<PAGE> 1
As filed with the Securities and Exchange Commission on October 9, 1997
1933 Act Registration No. 2-25469
1940 Act Registration No. 811-1424
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
----- ---
Post-Effective Amendment No. 53 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 53 X
---- ---
(Check appropriate box or boxes.)
AIM EQUITY FUNDS, INC.
----------------------
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
--------------
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046
------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
Lisa A. Moss, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this
Amendment.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- -----
on (date) pursuant to paragraph (b)
- -----
60 days after filing pursuant to paragraph (a)(1)
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X on November 3, 1997, pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
- -----
on (date) pursuant to paragraph (a)(2) of rule 485.
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(continued on next page)
<PAGE> 2
If appropriate, check the following box:
this post-effective amendment designates a new effective date
- ----- for a previously filed post-effective amendment.
Registrant continues its election to register an indefinite number of its
shares of Common Stock pursuant to Rule 24f-2 under the Investment Company Act
of 1940 and accordingly, filed its Rule 24f-2 Notice (for AIM Blue Chip Fund)
for the fiscal year ended September 30, 1996, on November 27, 1996, and its
Rule 24f-2 Notice for the fiscal year ended October 31, 1996, on December 20,
1996.
<PAGE> 3
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A
ITEM NO. PROSPECTUS LOCATION
- -------- -------------------
<S> <C>
I. RETAIL CLASSES
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
PART A - PROSPECTUS
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Table of Fees and Expenses
Item 3. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Highlights
Item 4. General Description of Registrant . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page; Summary;
Investment Programs;
Organization of the Company; General Information
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . Management; General Information
Item 5a. Management's Discussion of Fund Performance . . . . . . . . . . . . . . . . . [included in annual report]
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Dividends,
Distributions and Tax Matters; Terms
and Conditions of Purchases of the
AIM Funds; Management - Distribution Plans;
Organization of the Company; General Information
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . How to Purchase Shares;
Terms and Conditions of
Purchase of the AIM Funds;
Exchange Privilege; Table of Fees and
Expenses; Management; Special Plans;
Determination of Net Asset Value
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . How to Redeem Shares
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
II. RETAIL CLASSES STATEMENT OF ADDITIONAL INFORMATION LOCATION
--------------------------------------------
AIM BLUE CHIP FUND
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
AIM AGGRESSIVE GROWTH FUND
AIM CAPITAL DEVELOPMENT FUND
PART B - STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
Item 12. General Information and History . . . . . . . . . . . . . . . . . . . . Introduction; General Information
About the Funds
Item 13. Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . Investment Objectives and
Policies; Portfolio Transactions
and Brokerage; Investment Restrictions
Item 14. Management of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management
Item 15. Control Persons and Principal
Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous Information
Item 16. Investment Advisory and
Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . Management; The Distribution Plans; The
Distributor; Miscellaneous Information
Item 17. Brokerage Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portfolio Transactions
and Brokerage
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . General Information
About the Funds
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . How to Purchase and Redeem Shares;
The Distributor; Net Asset Value Determination
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends, Distributions, and Tax Matters
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . The Distribution Plans; The Distributor
Item 22. Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED OCTOBER 9, 1997
[AIM
LOGO THE AIM FAMILY OF FUNDS--Registered Trademark--
APPEARS HERE]
RETAIL CLASS OF AIM EQUITY FUNDS, INC.
AIM CHARTER FUND
(Growth and Income)
AIM WEINGARTEN FUND
(Growth)
AIM CONSTELLATION FUND
(Capital Appreciation)
PROSPECTUS
NOVEMBER 3, 1997
This Prospectus contains information about the three mutual funds listed above
(individually referred to as a "Fund" or collectively as the "Funds"), which are
separate portfolios of AIM Equity Funds, Inc. (the "Company"), an open-ended,
series, management investment company.
AIM CHARTER FUND ("CHARTER") is a diversified portfolio which seeks to provide
growth of capital, with current income as a secondary objective. To accomplish
its objectives, the Fund invests primarily in dividend-paying common stocks
which have prospects for both growth of capital and dividend income.
AIM WEINGARTEN FUND ("WEINGARTEN") is a diversified portfolio which seeks to
provide growth of capital through investments primarily in common stocks of
leading U.S. companies considered by management to have strong earnings
momentum.
AIM CONSTELLATION FUND ("CONSTELLATION") is a diversified portfolio which seeks
to provide capital appreciation through investments in common stocks, with
emphasis on medium-sized and smaller emerging growth companies.
This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated
November 3, 1997, has been filed with the United States Securities and Exchange
Commission (the "SEC") and is incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to the
Company at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or by calling
(800) 347-4246. The SEC maintains a Web site at http://www.sec.gov that contains
the Statement of Additional Information, material incorporated by reference, and
other information regarding the Funds. Additional information about the Funds
may also be obtained from http://www.aimfunds.com.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUNDS' SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 5
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY.................................. 2 How to Purchase Shares................. A-1
THE FUNDS................................ 4 Terms and Conditions of Purchase of the
Table of Fees and Expenses............. 4 AIM Funds........................... A-2
Financial Highlights................... 6 Special Plans.......................... A-9
Performance............................ 11 Exchange Privilege..................... A-11
Investment Programs.................... 11 How to Redeem Shares................... A-13
Management............................. 15 Determination of Net Asset Value....... A-17
Organization of the Company............ 18 Dividends, Distributions and Tax
INVESTOR'S GUIDE TO THE AIM FAMILY OF Matters............................. A-18
FUNDS--Registered Trademark--.......... A-1 General Information.................... A-20
Introduction to The AIM Family of APPLICATION INSTRUCTIONS................. B-1
Funds............................... A-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUNDS
AIM Equity Funds, Inc. (the "Company") is a Maryland corporation organized as
an open-end, diversified, series, management investment company. Currently, the
Company offers six series comprising six separate investment portfolios, each of
which pursues unique investment objectives. This Prospectus relates to Class A,
Class B and Class C shares of CHARTER, CONSTELLATION and WEINGARTEN (the "Retail
Class" or "Retail Classes"). The Company also offers other classes of shares in
three other investment portfolios, AIM AGGRESSIVE GROWTH FUND ("AGGRESSIVE
GROWTH"), AIM BLUE CHIP FUND ("BLUE CHIP") and AIM CAPITAL DEVELOPMENT FUND
("CAPITAL DEVELOPMENT") each of which pursues unique investment objectives. All
such other Funds (except AGGRESSIVE GROWTH) offer multiple classes of shares to
different types of investors. The shares of the other Funds of the Company have
different sales charges and expenses, which may affect performance. To obtain
information about AGGRESSIVE GROWTH, BLUE CHIP and CAPITAL DEVELOPMENT call
(800) 347-4246. See "General Information."
The assets of each Fund are invested in a separate portfolio. The classes of
each Fund share a common investment objective and portfolio of investments. The
income from the investment portfolio of a Fund is allocated to each class of the
Fund based on the net assets of such class as of the close of business on the
previous business day, as adjusted for the current day's shareholder activity.
Each class bears proportionately those expenses, such as the advisory fee, that
are allocated to the Fund as a whole and bears separately certain expenses, such
as those associated with the distribution of the shares of such class.
Consequently, the amounts available for payment of dividends and the net asset
value per share of each class will vary. See "General Information."
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as each Fund's investment
advisor pursuant to a Master Investment Advisory Agreement. AIM, together with
its subsidiaries, advises or manages 55 investment company portfolios. As of
October 1, 1997, the total assets of the investment company portfolios advised
or managed by AIM or its subsidiaries were approximately $81.6 billion. Under
the Master Investment Advisory Agreement dated as of February 28, 1997 (the
"Master Advisory Agreement"), AIM receives a fee for its services based on each
Fund's average daily net assets. Under the Master Administrative Services
Agreement between the Company and AIM dated as of February 28, 1997 (the "Master
Administrative Services Agreement"), AIM may receive reimbursement of its costs
to perform certain accounting and other administrative services to the Funds.
Under a Transfer Agency and Service Agreement, A I M Fund Services, Inc.
("AFS"), AIM's wholly owned subsidiary and a registered transfer agent, receives
a fee for its provision of transfer agency, dividend distribution and
disbursement, and shareholder services to the Retail Classes of the Funds. Under
the Master Sub-Advisory Agreement dated as of February 28, 1997 (the "Master
Sub-Advisory Agreement") between AIM and A I M Capital Management, Inc. ("AIM
Capital"), a wholly owned subsidiary of AIM, AIM Capital serves as sub-advisor
for the Funds and receives compensation equal to 50% of the amount paid by the
Funds to AIM. The total advisory fees paid by each Fund are higher than those
paid by many other investment companies of all sizes and investment objectives.
However, the effective fee paid by each Fund at its respective current size is
lower than the fees paid by many other funds with similar investment objectives.
See "Management."
PURCHASING SHARES. Investors may select Class A, Class B or Class C shares of
the Funds which are offered by this Prospectus at an offering price that
reflects differing sales charges and expense levels. See "Terms and Conditions
of Purchase of the AIM Funds -- Sales Charges and Dealer Concessions."
CLASS A SHARES -- Shares are offered at net asset value plus any applicable
initial sales charge.
CLASS B SHARES -- Shares are offered at net asset value without an initial
sales charge, and are subject to a maximum contingent deferred sales charge of
5% on certain redemptions made within six years from the date such shares were
purchased. Class B shares automatically convert to Class A shares of the same
Fund eight years following the end of the calendar month in which a purchase was
made. Class B shares are subject to higher expenses than Class A shares.
