ---------------------------------------------------------------
Unitrode Corp.(a) 300,000 8,043,750
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 475,000 20,603,124
- ---------------------------------------------------------------
Xilinx, Inc.(a) 1,500,000 51,187,500
- ---------------------------------------------------------------
934,973,202
- ---------------------------------------------------------------
ENTERTAINMENT-0.16%
Regal Cinemas, Inc.(a) 1,000,000 23,000,000
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS)-2.70%
Applied Materials, Inc.(a) 3,000,000 100,125,000
- ---------------------------------------------------------------
BMC Industries, Inc. 500,000 16,093,750
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 2,511,700 110,357,819
- ---------------------------------------------------------------
Lam Research Corp.(a) 1,400,000 50,575,000
- ---------------------------------------------------------------
Novellus Systems, Inc.(a) 1,000,000 44,500,000
- ---------------------------------------------------------------
Teradyne, Inc.(a) 1,887,900 70,678,256
- ---------------------------------------------------------------
392,329,825
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.09%
MGIC Investment Corp. 2,000,000 120,625,000
- ---------------------------------------------------------------
SunAmerica, Inc. 1,050,000 37,734,375
- ---------------------------------------------------------------
158,359,375
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOOTWEAR-0.15%
Wolverine World Wide, Inc. 1,000,000 $ 22,000,000
- ---------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES-0.28%
International Game Technology 750,000 19,171,875
- ---------------------------------------------------------------
MGM Grand, Inc.(a) 500,000 21,937,500
- ---------------------------------------------------------------
41,109,375
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.29%
Alpharma, Inc. 254,967 5,625,209
- ---------------------------------------------------------------
Columbia Laboratories, Inc.(a) 500,000 8,000,000
- ---------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 900,000 43,537,500
- ---------------------------------------------------------------
Forest Laboratories, Inc.(a) 600,000 27,750,000
- ---------------------------------------------------------------
Jones Medical Industries, Inc. 1,000,050 30,126,507
- ---------------------------------------------------------------
Mylan Laboratories, Inc.(a) 1,000,000 21,937,500
- ---------------------------------------------------------------
Parexel International Corp.(a) 350,000 12,643,750
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 1,200,000 38,100,000
- ---------------------------------------------------------------
187,720,466
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-2.40%
Health Management Associates,
Inc.-Class A(a) 5,186,530 126,421,680
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 1,800,000 43,650,000
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 3,913,800 119,615,513
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 1,350,000 59,484,375
- ---------------------------------------------------------------
349,171,568
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-1.83%
Beverly Enterprises, Inc.(a) 2,000,000 29,875,000
- ---------------------------------------------------------------
Health Care and Retirement
Corp.(a)(b) 1,815,000 68,629,688
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 5,200,000 132,925,000
- ---------------------------------------------------------------
Vencor, Inc.(a) 1,250,000 33,750,000
- ---------------------------------------------------------------
265,179,688
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-1.71%
American Oncology Resources,
Inc.(a) 250,000 3,656,250
- ---------------------------------------------------------------
Concentra Managed Care, Inc.(a) 430,000 14,028,750
- ---------------------------------------------------------------
Express Scripts, Inc.-Class A(a)(b) 700,000 39,462,500
- ---------------------------------------------------------------
HealthCare COMPARE Corp.(a) 600,000 32,250,000
- ---------------------------------------------------------------
Humana, Inc.(a) 1,235,000 25,935,000
- ---------------------------------------------------------------
Oxford Health Plans, Inc.(a) 911,900 23,538,419
- ---------------------------------------------------------------
PhyCor, Inc.(a) 2,050,000 47,278,125
- ---------------------------------------------------------------
United Healthcare Corp. 602,300 27,894,019
- ---------------------------------------------------------------
Wellpoint Health Networks, Inc.(a) 752,000 34,404,000
- ---------------------------------------------------------------
248,447,063
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-2.28%
Arterial Vascular Engineering,
Inc.(a) 263,100 13,977,187
- ---------------------------------------------------------------
Biomet, Inc. 875,000 21,820,313
- ---------------------------------------------------------------
Dentsply International, Inc. 820,200 23,273,175
- ---------------------------------------------------------------
Guidant Corp. 800,000 46,000,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-(CONTINUED)
Medtronic, Inc. 900,000 $ 39,150,000
- ---------------------------------------------------------------
Physician Sales & Service, Inc.(a) 850,000 20,825,000
- ---------------------------------------------------------------
Quintiles Transnational Corp.(a) 605,000 43,862,500
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 220,100 15,159,388
- ---------------------------------------------------------------
Stryker Corp. 400,000 14,875,000
- ---------------------------------------------------------------
Sullivan Dental Products, Inc. 500,000 11,687,500
- ---------------------------------------------------------------
Sybron International Corp.(a) 2,000,000 80,250,000
- ---------------------------------------------------------------
330,880,063
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-1.90%
American HomePatient, Inc.(a)(b) 750,000 19,312,500
- ---------------------------------------------------------------
Covance, Inc.(a) 2,000,000 35,375,000
- ---------------------------------------------------------------
FPA Medical Management, Inc.(a) 1,500,000 36,187,500
- ---------------------------------------------------------------
Lincare Holdings, Inc.(a) 1,000,000 53,625,000
- ---------------------------------------------------------------
Omnicare, Inc. 3,450,000 95,953,125
- ---------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 524,200 9,075,213
- ---------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 833,333 25,677,083
- ---------------------------------------------------------------
Transition Systems, Inc.(a) 33,300 674,325
- ---------------------------------------------------------------
275,879,746
- ---------------------------------------------------------------
HOMEBUILDING-0.24%
Clayton Homes, Inc. 1,750,000 28,765,625
- ---------------------------------------------------------------
Oakwood Homes Corp. 250,000 6,578,125
- ---------------------------------------------------------------
35,343,750
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.29%
Leggett & Platt, Inc. 1,000,000 41,750,000
- ---------------------------------------------------------------
HOUSEWARES-0.11%
Central Garden and Pet Co.(a) 485,500 12,744,375
- ---------------------------------------------------------------
Helen of Troy Ltd.(a) 185,000 3,075,625
- ---------------------------------------------------------------
15,820,000
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.36%
CapMAC Holdings, Inc. 424,800 12,744,000
- ---------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 750,000 28,218,750
- ---------------------------------------------------------------
Frontier Insurance Group, Inc. 100,000 3,368,750
- ---------------------------------------------------------------
HCC Insurance Holdings, Inc. 343,100 8,019,963
- ---------------------------------------------------------------
52,351,463
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.34%
T. Rowe Price Associates 750,000 49,687,500
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.67%
Callaway Golf Co. 450,000 14,512,500
- ---------------------------------------------------------------
GTECH Holdings Corp.(a) 750,000 24,187,500
- ---------------------------------------------------------------
Harley-Davidson, Inc. 1,400,000 38,850,000
- ---------------------------------------------------------------
North Face, Inc. (The)(a) 330,000 7,796,250
- ---------------------------------------------------------------
Speedway Motorsports, Inc.(a) 511,200 12,236,850
- ---------------------------------------------------------------
97,583,100
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LODGING-HOTELS-0.56%
Choice Hotels International,
Inc.(a) 1,000,000 $ 17,562,500
- ---------------------------------------------------------------
Doubletree Corp.(a) 702,800 29,254,050
- ---------------------------------------------------------------
Promus Hotel Corp.(a) 650,000 25,512,500
- ---------------------------------------------------------------
Sun International Hotels Ltd.(a) 157,600 5,673,600
- ---------------------------------------------------------------
Sunburst Hospitality Corp.(a) 333,333 3,375,000
- ---------------------------------------------------------------
81,377,650
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.94%
AMETEK, Inc. 300,000 7,068,750
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 750,000 32,062,500
- ---------------------------------------------------------------
Pentair, Inc. 500,000 19,312,500
- ---------------------------------------------------------------
Thermo Electron Corp.(a) 1,250,000 46,640,625
- ---------------------------------------------------------------
Tyco International Ltd. 823,964 31,104,641
- ---------------------------------------------------------------
136,189,016
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.76%
Cognex Corp.(a) 1,000,000 26,750,000
- ---------------------------------------------------------------
Diebold, Inc. 700,000 30,843,750
- ---------------------------------------------------------------
US Filter Corp.(a) 1,300,000 52,162,500
- ---------------------------------------------------------------
109,756,250
- ---------------------------------------------------------------
NATURAL GAS-0.01%
Edge Petroleum Corp.(a) 77,600 1,134,900
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.18%
Herman Miller, Inc. 350,000 17,106,250
- ---------------------------------------------------------------
HON INDUSTRIES, Inc. 181,900 9,390,587
- ---------------------------------------------------------------
26,496,837
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-7.52%
BJ Services Co.(a) 1,000,000 84,750,000
- ---------------------------------------------------------------
Baker Hughes, Inc. 1,000,000 45,937,500
- ---------------------------------------------------------------
Camco International, Inc. 963,700 69,627,325
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 1,000,000 72,250,000
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 900,000 56,025,000
- ---------------------------------------------------------------
ENSCO International, Inc. 1,000,000 42,062,500
- ---------------------------------------------------------------
EVI, Inc.(a) 600,000 38,512,500
- ---------------------------------------------------------------
Falcon Drilling Company, Inc.(a) 1,500,000 54,562,500
- ---------------------------------------------------------------
Global Industries Ltd.(a) 1,954,200 39,328,275
- ---------------------------------------------------------------
Global Marine, Inc.(a) 700,000 21,787,500
- ---------------------------------------------------------------
Halliburton Co. 750,000 44,718,750
- ---------------------------------------------------------------
Input/Output, Inc.(a) 1,400,000 37,537,500
- ---------------------------------------------------------------
Lone Star Technologies, Inc.(a) 700,000 26,731,250
- ---------------------------------------------------------------
Marine Drilling Companies,
Inc.(a)(b) 1,500,000 44,437,500
- ---------------------------------------------------------------
Nabors Industries, Inc.(a) 1,500,000 61,687,500
- ---------------------------------------------------------------
National-Oilwell, Inc.(a) 200,000 15,312,500
- ---------------------------------------------------------------
Noble Drilling Corp.(a) 1,000,000 35,562,500
- ---------------------------------------------------------------
Pride International, Inc.(a) 1,608,100 53,067,300
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 1,000,000 38,875,000
- ---------------------------------------------------------------
Santa Fe International Corp. 394,200 19,389,713
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Smith International, Inc.(a) 1,000,000 $ 76,250,000
- ---------------------------------------------------------------
Varco International, Inc.(a)(b) 1,500,000 91,406,250
- ---------------------------------------------------------------
Veritas DGC, Inc.(a) 600,000 24,562,500
- ---------------------------------------------------------------
1,094,381,363
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.75%
Apache Corp.(a) 750,000 31,500,000
- ---------------------------------------------------------------
Burlington Resources, Inc. 750,000 36,703,125
- ---------------------------------------------------------------
Pioneer Natural Resources Co. 350,000 14,021,875
- ---------------------------------------------------------------