2
<PAGE> 6
CLASS C SHARES -- Shares are offered at net asset value without an initial
sales charge and are subject to a contingent deferred sales charge of 1% on
certain redemptions made within one year from the date such shares were
purchased. Class C shares are subject to higher expenses than Class A shares.
Initial investments in any class of shares must be at least $500 and
additional investments must be at least $50. The minimum initial investment is
modified for investments through tax-qualified retirement plans and accounts
initially established with an Automatic Investment Plan. The distributor of the
Funds' shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares" and "Special Plans."
SUITABILITY FOR INVESTORS. An investor in Class A, Class B or Class C shares
of CHARTER, CONSTELLATION or WEINGARTEN should consider the method of purchasing
shares that is most beneficial given the amount of the purchase, the length of
time the shares are expected to be held, whether dividends will be paid in cash
or reinvested in additional shares of the Fund and other circumstances.
Investors should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution fees and any applicable
contingent deferred sales charges on Class B shares prior to conversion or Class
C shares would be less than the initial sales charge and accumulated
distribution fees on Class A shares purchased at the same time, and to what
extent such differential would be offset by the higher return on Class A shares.
To assist investors in making this determination, the table under the caption
"Table of Fees and Expenses" sets forth examples of the charges applicable to
each class of shares. Class A shares will normally be more beneficial than Class
B shares or Class C to the investor who qualifies for reduced initial sales
charges, as described above. Therefore, AIM Distributors will reject any order
for purchase of more than $250,000 for Class B shares.
EXCHANGE PRIVILEGE. The Funds are among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Funds may be exchanged for shares of other funds in The
AIM Family of Funds in the manner and subject to the policies and charges set
forth herein. See "Exchange Privilege."
REDEEMING SHARES. Class A shareholders of the Funds may redeem all or a
portion of their shares at the respective Fund's net asset value on any business
day, generally without charge. A contingent deferred sales charge of 1% may
apply to certain redemptions where a purchase of more than $1 million is made at
net asset value. See "How to Redeem Shares -- Contingent Deferred Sales Charge
Program for Large Purchases."
Class B shareholders of the Funds may redeem all or a portion of their shares
at net asset value on any business day, less a contingent deferred sales charge
for redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Class C shareholders of the Funds may redeem all or a portion of their shares
at net asset value on any business day, less a 1% contingent deferred sales
charge for redemptions made within one year from the date such shares were
purchased. See "How to Redeem Shares -- Multiple Distribution System."
DISTRIBUTIONS. The Funds currently declare and pay dividends from net
investment income, if any, on a quarterly basis with respect to CHARTER and on
an annual basis with respect to WEINGARTEN and CONSTELLATION. Each Fund makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of a Fund may be reinvested at current net asset value,
(without payment of a sales charge) in additional shares of such class of the
Fund or may be invested in shares of such class of the other funds in The AIM
Family of Funds. See "Dividends, Distributions and Tax Matters" and "Special
Plans."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, LA FAMILIA AIM DE
FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED SERVICE MARKS AND
AIMFUNDS.COM AND INVEST WITH DISCIPLINE ARE SERVICE MARKS OF A I M MANAGEMENT
GROUP INC.
3
<PAGE> 7
THE FUNDS
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in any of the Funds
understand the various costs that an investor will bear, both directly and
indirectly. The fees and expenses for Class A and Class B shares of CHARTER and
WEINGARTEN and the Class A shares of CONSTELLATION set forth in the table are
based on the actual average net assets of each Fund for its 1996 fiscal year.
The fees and expenses for the Class C shares of the Funds, and the Class B
shares of CONSTELLATION set forth in the table are based on the estimated
expenses for the current fiscal year. The rules of the SEC require that the
maximum sales charge be reflected in the table, even though certain investors
may qualify for reduced sales charges. See "How to Purchase Shares."
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchase of shares (as a
percentage of offering
price)...................... 5.50% None None 5.50% None None 5.50% None None
Maximum sales load imposed on
reinvested dividends and
distributions............... None None None None None None None None None
Deferred sales load (as a
percentage of original
purchase price or redemption
proceeds, whichever is
lower)...................... None1 5.00% 1.00% None1 5.00% 1.00% None1 5.00% 1.00%
Redemption fees................ None None None None None None None None None
Exchange fee................... None None None None None None None None None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fee (after fee
waiver)..................... .63%* .63%* .63%* .61%* .61%* .61%* .61%* .61%* .61%*
12b-1 fees(2).................. .30% 1.00% 1.00% .30% 1.00% 1.00% .30% 1.00% 1.00%
Other expenses:
Transfer agent fees and
costs..................... .15% .27% .27% .18% .30% .30% .19% .30% .30%
Other....................... .04% .04% .04% .03% .04% .04% .04% .04% .04%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total other expenses........ .19% .31% .31% .21% .34% .34% .23% .34% .34%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund operating
expenses.................... 1.12% 1.94% 1.94% 1.12% 1.95% 1.95% 1.14% 1.95% 1.95%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Purchases of $1 million or more are not subject to an initial sales
charge. However, a contingent deferred sales charge of 1% applies to
certain redemptions made within 18 months from the date such shares were
purchased. See the Investor's Guide, under the caption "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases."
(2) As a result of 12b-1 fees, a long-term shareholder may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
the rules of the National Association of Securities Dealers, Inc. Given
the Rule 12b-1 fee of the Fund, however, it is estimated that it would
take a substantial number of years for a shareholder to exceed such
maximum front-end sales charges.
* CHARTER'S, WEINGARTEN'S and CONSTELLATION'S investment advisor is currently
waiving a portion of its fees. Had there been no fee waivers during the year,
management fees would have been 0.64%, 0.64% and 0.63%, respectively, of
average net assets. There can be no assurance that future waivers of fees (if
any) will not vary from the figures reflected in the table.
4
<PAGE> 8
EXAMPLES. An investor would pay the following expenses on a $1,000 investment in
Class A shares of the Funds, assuming (a) a 5% annual return and (b) redemption
at the end of each time period:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
1 year.......................................... $ 66 $ 66 $ 66
3 years......................................... $ 89 $ 89 $ 89
5 years......................................... $113 $113 $114
10 years......................................... $184 $184 $186
</TABLE>
The above examples assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of $1 million or more, which are made at
net asset value and subject to contingent deferred sales charge for 18 months
following the date such shares were purchased.
An investor would pay the following expenses on a $1,000 investment in Class B
shares of the Funds, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
1 year...................................... $ 70 $ 70 $ 70
3 years..................................... $ 91 $ 91 $ 91
5 years..................................... $125 $125 --
10 years..................................... $205 $206 --
</TABLE>
An investor would pay the following expenses on the same $1,000 investment in
Class B shares of the Funds, assuming no redemption at the end of each time
period:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
1 year...................................... $ 20 $ 20 $ 20
3 years..................................... $ 61 $ 61 $ 61
5 years..................................... $105 $105 --
10 years..................................... $205 $206 --
</TABLE>
An investor would pay the following expenses on a $1,000 investment in Class C
shares of the Funds, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
1 year...................................... $30 $30 $30
3 years..................................... $61 $61 $61
</TABLE>
An investor would pay the following expenses on the same $1,000 investment in
Class C shares of the Funds, assuming no redemption at the end of each time
period:
<TABLE>
<CAPTION>
CHARTER WEINGARTEN CONSTELLATION
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
1 year...................................... $20 $20 $20
3 years..................................... $61 $61 $61
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF A PARTICULAR
FUND'S ACTUAL OR FUTURE EXPENSES, WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN.
IN ADDITION, WHILE THE EXAMPLES ASSUME A 5% ANNUAL RETURN, A FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN THAT IS GREATER OR LESS
THAN 5%. THE EXAMPLES ASSUME REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS AND
THAT THE PERCENTAGE AMOUNTS FOR TOTAL FUND OPERATING EXPENSES REMAIN THE SAME
FOR EACH YEAR.
5
<PAGE> 9
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FINANCIAL HIGHLIGHTS
Shown below for the periods indicated are per share data, ratios and
supplemental data (collectively, "data") for the Class A and Class B shares of
each of the Funds. The data for Class A and Class B shares for the six-month
period ended April 30, 1997, is unaudited. The data with respect to Class A
shares of CHARTER for the fiscal years ended October 31, 1996, 1995 and 1994,
has been audited by KPMG Peat Marwick LLP, independent auditors, whose
unqualified report thereon appears in the Statement of Additional Information.
The data with respect to Class A shares of CHARTER for the seven years ended
October 31, 1993, has been audited by Tait, Weller & Baker, independent
auditors. The data with respect to Class A shares of WEINGARTEN and
CONSTELLATION for each of the years in the eight year period ended October 31,
1996, the ten months ended October 31, 1988 and the year ended December 31, 1987
has been audited by KPMG Peat Marwick LLP, independent auditors, whose
unqualified report thereon appears in the Statement of Additional Information.
The data with respect to Class B shares of CHARTER and WEINGARTEN for the period
June 26, 1995 through October 31, 1995 and the fiscal year ended October 31,
1996 has been audited by KPMG Peat Marwick LLP, independent auditors, whose
unqualified report thereon appears in the Statement of Additional Information.
Class B share of CONSTELLATION commenced operations on November 3, 1997. Class C
shares of the Funds commenced operations on August 4, 1997.
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
AIM CHARTER FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 11.19 $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55
Income from investment
operations:
Net investment income.......... 0.06 0.19 0.15 0.21 0.17 0.18 0.18
Net gains (losses) on
securities (both realized and
unrealized).................. 0.93 1.43 2.11 (0.45) 1.22 0.16 2.15
---------- ---------- ---------- ---------- ---------- ---------- --------
Total from investment
operations................... 0.99 1.62 2.26 (0.24) 1.39 0.34 2.33
---------- ---------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment
income....................... (0.08) (0.16) (0.20) (0.16) (0.29) (0.17) (0.15)
Distributions from capital
gains........................ (0.63) (0.90) (0.33) (0.16) -- (0.23) (0.31)
---------- ---------- ---------- ---------- ---------- ---------- --------
Total distributions............ (0.71) (1.06) (0.53) (0.32) (0.29) (0.40) (0.46)
---------- ---------- ---------- ---------- ---------- ---------- --------
Net asset value, end of
period......................... $ 11.47 $ 11.19 $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42
========== ========== ========== ========== ========== ========== ========
Total return(a)................. 9.31% 16.70% 27.03% (2.55)% 16.92% 4.17% 37.65%
========== ========== ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)..................... $2,948,273 $2,647,208 $1,974,417 $1,579,074 $1,690,482 $1,256,151 $443,546
========== ========== ========== ========== ========== ========== ========
Ratio of expenses to average
net assets................... 1.10%(b)(c) 1.12% 1.17% 1.17% 1.17% 1.17% 1.29%
========== ========== ========== ========== ========== ========== ========
Ratio of net investment income
to average net assets........ 0.98%(b) 1.81% 1.55% 2.32% 1.89% 2.14% 2.14%
========== ========== ========== ========== ========== ========== ========
Portfolio turnover rate........ 95% 164% 161% 126% 144% 95% 144%
========== ========== ========== ========== ========== ========== ========
Average broker commission
rate(d)...................... $ 0.0623 $ 0.0638 N/A N/A N/A N/A N/A
========== ========== ========== ========== ========== ========== ========
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------
1990 1989 1988 1987
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 6.97 $ 5.40 $ 6.61 $ 8.18
Income from investment
operations:
Net investment income.......... 0.18 0.21 0.15 0.09
Net gains (losses) on
securities (both realized and
unrealized).................. 0.08 1.55 0.16 0.35
-------- ------- ------- -------
Total from investment
operations................... 0.26 1.76 0.31 0.44
-------- ------- ------- -------
Less distributions:
Dividends from net investment
income....................... (0.26) (0.19) (0.12) (0.14)
Distributions from capital
gains........................ (0.42) -- (1.40) (1.87)
-------- ------- ------- -------
Total distributions............ (0.68) (0.19) (1.52) (2.01)
-------- ------- ------- -------
Net asset value, end of
period......................... $ 6.55 $ 6.97 $ 5.40 $ 6.61
======== ======= ======= =======
Total return(a)................. 3.86% 33.68% 5.90% 6.72%
======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)..................... $102,499 $70,997 $65,799 $82,756
======== ======= ======= =======
Ratio of expenses to average
net assets................... 1.35% 1.35% 1.46% 1.15%
======== ======= ======= =======
Ratio of net investment income
to average net assets........ 2.51% 3.73% 2.83% 1.57%
======== ======= ======= =======
Portfolio turnover rate........ 215% 131% 247% 225%
======== ======= ======= =======
Average broker commission
rate(d)...................... N/A N/A N/A N/A
======== ======= ======= =======
</TABLE>
- ---------------
(a) Does not deduct sales charges and are not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $2,885,632,617.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been 1.09%.
(d) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
6
<PAGE> 10
AIM CHARTER FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
PERIOD
JUNE 26,
YEAR 1995
ENDED THROUGH
APRIL 30 OCTOBER 31, OCTOBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 11.18 $ 10.62 $ 9.81
-------- ------- -------
Income from investment operations:
Net investment income..................................... 0.01 0.10 0.03
Net gains (losses) on securities (both realized and
unrealized)............................................. 0.93 1.45 0.80
-------- ------- -------
Total from investment operations.......................... 0.94 1.55 0.83
-------- ------- -------
Less distributions:
Dividends from net investment income...................... (0.04) (0.09) (0.02)
Distributions from capital gains.......................... (0.63) (0.90) --
-------- ------- -------
Total distributions....................................... (0.67) (0.99) (0.02)
-------- ------- -------
Net asset value, end of period.............................. $ 11.45 $ 11.18 $ 10.62
======== ======= =======
Total return(a)............................................. 8.87% 15.90% 8.48%
======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).................. $752,281 $15,672 $67,592
======== ======= =======
Ratio of expenses to average net assets................... 1.85%(b)(c) 1.94% 1.98%(d)
======== ======= =======
Ratio of net investment income to average net assets...... 0.22%(b) 0.99% 0.74%(d)
======== ======= =======
Portfolio turnover rate................................... 95% 164% 161%
======== ======= =======
Average broker commission rate(e)......................... $ 0.0623 $0.0638 N/A
======== ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $646,072,131.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have remained the same.
(d) Annualized.
(e) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
7
<PAGE> 11
AIM WEINGARTEN FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 20.19 $ 20.33 $ 17.82 $ 17.62 $ 16.68 $ 15.76 $ 11.15
Income from investment operations:
Net investment income............. -- 0.06 -- 0.07 0.10 0.10 0.11
Net gains (losses) on securities
(both realized and
unrealized)..................... 1.04 2.51 4.36 0.57 0.93 0.98 4.80
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations...................... 1.04 2.57 4.36 0.64 1.03 1.08 4.91
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment
income.......................... (0.06) -- (0.07) (0.11) (0.09) (0.07) (0.09)
Distributions from net realized
capital gains................... (2.24) (2.71) (1.78) (0.33) -- (0.09) (0.21)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions............... (2.30) (2.71) (1.85) (0.44) (0.09) (0.16) (0.30)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period..... $ 18.93 $ 20.19 $ 20.33 $ 17.82 $ 17.62 $ 16.68 $ 15.76
========== ========== ========== ========== ========== ========== ==========
Total return(c).................... 5.67% 14.81% 28.20% 3.76% 6.17% 6.85% 44.88%
========== ========== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................ $5,014,448 $4,977,493 $4,564,730 $3,965,858 $4,999,983 $5,198,835 $2,534,331
========== ========== ========== ========== ========== ========== ==========
Ratio of expenses to average net
assets(d)....................... 1.11%(e)(f) 1.12% 1.17% 1.21% 1.13% 1.13% 1.18%
========== ========== ========== ========== ========== ========== ==========
Ratio of net investment income to
average net assets(h)........... 0.03%(e) 0.33% (0.02)% 0.45% 0.62% 0.60% 0.72%
========== ========== ========== ========== ========== ========== ==========
Portfolio turnover rate........... 68% 159% 139% 136% 109% 37% 46%
========== ========== ========== ========== ========== ========== ==========
Average brokerage commission
rate(i)......................... $ 0.0622 $ 0.0615 N/A N/A N/A N/A N/A
========== ========== ========== ========== ========== ========== ==========
Borrowings for the period:
Amount of debt outstanding at end
of period....................... -- -- -- -- -- -- --
Average amount of debt outstanding
during the period(j)............ -- -- $ 593,789 -- -- -- --
Average number of shares
outstanding during the period
(000s omitted)(j)............... 264,280 248,189 229,272 249,351 314,490 246,273 102,353
Average amount of debt per share
during the period............... -- -- $ 0.0026 -- -- -- --
<CAPTION>
YEAR ENDED OCTOBER 31, DECEMBER
----------------------------------- 31,
1990 1989 1988(a) 1987(b)
-------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 12.32 $ 9.23 $ 8.36 $ 8.82
Income from investment operations:
Net investment income............. 0.09 0.10 0.07 0.07
Net gains (losses) on securities
(both realized and
unrealized)..................... (0.56) 3.10 0.80 0.83
-------- ---------- ---------- --------
Total from investment
operations...................... (0.47) 3.20 0.87 0.90
-------- ---------- ---------- --------
Less distributions:
Dividends from net investment
income.......................... (0.06) (0.11) -- (0.09)
Distributions from net realized
capital gains................... (0.64) -- -- (1.27)
-------- ---------- ---------- --------
Total distributions............... (0.70) (0.11) -- (1.36)
-------- ---------- ---------- --------
Net asset value, end of period..... $ 11.15 $ 12.32 $ 9.23 $ 8.36
======== ========== ========== ========
Total return(c).................... (4.03)% 35.13% 10.41% 9.75%
======== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................ $632,522 $ 393,320 $ 297,284 $286,453
======== ========== ========== ========
Ratio of expenses to average net
assets(d)....................... 1.25% 1.19% 1.08%(g) 0.95%
======== ========== ========== ========
Ratio of net investment income to
average net assets(h)........... 0.75% 0.96% 0.90%(g) 0.66%
======== ========== ========== ========
Portfolio turnover rate........... 79% 87% 93% 108%
======== ========== ========== ========
Average brokerage commission
rate(i)......................... N/A N/A N/A N/A
======== ========== ========== ========
Borrowings for the period:
Amount of debt outstanding at end
of period....................... -- $3,781,000 -- $355,000
Average amount of debt outstanding
during the period(j)............ $485,359 $1,082,551 $ 228,587 $509,259
Average number of shares
outstanding during the period
(000s omitted)(j)............... 44,770 31,275 33,031 25,825
Average amount of debt per share
during the period............... $ 0.011 $ 0.035 $ 0.007 $ 0.020
</TABLE>
- ---------------
(a) The Fund changed investment advisors on September 30, 1988.