St. Mary Land & Exploration
Co. 100,000 4,075,000
- ---------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 1,750,000 22,859,375
- ---------------------------------------------------------------
109,159,375
- ---------------------------------------------------------------
PERSONAL CARE-0.47%
Perrigo Co.(a) 1,977,400 30,402,524
- ---------------------------------------------------------------
Rexall Sundown, Inc.(a) 1,755,000 38,390,625
- ---------------------------------------------------------------
68,793,149
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.27%
Xerox Corp. 500,000 39,656,250
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.30%
AES Corp.(a) 1,100,000 43,587,500
- ---------------------------------------------------------------
RESTAURANTS-1.39%
Apple South, Inc.(b) 2,000,000 37,250,000
- ---------------------------------------------------------------
Applebee's International, Inc.(b) 1,700,000 37,718,750
- ---------------------------------------------------------------
Brinker International, Inc.(a) 1,000,000 14,000,000
- ---------------------------------------------------------------
CKE Restaurants, Inc. 947,900 37,856,756
- ---------------------------------------------------------------
Cracker Barrel Old Country
Store, Inc. 1,125,000 33,187,500
- ---------------------------------------------------------------
Foodmaker, Inc.(a) 250,000 4,109,375
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(a) 500,000 13,531,250
- ---------------------------------------------------------------
Starbucks Corp.(a) 750,000 24,750,000
- ---------------------------------------------------------------
202,403,631
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.32%
Eagle Hardware & Garden, Inc.(a) 750,000 12,750,000
- ---------------------------------------------------------------
Fastenal Co. 350,000 17,150,000
- ---------------------------------------------------------------
Home Depot, Inc. 300,000 16,687,500
- ---------------------------------------------------------------
46,587,500
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.94%
Best Buy Company, Inc.(a) 1,000,000 27,937,500
- ---------------------------------------------------------------
CHS Electronics, Inc.(a) 1,500,000 36,656,250
- ---------------------------------------------------------------
CompUSA, Inc.(a) 3,000,000 98,250,000
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 1,350,000 40,246,875
- ---------------------------------------------------------------
Tech Data Corp.(a) 1,775,000 78,987,500
- ---------------------------------------------------------------
282,078,125
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.74%
Fred Meyer, Inc.(a) 1,000,000 28,562,500
- ---------------------------------------------------------------
Kohl's Corp.(a) 500,000 33,562,500
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-(CONTINUED)
Nordstrom, Inc. 750,000 $ 45,937,500
- ---------------------------------------------------------------
108,062,500
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.71%
Consolidated Stores Corp.(a) 2,500,000 99,687,500
- ---------------------------------------------------------------
Dollar General Corp. 625,082 20,666,773
- ---------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 1,040,400 42,136,200
- ---------------------------------------------------------------
Men's Wearhouse, Inc.(The)(a)(b) 1,500,050 58,126,938
- ---------------------------------------------------------------
Ross Stores, Inc. 734,000 27,433,250
- ---------------------------------------------------------------
248,050,661
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.62%
CVS Corp. 200,000 12,262,500
- ---------------------------------------------------------------
Rite Aid Corp. 1,300,020 77,188,688
- ---------------------------------------------------------------
89,451,188
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-2.26%
American Stores Co. 3,000,000 77,062,500
- ---------------------------------------------------------------
Kroger Co.(a) 2,700,000 88,087,500
- ---------------------------------------------------------------
Quality Food Centers, Inc.(a) 1,000,000 47,625,000
- ---------------------------------------------------------------
Safeway, Inc.(a) 2,000,000 116,250,000
- ---------------------------------------------------------------
329,025,000
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.56%
Costco Companies, Inc.(a) 500,000 19,250,000
- ---------------------------------------------------------------
Dayton Hudson Corp. 1,000,000 62,812,500
- ---------------------------------------------------------------
82,062,500
- ---------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.71%
CDW Computer Centers, Inc.(a)(b) 1,200,000 74,400,000
- ---------------------------------------------------------------
Micro Warehouse, Inc.(a)(b) 1,925,200 28,878,000
- ---------------------------------------------------------------
103,278,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-3.54%
AutoZone, Inc.(a) 518,700 15,334,069
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 1,250,000 39,687,500
- ---------------------------------------------------------------
Finish Line, Inc. (The)-Class
A(a) 250,000 4,218,750
- ---------------------------------------------------------------
General Nutrition Companies,
Inc.(a) 1,000,000 31,500,000
- ---------------------------------------------------------------
Hollywood Entertainment Corp.(a) 1,500,000 18,375,000
- ---------------------------------------------------------------
Inacom Corp.(a) 580,000 17,871,250
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 1,250,000 37,578,125
- ---------------------------------------------------------------
Office Depot, Inc.(a) 2,175,000 44,859,375
- ---------------------------------------------------------------
Petco Animal Supplies, Inc.(a)(b) 850,000 26,137,500
- ---------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 800,000 20,800,000
- ---------------------------------------------------------------
Staples, Inc.(a) 3,500,000 91,875,000
- ---------------------------------------------------------------
Tiffany & Co. 1,000,000 39,500,000
- ---------------------------------------------------------------
Toys "R" Us, Inc.(a) 750,000 25,546,875
- ---------------------------------------------------------------
Viking Office Products, Inc.(a) 3,000,000 71,812,500
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 750,000 30,093,750
- ---------------------------------------------------------------
515,189,694
- ---------------------------------------------------------------
(SPECIALTY-APPAREL)-0.56%
Gap, Inc. 775,000 $ 41,220,312
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 1,350,000 39,993,750
- ---------------------------------------------------------------
81,214,062
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.22%