(b) Per share information has been restated to reflect a 2 for 1 stock split,
effected in the form of a dividend, on September 29, 1987.
(c) Does not deduct sales charges and, for periods less than one year, total
returns are not annualized.
(d) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.14%(annualized), 1.15%, 1.19%, 1.24%, 1.17% and 1.15% for the periods
1997-1992, respectively.
(e) Ratios are annualized and based on average net assets of $5,167,944,740.
(f) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
(g) Annualized.
(h) After waiver of fees and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to waiver of fees and/or expense
reimbursements were 0.00% (annualized), 0.30%, (0.04)%, 0.42%, 0.58% and
0.58% for the periods 1997-1992, respectively.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(j) Averages computed on a daily basis.
8
<PAGE> 12
AIM WEINGARTEN FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
PERIOD
JUNE 26,
YEAR 1995
ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 19.98 $ 20.28 $ 18.56
Income from investment operations:
Net investment income (loss)............................... (0.05) (0.05)(a) (0.03)
Net gains (losses) on securities (both realized and
unrealized).............................................. 1.00 2.46 1.75
-------- -------- -------
Total from investment operations........................... 0.95 2.41 1.72
-------- -------- -------
Less distributions:
Distributions from net realized capital gains.............. (2.24) (2.71) --
-------- -------- -------
Net asset value, end of period............................. $ 18.69 $ 19.98 $ 20.28
======== ======== =======
Total return(b)............................................. 5.23% 13.95% 9.27%
======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)................... $351,020 $267,459 $42,238
======== ======== =======
Ratio of expenses to average net assets.................... 1.88%(c)(d)(e) 1.95%(e) 1.91%(e)(f)
======== ======== =======
Ratio of net investment income (loss) to average net
assets................................................... (0.74)%(c)(g) (0.50)%(g) (0.76)%(f)(g)
======== ======== =======
Portfolio turnover rate.................................... 68% 159% 139%
======== ======== =======
Average broker commission rate(h).......................... $ 0.0622 $ 0.0615 N/A
======== ======== =======
Borrowings for the period:
Amount of debt outstanding at end of period (000s
omitted)................................................. -- -- --
Average amount of debt outstanding during the period (000s
omitted)(i).............................................. -- -- $ 3
Average number of shares outstanding during the period
(000s omitted)(i)........................................ 16,619 7,956 1,036
Average amount of debt per share during the period......... -- -- $0.0029
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $320,508,971.
(d) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
(e) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.89% (annualized), 1.98% and 1.94% (annualized) for the periods
1997-1995, respectively.
(f) Annualized.
(g) After waiver of fees and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to waiver of fees and/or expense
reimbursements were (0.75)% (annualized), (0.53)% and (0.79)% (annualized)
for the periods 1997-1995, respectively.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(i) Averages computed on a daily basis.
9
<PAGE> 13
AIM CONSTELLATION FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ----------- ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72 $ 6.59
Income from investment operations:
Net investment income (loss)...... (0.05) (0.06) (0.05) (0.02) (0.04) (0.04) (0.03)
Net gains (losses) on securities
(both realized and
unrealized)..................... (0.54) 2.60 5.95 1.29 3.83 1.76 5.16
---------- ----------- ---------- ---------- ---------- ------- ---------
Total from investment
operations...................... (0.59) 2.54 5.90 1.27 3.79 1.72 5.13
---------- ----------- ---------- ---------- ---------- ------- ---------
Less distributions:
Dividends from net investment
income.......................... -- -- -- -- -- -- --
Distributions from capital
gains........................... (0.89) (0.75) (0.52) -- -- (0.19) --
---------- ----------- ---------- ---------- ---------- ------- ---------
Total distributions............... (0.89) (0.75) (0.52) -- -- (0.19) --
---------- ----------- ---------- ---------- ---------- ------- ---------
Net asset value, end of period..... $ 24.00 $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72
========== =========== ========== ========== ========== ======= =========
Total return(c).................... (2.41)% 11.26% 33.43% 7.45% 28.60% 14.82% 77.85%
========== =========== ========== ========== ========== ======= =========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................ $11,505,286 $11,255,506 $7,000,350 $3,726,029 $2,756,497 $966,472 $ 342,835
========== =========== ========== ========== ========== ======= =========
Ratio of expenses to average net
assets(d)....................... 1.12%(e)(f) 1.14% 1.16% 1.20% 1.22% 1.21% 1.35%
========== =========== ========== ========== ========== ======= =========
Ratio of net investment income
(loss) to average net
assets(h)....................... (0.37)%(e) (0.27)% (0.32)% (0.15)% (0.31)% (0.42)% (0.41)%
========== =========== ========== ========== ========== ======= =========
Portfolio turnover rate........... 33% 58% 45% 79% 70% 62% 109%
========== =========== ========== ========== ========== ======= =========
Average broker commission
rate(i)......................... $ 0.0588 $ 0.0596 N/A N/A N/A N/A N/A
========== =========== ========== ========== ========== ======= =========
Borrowings for the period:
Amount of debt outstanding at end
of period (000s omitted)........ -- -- -- -- -- -- --
Average amount of debt outstanding
during the period(j)............ -- -- -- -- -- -- --
Average number of shares
outstanding during the period
(000s omitted)(j)............... 468,998 381,030 244,731 182,897 124,101 55,902 21,205
Average amount of debt per share
during the period............... -- -- -- -- -- -- --
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------- DECEMBER 31,
1990 1989 1988(a) 1987(b)
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 9.40 $ 7.34 $ 6.35 $ 10.58
Income from investment operations:
Net investment income (loss)...... (0.03) 0.01 (0.03) (0.05)
Net gains (losses) on securities
(both realized and
unrealized)..................... (1.23) 2.46 1.02 0.36
--------- --------- --------- ----------
Total from investment
operations...................... (1.26) 2.47 0.99 0.31
--------- --------- --------- ----------
Less distributions:
Dividends from net investment
income.......................... (0.01) -- -- --
Distributions from capital
gains........................... (1.54) (0.41) -- (4.54)
--------- --------- --------- ----------
Total distributions............... (1.55) (0.41) -- (4.54)
--------- --------- --------- ----------
Net asset value, end of period..... $ 6.59 $ 9.40 $ 7.34 $ 6.35
========= ========= ========= ==========
Total return(c).................... (16.17)% 35.50% 15.59% 2.85%
========= ========= ========= ==========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................ $ 83,304 $ 74,731 $ 78,272 $ 71,418
========= ========= ========= ==========
Ratio of expenses to average net
assets(d)....................... 1.37% 1.36% 1.30(g) 1.11%
========= ========= ========= ==========
Ratio of net investment income
(loss) to average net
assets(h)....................... (0.44)% 0.07% (0.57)%(g) (0.41)%
========= ========= ========= ==========
Portfolio turnover rate........... 192% 149% 131% 135%
========= ========= ========= ==========
Average broker commission
rate(i)......................... N/A N/A N/A N/A
========= ========= ========= ==========
Borrowings for the period:
Amount of debt outstanding at end
of period (000s omitted)........ -- $ 9,610 $ 5,266 $ 109
Average amount of debt outstanding
during the period(j)............ $2,344,356 $2,608,721 $2,147,733 $2,365,545
Average number of shares
outstanding during the period
(000s omitted)(j)............... 11,397 10,050 10,845 9,668
Average amount of debt per share
during the period............... $ 0.21 $ 0.26 $ 0.20 $ 0.24
</TABLE>
- ---------------
(a) The Fund changed investment advisors on September 30, 1988.
(b) Per share information has been restated to reflect a 2 for 1 stock split,
effected in the form of a dividend, on June 19, 1987.
(c) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(d) Ratios of expenses prior to waiver of advisory fees are 1.14% (annualized),
1.16%, 1.18% and 1.21% for the years 1997-1994, respectively.
(e) Ratios are annualized and based on average net assets of $11,958,901,203.
(f) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have remained
the same.
(g) Annualized.
(h) Ratios of net investment income (loss) prior to waiver of advisory fees are
(0.39)% (annualized), (0.29)%, (0.34)% and (0.16)% for the years 1997-1994,
respectively.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(j) Averages computed on a daily basis.
10
<PAGE> 14
- --------------------------------------------------------------------------------
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield or
total return. All advertisements of the Funds will disclose the maximum sales
charge (including deferred sales charge) to which investments in shares of the
Funds may be subject. If any advertised performance data does not reflect the
maximum sales charge (if any), such advertisement will disclose that the sales
charge has not been deducted in computing the performance data, and that, if
reflected, the maximum sales charge would reduce the performance quoted. See the
Statement of Additional Information for further details concerning performance
comparisons used in advertisements by the Funds. Further information regarding
each Fund's performance is contained in that Fund's annual report to
shareholders which is available upon request and without charge.
Standardized total return for Class A shares of a Fund reflects the deduction
of the maximum initial sales charge at the time of purchase. Standardized total
return for Class B shares of a Fund reflects the deduction of the maximum
applicable contingent deferred sales charge on a redemption of shares held for
the period. Standardized total return for Class C shares of a Fund reflects the
deduction of a 1% contingent deferred sales charge, if applicable, on a
redemption of shares held for the period.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested and that all charges and expenses are deducted. A cumulative
total return reflects a Fund's performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the Fund's
performance had been constant over the entire period. BECAUSE AVERAGE ANNUAL
RETURNS TEND TO EVEN OUT VARIATIONS IN A FUND'S RETURN, INVESTORS SHOULD
RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To
illustrate the components of overall performance, a Fund may separate its
cumulative and average annual returns into income results and capital gain or
loss.
Yield is computed in accordance with a standardized formula described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield is a function of the
type and quality of a Fund's investments, the Fund's maturity and the Fund's
operating expense ratio.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of any Fund. Such a practice will
have the effect of increasing that Fund's yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily indicative of future results. A Fund's performance is a function of
its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAMS
The Company has six series, each of which is a separate investment portfolio.
Three of the investment portfolios, CHARTER, WEINGARTEN and CONSTELLATION are
discussed herein. Each of the Funds has its own investment objectives and
investment program. There can, of course, be no assurance that any Fund will in
fact achieve its objectives since all investments are inherently subject to
market risks. The Board of Directors of the Company reserves the right to change
any of the investment policies, strategies or practices of any of the Funds, as
described in this Prospectus and in the Statement of Additional Information,
without shareholder approval, except in those instances where shareholder
approval is expressly required.
AIM CHARTER FUND. The primary investment objective of CHARTER is to seek
growth of capital, with current income as a secondary objective. Although the
amount of CHARTER'S current income will vary from time to time, it is
anticipated that the current income realized by CHARTER will generally be
greater than that realized by mutual funds whose sole objective is growth of
capital. CHARTER seeks to achieve its objective by generally investing at least
65% of its net assets in stocks of companies believed by management to have the
potential for above average growth in revenues and earnings. CHARTER generally
will also invest at least 80% of its net assets in securities which pay income
to CHARTER.
AIM WEINGARTEN FUND. The investment objective of WEINGARTEN is to seek growth
of capital principally through investment in common stocks of seasoned and
better capitalized companies. Current income will not be an important criterion
of investment selection, and any such income should be considered incidental. It
is anticipated that common stocks will be the principal form of investment by
the Fund. WEINGARTEN'S portfolio is primarily comprised of securities of two
basic categories of companies: (a) "core" companies, which Fund management
considers to have experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding future growth, and (b)
"earnings acceleration" companies which Fund management believes are currently
enjoying a dramatic increase in profits. See "Investment Objectives and
Policies" in the Statement of Additional Information.
AIM CONSTELLATION FUND. The investment objective of CONSTELLATION is to seek
capital appreciation. CONSTELLATION aggressively seeks to increase shareholders'
capital by investing principally in common stocks, with emphasis on medium-sized
and
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<PAGE> 15
smaller emerging growth companies. Management of the Fund will be particularly
interested in companies that are likely to benefit from new or innovative
products, services or processes that should enhance such companies' prospects
for future growth in earnings. As a result of this policy, the market prices of
many of the securities purchased and held by the Fund may fluctuate widely. Any
income received from securities held by the Fund will be incidental, and an
investor should not consider a purchase of shares of the Fund as equivalent to a
complete investment program. CONSTELLATION'S portfolio is primarily comprised of
securities of two basic categories of companies: (a) "core" companies, which
Fund management considers to have experienced above-average and consistent long-
term growth in earnings and to have excellent prospects for outstanding future
growth, and (b) "earnings acceleration" companies which Fund management believes
are currently enjoying a dramatic increase in profits. See "Certain Investment
Strategies and Policies" below and "Investment Objectives and Policies" in the
Statement of Additional Information.
There can, of course, be no assurance that the Funds will in fact achieve
their objectives since all investments are inherently subject to market risks.
The Board of Directors of the Company reserves the right to change any of the
investment policies, strategies or practices of the Funds, as described in this
Prospectus and in the Statement of Additional Information, without shareholder
approval, except in those instances where shareholder approval is expressly
required.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of their respective
objectives and policies, the Funds may employ one or more of the following
strategies in order to enhance investment results:
TEMPORARY DEFENSIVE MEASURES. A portion of each Fund's assets may be held,
from time to time, in cash, repurchase agreements, commercial paper, U.S.
government obligations, taxable municipal securities, investment grade (high
quality) corporate bonds or other debt securities, when such positions are
deemed advisable in light of economic or market conditions or for daily cash
management purposes. In addition, each of the Funds may invest, for temporary
defensive purposes, all or a substantial portion of their assets in the
securities described above. To the extent that a Fund invests to a significant
degree in these instruments, its ability to achieve its investment objective may
be adversely affected.
REPURCHASE AGREEMENTS. Each of the Funds may enter into repurchase agreements.
A repurchase agreement is an instrument under which the Fund acquires ownership
of a debt security and the seller agrees, at the time of the sale, to repurchase
the obligation at a mutually agreed upon time and price, thereby determining the
yield during the Fund's holding period. With regard to repurchase transactions,
in the event of a bankruptcy or other default of a seller of a repurchase
agreement, a Fund could experience both delays in liquidating the underlying
securities and losses, including: (a) a possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto; (b) possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.
U.S. GOVERNMENT SECURITIES. CHARTER may invest in U.S. Government securities,
including, but not limited to, U.S. Treasury obligations, such as Treasury Bills
(maturities of one year or less) or Treasury Notes (maturities of less than
three years). The market value of U.S. Government securities will fluctuate with
changes in interest rate levels. Thus, if interest rates increase from the time
the security was purchased, the market value of the security will decrease.
Conversely, if interest rates decrease, the market value of the security will
increase.
STOCK INDEX FUTURES CONTRACTS. Each of the Funds may purchase and sell stock
index futures contracts. A stock index futures contract is an agreement pursuant
to which two parties agree to take or make delivery of an amount of cash equal
to a specified dollar amount times the difference between the stock index value
at the close of the last trading day of the contract and the price at which the
futures contract is originally struck. Each of the Funds will only enter into
domestic stock index futures. No physical delivery of the underlying stocks in
the index is made. Each of the Funds may purchase and sell futures contracts in
order to hedge the value of its portfolio against changes in market conditions.
Generally, a Fund may elect to close a position in a futures contract by taking
an opposite position which will operate to terminate such Fund's position in the
futures contract. See the Statement of Additional Information for a description
of the Funds' investments in futures contracts, including certain related risks.
The Funds may each purchase or sell futures contracts if, immediately
thereafter, the sum of the amount of margin deposits and premiums on open
positions with respect to futures contracts would not exceed 5% of the market
value of a Fund's total assets.
There are risks associated with investments in stock index futures contracts.
During certain market conditions, purchases and sales of futures contracts may
not completely offset a decline or rise in the value of a Fund's portfolio. In
the futures markets, it may not always be possible to execute a buy or sell
order at the desired price, or to close out an open position due to market
conditions, limits on open positions and/or daily price fluctuations. Changes in
the market value of a Fund's portfolio may differ substantially from the changes
anticipated by the Fund when hedged positions were established, and
unanticipated price movements in a futures contract may result in a loss
substantially greater than a Fund's initial investment in such contract.
Successful use of futures contracts is dependent upon AIM's ability to predict
correctly movements in the direction of the applicable markets. No assurance can
be given that AIM's judgment in this respect will be correct.
WRITING COVERED CALL OPTION AND PURCHASING PUT OPTION CONTRACTS. CHARTER,
WEINGARTEN and CONSTELLATION may write (sell) covered call options. The purpose
of put and covered call option transactions is to hedge against changes in the
market value of a Fund's portfolio securities caused by fluctuating interest
rates, fluctuating currency exchange rates and changing market conditions, and
to close out or offset existing positions in such options or futures contracts
as described below. None of the Funds will engage in such transactions for
speculative purposes.
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<PAGE> 16
CHARTER, CONSTELLATION and WEINGARTEN may each write (sell) call options, but
only if such options are covered and remain covered as long as the Fund is
obligated as a writer of the option (seller). Writing a call option obligates a
Fund to sell or deliver the option's underlying security in return for the
strike price upon exercise of the option. A call option is "covered" if a Fund
owns or has the right to acquire the underlying security subject to the call. If
a "covered" call option expires unexercised, the writer realizes a gain in the
amount of the premium received. If the covered call option is exercised, the
writer realizes either a gain or loss from the sale or purchase of the
underlying security with the proceeds to the writer being increased by the
amount of the premium. Prior to its expiration, a call option may be closed out
by means of a purchase of an identical option. Any gain or loss from such
transaction will depend on whether the amount paid is more or less than the
premium received for the option plus related transaction costs.
CHARTER and WEINGARTEN may also purchase puts. By purchasing a put option, a
Fund obtains the right (but not the obligation) to sell the option's underlying
security at a fixed strike price.
Options are subject to certain risks, including the risk of imperfect
correlation between the option and a Fund's other investments and the risk that
there might not be a liquid secondary market for the option when the Fund seeks
to hedge against adverse market movements. In general, options whose strike
prices are close to their underlying securities' current values will have the
highest trading value, while options whose strike prices are further away may be
less liquid. The liquidity of options may also be affected if options exchanges
impose trading halts, particularly when markets are volatile.
The investment policies of CHARTER, WEINGARTEN and CONSTELLATION permit the
writing of covered call options on securities comprising no more than 25% of the
value of each Fund's net assets. Each Fund's policies with respect to the
writing of call options or the purchase of put options may be changed by the
Company's Board of Directors, without shareholder approval.
ILLIQUID SECURITIES. None of the Funds will invest more than 15% of their net
assets in illiquid securities, including repurchase agreements with maturities
in excess of seven days.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. Each Fund may
purchase securities on a "when-issued" basis, that is, delivery of and payment
for the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). Each Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. A Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. For further information regarding
securities issued on a when-issued or delayed delivery basis see the caption
"Investment Objectives and Policies" in the Statement of Additional Information.