Dime Bancorp, Inc. 250,000 6,000,000
- ---------------------------------------------------------------
TCF Financial Corp. 457,000 25,991,875
- ---------------------------------------------------------------
31,991,875
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.24%
Omnicom Group, Inc. 500,000 35,312,500
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.75%
Cerner Corp.(a)(b) 1,750,000 42,437,500
- ---------------------------------------------------------------
Cintas Corp. 100,000 7,225,000
- ---------------------------------------------------------------
Equity Corp. International(a) 400,000 8,150,000
- ---------------------------------------------------------------
HFS, Inc.(a) 500,000 35,250,000
- ---------------------------------------------------------------
Service Corp. International 3,500,000 106,531,250
- ---------------------------------------------------------------
Stewart Enterprises, Inc.-
Class A 1,300,000 53,950,000
- ---------------------------------------------------------------
253,543,750
- ---------------------------------------------------------------
SERVICES (COMPUTER & SYSTEMS)-0.45%
Cambridge Technology Partners,
Inc.(a) 470,400 17,169,600
- ---------------------------------------------------------------
Shared Medical Systems Corp. 410,000 22,447,500
- ---------------------------------------------------------------
SunGard Data Systems Inc.(a) 1,060,000 25,042,500
- ---------------------------------------------------------------
64,659,600
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.00%
Affiliated Computer Services,
Inc.(a) 1,000,000 25,125,000
- ---------------------------------------------------------------
BDM International Inc.(a) 361,500 7,998,188
- ---------------------------------------------------------------
BISYS Group, Inc. (The)(a) 463,200 14,417,100
- ---------------------------------------------------------------
CSG Systems International, Inc.(a) 703,100 27,552,731
- ---------------------------------------------------------------
DST Systems, Inc.(a) 1,000,000 35,312,500
- ---------------------------------------------------------------
Equifax, Inc. 500,000 15,531,250
- ---------------------------------------------------------------
First Data Corp. 400,000 11,625,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 1,250,000 55,937,500
- ---------------------------------------------------------------
National Data Corp. 750,000 27,703,125
- ---------------------------------------------------------------
Paychex, Inc. 1,300,000 49,562,500
- ---------------------------------------------------------------
PMT Services, Inc.(a) 1,250,000 20,156,250
- ---------------------------------------------------------------
290,921,144
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.20%
AccuStaff, Inc.(a) 1,000,000 28,562,500
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.21%
Corrections Corp. of America(a) 1,000,000 30,500,000
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.38%
Gartner Group, Inc.(a) 1,150,000 32,487,500
- ---------------------------------------------------------------
Valassis Communications, Inc.(a) 750,000 22,125,000
- ---------------------------------------------------------------
54,612,500
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.04%
Billing Information Concepts(a)(b) 780,000 $ 30,615,000
- ---------------------------------------------------------------
CIENA Corp.(a) 1,050,000 57,750,000
- ---------------------------------------------------------------
LCI International, Inc.(a) 2,000,000 51,750,000
- ---------------------------------------------------------------
USLD Communications Corp.(a) 570,300 11,299,068
- ---------------------------------------------------------------
151,414,068
- ---------------------------------------------------------------
TELEPHONE-0.23%
Cincinnati Bell, Inc. 1,250,000 33,750,000
- ---------------------------------------------------------------
TEXTILES (APPAREL)-1.75%
Jones Apparel Group, Inc.(a) 1,500,000 76,312,500
- ---------------------------------------------------------------
Liz Claiborne, Inc. 1,250,000 63,359,375
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 1,300,000 34,612,500
- ---------------------------------------------------------------
St. John Knits, Inc. 500,000 20,093,750
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 1,500,000 59,343,750
- ---------------------------------------------------------------
253,721,875
- ---------------------------------------------------------------
TEXTILES (SPECIALTY)-0.26%
Unifi, Inc. 1,000,000 38,437,500
- ---------------------------------------------------------------
TRUCKERS-0.11%
Caliber System, Inc. 300,200 15,647,925
- ---------------------------------------------------------------
TRUCKS & PARTS-0.07%
Wabash National Corp. 340,200 10,163,475
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.06%
American Disposal Services,
Inc.(a) 500,000 17,625,000
- ---------------------------------------------------------------
Thermo Instrument Systems,
Inc.(a) 908,400 32,759,175
- ---------------------------------------------------------------
USA Waste Services, Inc.(a) 2,807,500 103,877,500
- ---------------------------------------------------------------
154,261,675
- ---------------------------------------------------------------
Total Domestic Common
Stocks 12,986,108,509
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-0.08%
FINANCIAL (DIVERSIFIED)-0.08%
MGIC Investment Corp.-$3.12
Conv. Pfd. 116,500 11,883,000
- ---------------------------------------------------------------
CONVERTIBLE BONDS & PRINCIPAL
NOTES-0.37% AMOUNT
BROADCASTING (TELEVISION, RADIO & CABLE)-0.06%
Jacor Communications Inc.,
Conv. Sr. LYON, 5.50%,
06/12/11(b)(c) $ 14,450,000 8,849,614
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.17%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 17,500,000 24,287,375
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.06%
Sandoz Capital BVI Ltd.
(Switzerland),
Sr. Conv. Deb., 2.00%,
10/06/02(d) (Acquired
11/04/96-11/13/96;
Cost $6,240,625) 5,540,000 8,143,800
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.08%
Loews Corp., Conv. Sub. Notes,
3.125%, 09/15/07 10,500,000 11,982,075
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes 53,262,864
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-5.07%
CANADA-1.67%
Biovail Corporation
International (Health
Care-Drugs-Generic & Other)(a) 250,000 $ 7,218,750
- ---------------------------------------------------------------
CanWest Global Communications
Corp. (Broadcasting-Television,
Radio & Cable) 2,250,000 43,031,250
- ---------------------------------------------------------------
Newbridge Networks Corp.
(Computers-Networking)(a) 2,000,000 106,000,000
- ---------------------------------------------------------------
Newcourt Credit Group, Inc.
(Finance-Diversified) 257,800 8,974,663
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Communications Equipment) 350,000 31,390,625
- ---------------------------------------------------------------
Precision Drilling Corp. (Oil &
Gas-Drilling & Equipment)(a) 1,500,000 46,125,000
- ---------------------------------------------------------------
242,740,288
- ---------------------------------------------------------------
FINLAND-0.70%
Nokia Oy A.B.-Class A-ADR
(Telecommunications-
Cellular/Wireless) 999,950 88,245,588
- ---------------------------------------------------------------
Nokia Oy A.B.-Class A
(Telecommunications-
Cellular/Wireless) 152,650 13,337,418
- ---------------------------------------------------------------
101,583,006
- ---------------------------------------------------------------
GERMANY-0.10%
Adidas A.G. (Footwear) 100,000 14,486,022
- ---------------------------------------------------------------
IRELAND-0.63%
CBT Group PLC-ADR
(Computers-Software &
Services)(a) 49,400 3,791,450
- ---------------------------------------------------------------
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 1,750,000 87,281,250
- ---------------------------------------------------------------
91,072,700
- ---------------------------------------------------------------
ISRAEL-0.41%
ECI Telecommunications Ltd.
Designs (Communications
Equipment) 750,000 20,718,750
- ---------------------------------------------------------------
Tecnomatix Technologies Ltd.
(Computers-Software &
Services)(a)(b) 479,500 14,804,563
- ---------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 500,000 23,375,000
- ---------------------------------------------------------------
58,898,313
- ---------------------------------------------------------------
ITALY-0.05%
Telecom Italia Mobile S.p.A.
(Telecommunications-
Cellular/Wireless) 1,074,000 3,964,855
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 596,666 3,732,246
- ---------------------------------------------------------------
7,697,101
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-0.20%
ASM Lithography Holding N.V.
(Electronics-Semiconductors)(a) 300,000 $ 21,975,000
- ---------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 328,500 7,783,157
- ---------------------------------------------------------------
29,758,157
- ---------------------------------------------------------------
NORWAY-0.09%
Petroleum Geo-Services ASA-ADR
(Oil & Gas-Drilling &
Equipment)(a) 187,300 12,970,525
- ---------------------------------------------------------------
SWEDEN-0.52%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 1,707,500 75,556,875
- ---------------------------------------------------------------
TAIWAN-0.10%
ASE Test Ltd.-ADR (Electronics-
Semiconductors)(a) 82,200 4,500,450
- ---------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd.-ADR
(Electronics-Semiconductors)(a) 500,000 9,906,250
- ---------------------------------------------------------------
14,406,700
- ---------------------------------------------------------------
UNITED KINGDOM-0.60%
Danka Business Systems PLC-ADR
(Office Equipment & Supplies) 2,200,000 81,400,000
- ---------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Granada Group PLC (Leisure
Time-Products) 390,000 $ 5,378,530
- ---------------------------------------------------------------
86,778,530
- ---------------------------------------------------------------
Total Foreign Stocks &
Other Equity Interests 735,948,217
- ---------------------------------------------------------------
U.S. TREASURY BILLS-2.43%(e)
5.093%, 01/02/98 $355,185,000(f) $ 352,350,624
- ---------------------------------------------------------------
COMMERCIAL PAPER-0.21%
Citibank, NA CP Trust, 5.715%,
12/26/97(g) 30,000,000 30,000,000
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-1.67%(h)
Goldman Sachs & Co.(i) 242,843,032 242,843,032
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.20% 14,412,396,246
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.80% 116,662,726
- ---------------------------------------------------------------
NET ASSETS-100.00% $14,529,058,972
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Affiliated issuers are those in which the Fund's holdings of an Issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has never owned enough of the outstanding voting securities of any
issuer to have control (as defined in the Investment Company Act of 1940) of
that issuer. The aggregate market value of these securities as of 10/31/97
was $664,603,803 which represented 4.57% of the Fund's net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of original
issue discount.
(d) 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 this security has been determined in
accordance with procedures established by the Board of Directors. The market
value of this security at 10/31/97 represented 0.06% of the Fund's net
assets.
(e) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(f) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 8.
(g) Variable rate trust certificates representing an interest in a trust
(comprised of eligible debt obligations) entitling the Portfolio to receive
variable rate interest. The Fund has the right, upon seven calendar days'
notice to the trustee, to put its certificates to the trust at par value
plus accrued interest. Because variable rate trust certificates involve a
trust and a third party put feature, they involve complexities and potential
risks that may not be present where the debt obligation is owned directly.
Rate shown is the rate in effect on 10/31/97.
(h) 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, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(i) Joint repurchase agreement entered into 10/31/97 with a maturing value of
$500,239,583. Collateralized by $500,000,000 U.S. Government obligations,
5.63% to 9.50% due 02/01/00 to 08/01/36 with an aggregate market value at
10/31/97 of $510,000,000.