RULE 144A SECURITIES. Each of the Funds may invest in securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). These securities are sometimes
referred to as private placements. Although securities which may be resold only
to "qualified institutional buyers" in accordance with the provisions of Rule
144A under the 1933 Act are unregistered securities, the Funds may each purchase
Rule 144A securities without regard to the limitation on investments in illiquid
securities described above under "Illiquid Securities," provided that a
determination is made that such securities have a readily available trading
market. AIM will determine the liquidity of Rule 144A securities under the
supervision of the Company's Board of Directors. The liquidity of Rule 144A
securities will be monitored by AIM and, if as a result of changed conditions,
it is determined that a Rule 144A security is no longer liquid, a Fund's
holdings of illiquid securities will be reviewed to determine what, if any,
action is required to assure that the Fund does not exceed its applicable
percentage limitation for investments in illiquid securities.
INVESTMENT IN UNSEASONED ISSUERS. Charter may purchase securities in
unseasoned issuers. Securities in such issuers may provide opportunities for
long term capital growth. Greater risks are associated with investments in
securities of unseasoned issuers than in the securities of more established
companies because unseasoned issuers have only a brief operating history and may
have more limited markets and financial resources.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each of the Funds may invest in
other investment companies to the extent permitted by the Investment Company Act
of 1940, and rules and regulations thereunder, and, if applicable, exemptive
orders granted by the SEC.
FOREIGN SECURITIES. To the extent consistent with their respective investment
objectives, each of the Funds may invest in foreign securities. It is not
anticipated that such foreign securities, which may be payable in foreign
currencies and traded abroad, will constitute more than 20% of the value of each
Fund's respective total assets. For purposes of computing such limitation,
American Depository Receipts, European Depository Receipts and other securities
representing underlying securities of foreign issuers are treated as foreign
securities. To the extent a Fund invests in securities denominated in foreign
currencies, each Fund bears the risk of changes in the exchange rates between
U.S. currency and the foreign currency, as well as the availability and status
of foreign securities markets. These securities will be marketable equity
securities (including common and preferred stock, depositary receipts for stock
and fixed income or equity securities exchangeable for or convertible into
stock) of foreign companies which, with their predecessors, have been in
continuous operation for three years or more and which generally are listed on a
recognized foreign securities exchange or traded in a foreign over-the-counter
market. Each of the Funds may also invest in foreign securities listed on
recognized U.S. securities exchanges or traded in the U.S. over-the-counter
market. Such foreign securities may be issued by foreign
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<PAGE> 17
companies located in developing countries in various regions of the world. A
"developing country" is a country in the initial stages of its industrial cycle.
As compared to investment in the securities markets of developed countries,
investment in the securities markets of developing countries involves exposure
to markets that may have substantially less trading volume and greater price
volatility, economic structures that are less diverse and mature, and political
systems that may be less stable. For a discussion of the risks pertaining to
investments in foreign obligations, see "Risk Factors Regarding Foreign
Securities" below.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by a Fund in foreign
securities, whether denominated in U.S. currencies or foreign currencies, may
entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or
similar securities also may entail some or all of the risks as set forth below.
Currency Risk. The value of each Fund's foreign investments will be affected
by changes in currency exchange rates. The U.S. dollar value of a foreign
security decreases when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and increases when the value of
the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which
the Funds may invest are not as developed as the United States economy and may
be subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation, and limitations on the removal of funds
or other assets could also adversely affect the value of each Fund's
investments.
Regulatory Risk. Foreign companies are not registered with the SEC and are
generally not subject to the regulatory controls imposed on United States
issuers and, as a consequence, there is generally less publicly available
information about foreign securities than is available about domestic
securities. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Income from foreign securities owned by
the Funds may be reduced by a withholding tax at the source, which tax would
reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
PORTFOLIO TURNOVER. Any particular security will be sold, and the proceeds
reinvested, whenever such action is deemed prudent from the viewpoint of a
Fund's investment objectives, regardless of the holding period of that security.
Each Fund's historical portfolio turnover rates are included in the Financial
Highlights tables herein. A higher rate of portfolio turnover may result in
higher transaction costs, including brokerage commissions. Also, to the extent
that higher portfolio turnover results in a higher rate of net realized capital
gains to a Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
The investment objectives and policies stated above are not fundamental
policies of the Funds and may be changed by the Board of Directors of the
Company without shareholder approval. Shareholders will be notified before any
material change in the investment policies stated above become effective.
INVESTMENT RESTRICTIONS. Each of the Funds has adopted a number of investment
restrictions, including the following:
BORROWING. Each of the Funds may borrow money to a limited extent from banks
(including the Funds' custodian bank) for temporary or emergency purposes.
CHARTER and WEINGARTEN may each borrow amounts of up to 10% of their respective
total assets and may each pledge amounts of up to 20% of their respective total
assets to secure such borrowings. No Fund will purchase additional securities
when any borrowings from banks exceed 5% of the Fund's total assets.
In addition to the ability to borrow money for temporary or emergency
purposes, CONSTELLATION may, but has no current intention to, borrow money from
banks to purchase or carry securities. CONSTELLATION may borrow amounts to
purchase or carry securities only if, immediately after such borrowing, the
value of its assets, including the amount borrowed, less its liabilities, is
equal to at least 300% of the amount borrowed, plus all outstanding borrowings.
Any investment gains made by CONSTELLATION with the borrowed monies in excess of
interest paid by the Fund will cause the net asset value of the Fund's shares to
rise faster than would otherwise be the case. On the other hand, if the
investment performance of the additional securities purchased with the proceeds
of such borrowings fails to cover the interest paid on the money borrowed by the
Fund, the net asset value of the Fund will decrease faster than would otherwise
be the case. This speculative factor is known as "leveraging."
LENDING OF FUND SECURITIES. Each of the Funds may also lend its portfolio
securities in amounts up to 33-1/3% of the total assets of the respective Funds.
Such loans could involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
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The foregoing investment restrictions are matters of fundamental policy and
may not be changed without shareholder approval. For additional investment
restrictions applicable to the Funds, see the Statement of Additional
Information.
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Funds is vested with
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company and persons or companies furnishing
services to a Fund, including the Master Advisory Agreement with AIM, the Master
Sub-Advisory Agreement between AIM and AIM Capital with respect to the Funds,
the Master Administrative Services Agreement with AIM, the Master Distribution
Agreement with AIM Distributors as the distributor of the shares of the Retail
Classes of the Funds, the Custodian Agreement with State Street Bank and Trust
Company as custodian and the Transfer Agency and Service Agreement with AFS as
transfer agent. The day-to-day operations of each Fund are delegated to its
officers and to AIM, subject always to the objectives and policies of the Fund
and to the general supervision of the Company's Board of Directors. Information
concerning the Board of Directors may be found in the Statement of Additional
Information. Certain directors and officers of the Company are affiliated with
AIM and A I M Management Group Inc. ("AIM Management"), the parent of AIM. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC
and its subsidiaries are an independent investment management group engaged in
institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific Region.
INVESTMENT ADVISOR. AIM, 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, serves as the investment advisor to each Fund pursuant to the Master
Advisory Agreement. AIM was organized in 1976, and, together with its
subsidiaries, advises or manages 55 investment company portfolios (including the
Funds). As of October 1, 1997, the total assets of the investment company
portfolios advised or managed by AIM and its subsidiaries were approximately
$81.6 billion. AIM is a wholly owned subsidiary of AIM Management.
Under the terms of the Master Advisory Agreement, AIM supervises all aspects
of the Funds' operations and provides investment advisory services to the Funds.
AIM obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Funds. AIM will not be
liable to the Funds or their shareholders except in the case of AIM's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty;
provided, however that AIM may be liable for certain breaches of duty under the
1940 Act.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the directors, AIM may
take into account sales of shares of the Funds and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf of the
Funds.
ADMINISTRATOR. The Company has entered into a Master Administrative Services
Agreement effective as of February 28, 1997 with AIM, pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Funds, including the services of a principal
financial officer of the Funds and related staff. As compensation to AIM for its
services under the Master Administrative Services Agreements, the Funds
reimburse AIM for expenses incurred by AIM or its subsidiaries in connection
with such services.
SUB-ADVISOR. AIM Capital, 11 Greenway Plaza, Suite 100, Houston, TX
77046-1173, serves as sub-advisor to the Funds pursuant to the Master
Sub-Advisory Agreement between AIM and AIM Capital. Under the terms of the
Master Sub-Advisory Agreement, AIM has appointed AIM Capital to provide certain
investment advisory services for each of the Funds, subject to overall
supervision by AIM and the Company's Board of Directors. Sub-advisory agreements
between AIM and AIM Capital for the Funds, with substantially identical terms to
the Sub-Advisory Agreement, were in effect prior to February 28, 1997. AIM
Capital is a wholly owned subsidiary of AIM. Certain of the directors and
officers of AIM Capital are also executive officers of the Company.
FEE WAIVERS. AIM may in its discretion from time to time agree to waive
voluntarily all or any portion of its advisory fee and/or assume certain
expenses of any Fund but will retain its ability to be reimbursed prior to the
end of the fiscal year.
ADVISORY FEES. As compensation for its services AIM is paid an investment
advisory fee, which is calculated separately for each Fund. AIM received total
advisory fees from CHARTER, WEINGARTEN and CONSTELLATION for the fiscal year
ended October 31, 1996 which represented 0.63%, 0.61% and 0.61%, respectively,
of each of such Fund's average daily net assets. As compensation for its
services, AIM Capital receives a fee from AIM equal to 50% of the fees received
by AIM under the Master Advisory Agreement on behalf of the Funds.