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
LYON - Liquid Yield Option Notes
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$10,410,065,063) $14,412,396,246
- ------------------------------------------------------------
Foreign currencies, at market value (cost
$43,837) 45,707
- ------------------------------------------------------------
Receivables for:
Investments sold 100,404,112
- ------------------------------------------------------------
Capital stock sold 106,931,262
- ------------------------------------------------------------
Dividends and interest 1,922,668
- ------------------------------------------------------------
Variation margin 7,210,500
- ------------------------------------------------------------
Investment for deferred compensation plan 100,105
- ------------------------------------------------------------
Other assets 55,235
- ------------------------------------------------------------
Total assets 14,629,065,835
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 56,413,158
- ------------------------------------------------------------
Capital stock reacquired 27,338,316
- ------------------------------------------------------------
Deferred compensation 100,105
- ------------------------------------------------------------
Accrued advisory fees 7,883,834
- ------------------------------------------------------------
Accrued administrative service fees 18,472
- ------------------------------------------------------------
Accrued directors' fees 24,640
- ------------------------------------------------------------
Accrued distribution fees 3,864,856
- ------------------------------------------------------------
Accrued transfer agent fees 2,384,261
- ------------------------------------------------------------
Accrued operating expenses 1,979,221
- ------------------------------------------------------------
Total liabilities 100,006,863
- ------------------------------------------------------------
Net assets applicable to shares outstanding $14,529,058,972
============================================================
NET ASSETS:
Class A $14,319,441,125
============================================================
Class C $ 21,508,420
============================================================
Institutional Class $ 188,109,427
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 489,907,670
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 737,163
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,269,599
============================================================
CLASS A:
Net asset value and redemption price per
share $ 29.23
============================================================
Offering price per share:
(Net asset value of $29.23
divided by 94.50%) $ 30.93
============================================================
CLASS C:
Net asset value and offering price per
share $ 29.18
============================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption
price per share $ 30.00
============================================================
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends (net of $582,223 foreign
withholding tax) $ 32,008,695
- ------------------------------------------------------------
Interest 61,609,664
- ------------------------------------------------------------
Total investment income 93,618,359
- ------------------------------------------------------------
EXPENSES:
Advisory fees 82,922,239
- ------------------------------------------------------------
Administrative service fees 251,513
- ------------------------------------------------------------
Custodian fees 808,078
- ------------------------------------------------------------
Directors' fees 91,513
- ------------------------------------------------------------
Distribution fees-Class A 38,860,415
- ------------------------------------------------------------
Distribution fees-Class C 26,490
- ------------------------------------------------------------
Transfer agent fees-Class A 21,499,897
- ------------------------------------------------------------
Transfer agent fees-Class C 5,881
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 24,455
- ------------------------------------------------------------
Other 3,850,511
- ------------------------------------------------------------
Total expenses 148,340,992
- ------------------------------------------------------------
Less: Fees waived by advisor (2,805,955)
- ------------------------------------------------------------
Expenses paid indirectly (290,066)
- ------------------------------------------------------------
Net expenses 145,244,971
- ------------------------------------------------------------
Net investment income (loss) (51,626,612)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 851,008,605
- ------------------------------------------------------------
Foreign currencies (275,168)
- ------------------------------------------------------------
Futures contracts 195,426,592
- ------------------------------------------------------------
1,046,160,029
- ------------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 1,270,975,830
- ------------------------------------------------------------
Foreign currencies 1,294
- ------------------------------------------------------------
Futures contracts (36,703,480)
- ------------------------------------------------------------
1,234,273,644
- ------------------------------------------------------------
Net gain on investment securities,
foreign currencies and futures
contracts 2,280,433,673
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $2,228,807,061
============================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (51,626,612) $ (25,042,610)
- -----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and futures contracts 1,046,160,029 394,119,929
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 1,234,273,644 672,745,646
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,228,807,061 1,041,822,965
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (401,536,883) (233,242,373)
- -----------------------------------------------------------------------------------------------
Institutional Class (10,336,039) (4,789,469)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,280,740,251 3,470,281,071
- -----------------------------------------------------------------------------------------------
Class C 22,611,449 --
- -----------------------------------------------------------------------------------------------
Institutional Class (139,767,829) 135,200,711
- -----------------------------------------------------------------------------------------------
Net increase in net assets 2,980,518,010 4,409,272,905
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 11,548,540,962 7,139,268,057
- -----------------------------------------------------------------------------------------------
End of period $14,529,058,972 $11,548,540,962
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 9,520,633,579 $ 8,408,805,783
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (270,243) (124,538)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies and futures contracts 1,022,762,877 388,200,602
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 3,985,932,759 2,751,659,115
- -----------------------------------------------------------------------------------------------
$14,529,058,972 $11,548,540,962
===============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
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 six diversified portfolios:
AIM Constellation Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM
Capital Development Fund, AIM Charter Fund and AIM Weingarten Fund. The Fund
currently offers three different classes of shares: the Class A shares, the
Class C shares and the Institutional Class. Class C shares commenced sales on
August 4, 1997. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to seek capital appreciation.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) 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 (including convertible bonds) 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
14
<PAGE> 17
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in
foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which would 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 market 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, 1997,
$275,168 was reclassified from undistributed net realized gains to
undistributed net investment income (loss) as a result of differing
book/tax treatments on foreign currency transactions. In addition,
$51,756,075 was reclassified from undistributed net investment income
(loss) to paid-in capital as a result of a net operating tax loss. The
reclassifications were made in order to comply with the requirements of the
American Institute of Certified Public Accountants Statement of Position
93-2. 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--Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated
between the classes.
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 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 foreign 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.
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 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 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 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. Under the voluntary waiver, 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, 1997, AIM waived fees of $2,805,955. The waiver is entirely
voluntary but approval is required by the Board of Directors for 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.
15
<PAGE> 18
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, 1997, AIM was
reimbursed $251,513 for such services.
The Fund, pursuant to a transfer agent 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 C shares. During the
year ended October 31, 1997, AFS was reimbursed $10,499,779 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the Fund. During the year ended
October 31, 1997, the Portfolio paid AIFS $24,455 for such services. On
September 19, 1997, the Board of Directors of the Fund approved the appointment
of AFS as transfer agent of the Fund to be effective in late 1997 or early 1998.
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 C shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted distribution plans pursuant to Rule 12b-1 under
the 1940 Act with respect to the Fund's Class A shares (the "Class A Plan") and
the Fund's Class C shares (the "Class C Plan") (collectively, the "Plan"). The
Fund, pursuant to the Plan, pays AIM Distributors compensation at the annual
rate of 0.30% of the average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class C shares. The Plan is designed to compensate
AIM Distributors 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 Class A or Class C shares of the Fund. 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 and Class C shares.