AIM received reimbursement of administrative services costs with respect to
CHARTER, WEINGARTEN and CONSTELLATION for the fiscal year ended October 31, 1996
which represented 0.004%, 0.003% and 0.002%, respectively, of each such Fund's
average daily net assets. Total expenses for a Class A share of the Retail Class
for the fiscal year ended October 31, 1996, stated as a percentage of average
net assets of each of Retail Class of CHARTER, WEINGARTEN and CONSTELLATION were
1.12%, 1.12% and 1.14%, respectively.
In addition, the Company and AFS, P.O. Box 4739, Houston, TX 77210-4739, a
wholly owned subsidiary of AIM and registered transfer agent, have entered into
the Transfer Agency and Service Agreement, pursuant to which AFS provides
transfer agency, dividend distribution and disbursement, and shareholder
services to the Retail Classes of the Funds.
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<PAGE> 19
DISTRIBUTOR. The Company has entered into a Master Distribution Agreement,
dated as of August 2, 1997 on behalf of Class A and Class C shares of the Funds,
and has entered into a Master Distribution Agreement, dated February 28, 1997,
on behalf of Class B shares of the Funds (individually referred to as the
"Distribution Agreement" or collectively as the "Distribution Agreements.") with
AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of
AIM, to act as the distributor of Class A, Class B and Class C shares of the
Funds. Certain directors and officers of the Company are affiliated with AIM
Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Retail Classes of the Funds directly and through
institutions with whom AIM Distributors has entered into selected dealer
agreements. Under the Distribution Agreement for the Class B shares, AIM
Distributors sells Class B shares of the Funds at net asset value subject to a
contingent deferred sales charge established by AIM Distributors. AIM
Distributors is authorized to advance to institutions through whom Class B
shares are sold a sales commission under schedules established by AIM
Distributors. The Distribution Agreement for the Class B shares provides that
AIM Distributors (or its assignee or transferee) will receive 0.75% (of the
total 1.00% payable under the distribution plan applicable to Class B shares) of
each Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors. In the event the Class B shares
Distribution Agreement is terminated, AIM Distributors would continue to receive
payments of asset based sales charges in respect of the outstanding Class B
shares attributable to the distribution efforts of AIM Distributors; provided,
however, that a complete termination of the Class B shares master distribution
plan (as defined in the plan) would terminate all payments to AIM Distributors.
Termination of the Class B shares distribution plan or Distribution Agreement
does not affect the obligation of Class B shareholders to pay contingent
deferred sales charges.
DISTRIBUTION PLANS. Class A and C Plan. The Company has adopted a Master
Distribution Plan applicable to Class A and Class C shares of each Fund (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of each Fund.
Under the Class A and C Plan, the Company may compensate AIM Distributors an
aggregate amount of 0.30% of the average daily net assets of Class A shares of
each Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of each Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of a Fund. Payments can
also be directed by AIM Distributors to selected institutions who have entered
into service agreements with respect to Class A and Class C shares of each Fund
and who provide continuing personal services to their customers who own Class A
and Class C shares of the Fund. The service fees payable to selected
institutions are calculated at the annual rate of 0.25% of the average daily net
asset value of those Fund shares that are held in such institution's customers'
accounts which were purchased on or after a prescribed date set forth in the
Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to the
Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc.
Class B Plan. The Company has also adopted a master distribution plan
applicable to Class B shares of the Fund (the "Class B Plan"). Under the Class B
Plan, each Fund pays distribution expenses at an annual rate of 1.00% of the
average daily net assets attributable to such Fund's Class B shares. Of such
amount each Fund pays a service fee of 0.25% of the average daily net assets
attributable to such Fund's Class B shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class B shares of the Fund. Any amounts not paid
as a service fee would constitute an asset-based sales charge. Amounts paid in
accordance with the Class B Plan with respect to any Fund may be used to finance
any activity primarily intended to result in the sale of Class B shares of such
Fund.
Activities that may be financed under the Class A and C Plan and the Class B
Plan (collectively, the "Plans") include, but are not limited to: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, overhead, preparation and distribution of advertising
material and sales literature, expense of organizing and conducting sales
seminars, supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements, and the cost of administering the Plans. These amounts
payable by a Fund under the Plans need not be directly related to the expenses
actually incurred by AIM Distributors on behalf of each Fund. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Company will not be obligated to pay more than
that fee, and if AIM Distributors' expenses are less than the fee it receives,
AIM Distributors will retain the
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full amount of the fee. Payments pursuant to the Plans are subject to any
applicable limitations imposed by rules of the National Association of
Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those directors who are not "interested persons" of the Company or by a vote of
the holders of the majority of the outstanding shares of the applicable class.
Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its 12b-1 fee, while retaining
its ability to be reimbursed for such fee prior to the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Fund in
making such payments. The Funds will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
PORTFOLIO MANAGERS
AIM uses a team approach and a disciplined investment process in providing
investment advisory services to all of its accounts, including the Funds. AIM's
investment staff consists of approximately 125 individuals. While individual
members of AIM's investment staff are assigned primary responsibility for the
day-to-day management of each of AIM's accounts, all accounts are reviewed on a
regular basis by AIM's Investment Policy Committee to ensure that they are being
invested in accordance with the account's and AIM's investment policies. The
individuals who are primarily responsible for the day-to-day management of the
Funds and their titles, if any, with AIM or its affiliates and the Fund, the
length of time they have been responsible for the management, and their years of
investment experience and prior experience (if they have been with AIM for less
than five years) are shown below.
Lanny H. Sachnowitz and Joel E. Dobberpuhl are primarily responsible for the
day-to-day management of CHARTER. Mr. Sachnowitz is Vice President of AIM
Capital and has been responsible for the Fund since 1991. Mr. Sachnowitz has
been associated with AIM and/or its subsidiaries since 1987 and has ten years of
experience as an investment professional. Mr. Dobberpuhl is Vice President of
AIM Capital and has been responsible for the Fund since 1995. Mr. Dobberpuhl has
been associated with AIM since 1990 and has a total of eight years of experience
as an investment professional. Prior to 1990, he served as an equity trader and
portfolio analyst for NationsBank of Texas, N.A.
Jonathan C. Schoolar, Robert M. Kippes and David P. Barnard are primarily
responsible for the day-to-day management of WEINGARTEN. Mr. Schoolar is Senior
Vice President and Director of AIM Capital, Vice President of AIM and Senior
Vice President of the Company and has been responsible for the Fund since 1987.
He has been associated with AIM and/or its subsidiaries since 1986 and has 14
years of experience as an investment professional. Mr. Kippes is Vice President
of AIM Capital and has been responsible for the Fund since 1994. Mr. Kippes has
been associated with AIM and/or its subsidiaries since 1989 and has eight years
of experience as an investment professional. Mr. Barnard is Vice President of
AIM Capital and has been responsible for the Fund since 1986. Mr. Barnard has
been associated with AIM and/or its subsidiaries since 1982 and has 23 years of
experience as an investment professional.
Robert M. Kippes, Kenneth A. Zschappel, Charles D. Scavone, and David P.
Barnard are primarily responsible for the day-to-day management of
CONSTELLATION. Mr. Kippes is Vice President of AIM Capital. He currently serves
as manager for CONSTELLATION and has been responsible for the Fund since 1993.
Mr. Kippes' background is discussed above with respect to the management of
Weingarten. Mr. Zschappel is Assistant Vice President of AIM Capital and has
been responsible for the Fund since 1996. Mr. Zschappel has been associated with
AIM and/or its subsidiaries since 1990 and has six years of experience as an
investment professional. Mr. Scavone is Vice President of AIM Capital and has
been responsible for the Fund and associated with AIM and/or its subsidiaries
since 1996. Mr. Scavone has six years experience as an investment professional.
Prior to joining AIM, Mr. Scavone was Associate Portfolio Manager for Van Kampen
American Capital Asset Management, Inc. from 1994-1996. From 1991 to 1994, he
worked in the investments department at Texas Commerce Investment Management
Company, with his last position being Equity Research Analyst/Assistant
Portfolio Manager. Mr. Barnard's background is discussed above with respect to
the management of WEINGARTEN; he has also been responsible for the management of
CONSTELLATION since 1990.
17
<PAGE> 21
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was organized in 1988 as a Maryland corporation, and is registered
with the SEC as a diversified, open-end, series, management investment company.
The Company consists of six separate portfolios: CHARTER, CONSTELLATION and
WEINGARTEN, each of which has retail classes of shares consisting of Class A,
Class B and Class C shares and an Institutional Class; AGGRESSIVE GROWTH, which
has a retail class of shares consisting of Class A shares; and BLUE CHIP and
CAPITAL DEVELOPMENT, which have retail classes of shares consisting of Class A,
Class B and Class C shares. The Company's common stock is classified into
nineteen different classes. Each class represents an interest in one of six
portfolios.
Each class of shares of the same Fund represents interests in that Fund's
assets and have identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that each class of shares bears differing
class-specific expenses, such as those associated with the shareholder servicing
of their shares, is subject to differing sales loads, conversion features and
exchange privileges, and has exclusive voting rights on matters pertaining to
that class' distribution plan.