During the year ended October 31, 1997 for the Class A shares and the period
August 4, 1997 (date sales commenced) through October 31, 1997, the Class C
shares, paid AIM Distributors $38,860,415 and $26,490, respectively as
compensation under the Plan.
AIM Distributors received commissions of $10,566,898 from sales of the Class A
shares of the Fund during the year ended October 31, 1997. 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, 1997,
AIM Distributors received commissions of $253,473 in contingent deferred sales
charges imposed on the redemptions of Fund 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, 1997, the Fund paid legal fees of $34,413
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $49,686 during the year ended October 31, 1997. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $70,375 and $170,005, respectively, under
expense offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $290,066 during the year ended October
31, 1997.
NOTE 4-DIRECTOR'S 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.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lessor of (i) $325,000,000 or (ii) the limit set
by its prospectus for borrowings. During the year ended October 31, 1997, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.05% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
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, 1997 was
$9,490,517,179 and $8,083,184,229, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1997, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $4,320,251,644
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (333,338,001)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $3,986,913,643
==========================================================
</TABLE>
Cost of investments for tax purposes is $10,425,482,603.
16
<PAGE> 19
NOTE 7-CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 211,624,665 $ 5,717,830,615 282,903,859 $ 6,791,107,589
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 745,655 22,872,597 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class 5,274,034 141,917,489 7,711,696 189,568,037
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 15,529,296 381,406,093 10,007,849 218,670,843
- -----------------------------------------------------------------------------------------------------------------------------
Class C* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class 387,258 9,720,186 200,095 4,444,113
- -----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (178,999,514) (4,818,496,457) (146,642,433) (3,539,497,361)
- -----------------------------------------------------------------------------------------------------------------------------
Class C* (8,492) (261,148) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class (10,657,023) (291,405,504) (2,422,264) (58,811,439)
- -----------------------------------------------------------------------------------------------------------------------------
43,895,879 $ 1,163,583,871 151,758,802 $ 3,605,481,782
=============================================================================================================================
</TABLE>
*Class C Shares commenced sales on August 4, 1997.
NOTE 8-OPEN FUTURES CONTRACTS
On October 31, 1997, $13,341,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open future
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACT CONTRACTS COMMITMENT (DEPRECIATION)
-------- --------- ---------- --------------
<S> <C> <C> <C>
S&P 500 Index............................................... 690 Dec. '97 $(16,400,635)
</TABLE>
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1997 and for a share of Class C capital stock outstanding during the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
CLASS A: ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25
- ------------------------------------------------------ ----------- ----------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.11) (0.06) (0.05) (0.02) (0.04)
- ------------------------------------------------------ ----------- ----------- ---------- ---------- ----------
Net gains on securities (both realized
and unrealized) 4.75 2.60 5.95 1.29 3.83
- ------------------------------------------------------ ----------- ----------- ---------- ---------- ----------
Total from investment operations 4.64 2.54 5.90 1.27 3.79
- ------------------------------------------------------ ----------- ----------- ---------- ---------- ----------
Less distributions:
Distributions from net realized gains (0.89) (0.75) (0.52) -- --
- ------------------------------------------------------ ----------- ----------- ---------- ---------- ----------
Total distributions (0.89) (0.75) (0.52) -- --
- ------------------------------------------------------ ----------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 29.23 $ 25.48 $ 23.69 $ 18.31 $ 17.04
====================================================== =========== =========== ========== ========== ==========
Total return(a) 18.86% 11.26% 33.43% 7.45% 28.60%
====================================================== =========== =========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $14,319,441 $11,255,506 $7,000,350 $3,726,029 $2,756,497
====================================================== =========== =========== ========== ========== ==========
Ratio of expenses to average net assets(b) 1.11%(c)(d) 1.14% 1.16% 1.20% 1.22%
====================================================== =========== =========== ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(e) (0.40)%(c) (0.27)% (0.32)% (0.15)% (0.31)%
====================================================== =========== =========== ========== ========== ==========
Portfolio turnover rate 67% 58% 45% 79% 70%
====================================================== =========== =========== ========== ========== ==========
Average brokerage commission rate paid(f) $ 0.0576 $ 0.0596 N/A N/A N/A
====================================================== =========== =========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.13%, 1.16%, 1.18% and 1.21%
for the periods 1997-1994, respectively.
(c) Ratios are based on average net assets of $12,953,471,546.
(d) Ratio includes expenses paid indirectly. Excluding expenses
paid indirectly, the ratio of expenses to average net assets
would have remained the same.
(e) After fee waivers and/or expense reimbursements. Ratios of
net investment income (loss) to average net assets prior to
fee waivers and/or expense reimbursement were (0.42)%,
(0.29)%, (0.34)% and (0.16)% for the periods 1997-1994,
respectively.
(f) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of
securities for the period divided by the total number of
related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and
thereafter.
17
<PAGE> 20
<TABLE>
<CAPTION>
1997
CLASS C: ----------
<S> <C>
Net asset value, beginning of period $ 30.32
- ------------------------------------------------------------ --------
Income from investment operations:
Net investment income (loss) (0.04)
- ------------------------------------------------------------ --------
Net gains (losses) on securities (both realized and
unrealized) (1.10)
- ------------------------------------------------------------ --------
Total from investment operations (1.14)
============================================================ ========
Net asset value, end of period $ 29.18
============================================================ ========
Total return(a) (3.76)%
============================================================ ========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 21,508
============================================================ ========
Ratio of expenses to average net assets(b) 1.83%(c)(d)
============================================================ ========
Ratio of net investment income (loss) to average net
assets(e) (1.12)%(c)
============================================================ ========
Portfolio turnover rate 67%
============================================================ ========
Average brokerage commission rate paid(f) $ 0.0576
============================================================ ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year,
total returns are not annualized.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses
to average net assets prior to fee waivers and/or expense
reimbursements was 1.86% (annualized).
(c) Ratios are annualized and based on average net assets of
$10,863,777.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have
been 1.84% (annualized).
(e) After fee waivers and/or expense reimbursements. Ratio of net
investment income (loss) to average net assets prior to fee waivers
and/or expense reimbursements was (1.15)% (annualized).
(f) The average commission rate paid is the total brokerage commissions
paid on applicable purchases and sales of securities for the period
divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning
September 1, 1995 and thereafter.
18
<PAGE> 21
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, 1997, 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 or periods in the
five-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, 1997, 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, 1997, 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 or periods in the five-year period
then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
19
<PAGE> 22
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the AIM Equity Funds, Inc. (the "Company")
was held on February 7, 1997 at the offices of A I M Management Group Inc., 11
Greenway Plaza, Houston, Texas. The meeting was held for the following purposes:
(1) To elect Directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson and Louis S. Sklar.
(2) To approve a new Master Investment Advisory Agreement between the AIM
Constellation Fund (the "Fund") and A I M Advisors, Inc.
(3) To approve a new Sub-Advisory Agreement between AIM and A I M Capital
Management, Inc.
(4) To approve the elimination of the fundamental investment policy prohibiting
the Fund from investing in other investment companies.
(5) To ratify the selection of KPMG Peat Marwick LLP as independent accountants
for the Fund for the Company's fiscal year ending October 31, 1997.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- ------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 618,811,245 0 19,923,485
Bruce L. Crockett........................................... 619,427,685 0 19,307,045
Owen Daly II................................................ 618,919,919 0 19,814,811
Carl Frischling............................................. 619,275,356 0 19,459,374
Robert H. Graham............................................ 619,431,576 0 19,303,154
John F. Kroeger............................................. 618,878,096 0 19,856,634
Lewis F. Pennock............................................ 619,272,998 0 19,461,732
Ian W. Robinson............................................. 618,944,840 0 19,789,890
Louis S. Sklar.............................................. 619,462,714 0 19,272,016
(2) Approval of Master Investment Advisory Agreement............ 230,906,150 3,535,231 9,875,635
(3) Approval of Sub-Advisory Agreement.......................... 230,060,493 4,051,941 10,204,582
(4) Elimination of Fundamental Investment Policy................ 167,170,198 8,866,029 10,438,104
(5) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
20
<PAGE> 23
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer
Chairman Charles T. Bauer 11 Greenway Plaza
A I M Management Group Inc. Chairman Suite 100
Houston, TX 77046
Bruce L. Crockett Robert H. Graham
Director President INVESTMENT ADVISOR
ACE Limited;
Formerly Director, President, and John J. Arthur A I M Advisors, Inc.
Chief Executive Officer Senior Vice President and Treasurer 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT
Cortland Trust Inc. Carol F. Relihan
Senior Vice President and Secretary A I M Fund Services, Inc.
Jack Fields P.O. Box 4739
Formerly Member of the Jonathan C. Schoolar Houston, TX 77210-4739
U.S. House of Representatives Senior Vice President
CUSTODIAN
Carl Frischling Melville B. Cox
Partner Vice President State Street Bank & Trust
Kramer, Levin, Naftalis & Frankel 225 Franklin Street
Dana R. Sutton Boston, MA 02110
Robert H. Graham Vice President and Assistant Treasurer
President and Chief Executive Officer COUNSEL TO THE FUND
A I M Management Group Inc. P. Michelle Grace
Assistant Secretary Ballard Spahr
John F. Kroeger Andrews & Ingersoll
Formerly Consultant Nancy L. Martin 1735 Market Street
Wendell & Stockel Associates, Inc. Assistant Secretary Philadelphia, PA 19103
Lewis F. Pennock Ofelia M. Mayo COUNSEL TO THE DIRECTORS
Attorney Assistant Secretary
Kramer, Levin, Naftalis & Frankel
Ian W. Robinson Kathleen J. Pflueger 919 Third Avenue
Consultant; Formerly Executive Assistant Secretary New York, NY 10022
Vice President and
Chief Financial Officer Samuel D. Sirko DISTRIBUTOR
Bell Atlantic Management Assistant Secretary
Services, Inc. A I M Distributors, Inc.
Stephen I. Winer 11 Greenway Plaza
Louis S. Sklar Assistant Secretary Suite 100
Executive Vice President Houston, TX 77046
Hines Interests Mary J. Benson
Limited Partnership Assistant Treasurer AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Constellation Fund distributed long-term capital gains of $0.887 per share
during its tax year ended October 31, 1997.
<PAGE> 24
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH OF CAPITAL
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
[PHOTO OF AIM Global Aggressive Growth Fund
11 Greenway Plaza
APPEARS HERE] GROWTH
AIM Advisor International Value Fund
AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in
the mutual fund industry since 1976 and managed
approximately $82 billion in assets for more than
3.6 million shareholders, including individual
investors, corporate clients, and financial *AIM Aggressive Growth Fund was closed to new investors
institutions, as of September 30, 1997. The AIM Family of on June 5, 1997. For more complete information about
Funds--Registered Trademark-- is distributed nationwide, any AIM Fund(s), including sales charges and expenses,
and AIM today ranks among the nation's top 15 mutual ask your financial consultant or securities dealer for
fund companies in assets under management, according a free prospectus(es). Please read the prospectus(es)
to Lipper Analytical Services, Inc. carefully before you invest or send money.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE(SM)
-----------------
A I M Distributors, Inc. BULK RATE
11 Greenway Plaza, Suite 100 U.S. POSTAGE
Houston, TX 77046 PAID
HOUSTON, TX
Permit No. 1919
------------------
</TABLE>