Except as specifically noted above, shareholders of each Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the different classes of shares,
where applicable, of a Fund. However, on matters affecting one portfolio of the
Company or one class of shares, a separate vote of shareholders of that
portfolio or class is required. Shareholders of a portfolio or class are not
entitled to vote on any matter which does not affect that portfolio or class but
which requires a separate vote of another portfolio or class. An example of a
matter which would be voted on separately by shareholders of a portfolio is the
approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect directors,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors of the Company, and the holders of less than 50% of
the shares voting for the election of directors will not be able to elect any
directors.
The holder of shares of each Fund is entitled to such dividends payable out of
the net assets allocable to such Fund as may be declared by the Board of
Directors of the Company. In the event of liquidation or dissolution of the
Company, the holders of shares of each Fund will be entitled to receive pro
rata, subject to the rights of creditors, the net assets of the Company
allocable to the Fund. Fractional shares of each Fund have the same rights as
full shares to the extent of their proportionate interest.
Under Maryland law and the Company's By-Laws, the Company need not hold an
annual meeting of shareholders unless a meeting is required under the 1940 Act
to elect directors. Shareholders may remove directors from office, and a meeting
of shareholders may be called at the request of the holders of 10% or more of
the Company's outstanding shares. As of October 1, 1997, Merrill Lynch Pierce
Fenner & Smith owned beneficially (for its clients) and of record 30.50% of the
outstanding Class C shares of AIM Charter Fund, 30.22% of the outstanding Class
C shares of AIM Weingarten Fund, and 32.53% of the outstanding Class C shares of
AIM Constellation Fund. As long as Merrill Lynch Pierce Fenner & Smith owns over
25% of such shares, it may be presumed to be in "control," as defined in the
1940 Act, of the Class C shares of each of AIM Charter Fund, AIM Weingarten Fund
and AIM Constellation Fund.
18
<PAGE> 22
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR CASH MANAGEMENT FUND(1),(2) AIM GLOBAL INCOME FUND
AIM ADVISOR FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INCOME FUND(2) AIM GROWTH FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM INCOME FUND
AIM ADVISOR MULTIFLEX FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERNATIONAL EQUITY FUND
AIM AGGRESSIVE GROWTH FUND AIM LIMITED MATURITY TREASURY SHARES
AIM BALANCED FUND AIM MONEY MARKET FUND(1)
AIM BLUE CHIP FUND AIM MUNICIPAL BOND FUND
AIM CAPITAL DEVELOPMENT FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CHARTER FUND AIM TAX-EXEMPT CASH FUND(1)
AIM CONSTELLATION FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM VALUE FUND
AIM GLOBAL GROWTH FUND AIM WEINGARTEN FUND
</TABLE>
(1) Class A shares of AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND, and Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, Class B and Class C shares of AIM MONEY MARKET FUND, are sold with
an initial sales charge or subject to a contingent deferred sales charge
upon redemption, as described below.
(2) Fund closed to new investments on October 3, 1997. Please refer to
"Exchange Privilege" herein and the Fund's prospectus dated August 4, 1997.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") is $250. There are
no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 403(b) plans or 457 (state deferred compensation)
plans (except that the minimum initial investment for salary deferrals for such
plans is $25), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM Funds account. A Salary Reduction SEP ("SARSEP")
may not be established after December 31, 1996; however existing SARSEP accounts
can remain in effect.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
MCF-A 10/97
A-1
<PAGE> 23
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME
FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND,
AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM AGGRESSIVE GROWTH
FUND, AIM BALANCED FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM
CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM
GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND
FUND, AIM VALUE FUND and AIM WEINGARTEN FUND, collectively (other than AIM
AGGRESSIVE GROWTH FUND), the "Multiple Class Funds," may be purchased at their
respective net asset value plus a sales charge as indicated below, except that
Class A shares of AIM TAX-EXEMPT CASH FUND, Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold
without a sales charge and Class B shares (the "Class B shares") and Class C
shares ("Class C shares") of the Multiple Class Funds (except Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND) are sold at net asset value subject to a
contingent deferred sales charge payable upon certain redemptions. These
contingent deferred sales charges are described under the caption "How to Redeem
Shares -- Multiple Distribution System." Securities dealers and other persons
entitled to receive compensation for selling or servicing shares of a Multiple
Class Fund may receive different compensation for selling or servicing one
particular class of shares over another class in the same Multiple Class Fund.
Factors an investor should consider prior to purchasing Class A, Class B or
Class C shares (or, if applicable, AIM Cash Reserve Shares) of a Multiple Class
Fund are described below under "Special Information Relating to Multiple Class
Funds." For information on purchasing any of the AIM Funds and to receive a
prospectus, please call (800) 347-4246. As described below, the sales charge
otherwise applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value." The following tables show the sales charge and dealer concession
at various investment levels for the AIM Funds.
MCF-A 10/97
A-2
<PAGE> 24
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM
VALUE FUND and AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM ADVISOR INCOME FUND, AIM ADVISOR REAL ESTATE FUND, AIM BALANCED
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-A 10/97
A-3
<PAGE> 25
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and the Class A shares
of AIM TAX-FREE INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases. See "Contingent Deferred Sales Charge Program for Large Purchases."
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), and which are sold at net
asset value and are not subject to a contingent deferred sales charge, in an
amount up to 0.10% of such purchases of shares of AIM LIMITED MATURITY TREASURY
SHARES, and in an amount up to 0.25% of such purchases of shares of AIM TAX-FREE
INTERMEDIATE SHARES.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price (0.60% of the
purchase price of the AIM ADVISOR INCOME FUND) of the Class C shares sold by the
dealer or institution, and will consist of a sales commission of 0.75% of the
purchase price (0.35% of the purchase price of the AIM ADVISOR INCOME FUND) of
the Class C shares sold plus an advance of the first year service fee of 0.25%
with respect to such shares. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. The
portion of the payments to AIM Distributors under the Class C Plan attributable
to Class C shares which constitutes an asset-based sales charge (0.75%) (0.35%
for AIM ADVISOR INCOME FUND) is intended in part to permit AIM Distributors to
recoup a portion of such on-going sales commission plus financing costs, if any.
MCF-A 10/97
A-4
<PAGE> 26
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES (except Class A shares of AIM ADVISOR CASH MANAGEMENT FUND)
are sold subject to the initial sales charges described above and are
subject to the other fees and expenses described herein. Class A shares of
AIM MONEY MARKET FUND are designed to meet the needs of an investor who
wishes to establish a dollar cost averaging program, pursuant to which
Class A shares an investor owns may be exchanged at net asset value for
Class A shares of another Multiple Class Fund or shares of another AIM Fund
which is not a Multiple Class Fund, subject to the terms and conditions
described under the caption "Exchange Privilege -- Terms and Conditions of
Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND)
are subject, however, to Rule 12b-1 Plan payments of 1.00% per annum on the
average daily net assets of a Multiple Class Fund attributable to Class C
shares. See the discussion under the caption "Management -- Distribution
Plans." In addition, Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) redeemed within one year from the date such shares
were purchased are subject to a 1.00% contingent deferred sales charge. No
contingent deferred sales charge will be imposed if Class C shares are
redeemed after one year from the date such shares were purchased.
Redemptions of Class C shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. (A
contingent deferred sales charge may be imposed upon redemptions of Class A
and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND when such shares
were purchased in an exchange. See "How to Redeem Shares -- Multiple
Distribution System -- Class C Shares" and "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases").
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are, however, subject to
the other fees and expenses described in the prospectus for AIM MONEY
MARKET FUND.
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<PAGE> 27
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM ADVISOR CASH MANAGEMENT FUND, AIM MONEY
MARKET FUND, AND AIM TAX-EXEMPT CASH FUND (THE "MONEY MARKET FUNDS"). Because
each Money Market Fund uses the amortized cost method of valuing the securities
it holds and rounds its per share net asset value to the nearest whole cent, it
is anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT
FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class B and Class C
shares of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
MCF-A 10/97
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<PAGE> 28
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and (ii) Class B and Class C shares of the Multiple Class Funds)
within the following 13 consecutive months. By marking the LOI section on the
account application and by signing the account application, the purchaser
indicates that he understands and agrees to the terms of the LOI and is bound by
the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii)
Class B and Class C shares of the Multiple Class Funds) at the time of the
proposed purchase. Rights of Accumulation are also available to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C
shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum
MCF-A 10/97
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<PAGE> 29
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM, or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; and (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the AIM Funds in connection with such services.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees.
Participants in such plans will be eligible for reduced sales charges based
solely on the aggregate value of their individual investments in the applicable
AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR
SUCH PLANS. AIM Distributors may pay investment dealers or other financial
service firms for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph as follows: 1% of the first $2 million of such purchases, plus
0.80% of the next $1 million of such purchases, plus 0.50% of the next $17
million of such purchases, plus 0.25% of amounts in excess of $20 million of
such purchases and up to 0.10% of the net asset value of any AIM Limited
Maturity Treasury Shares sold at net asset value to an employee benefit plan in
accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided:
MCF-A 10/97
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<PAGE> 30
(a) that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is effected within 30 days of such redemption or repurchase;
and (b) that the unit holder or his dealer provides AIM Distributors with a
letter which: (i) identifies the name, address and telephone number of the
dealer who sold to the unit holder the units to be redeemed or repurchased; and
(ii) states that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is being funded exclusively by the proceeds from the
redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual checks in any amount (but not less than
$50) to be drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that exceed on an annual
basis 12% of such account will be subject to a contingent deferred sales charge
on the amounts exceeding 12% of the account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the Multiple Class Funds, AIM Cash
Reserve Shares of AIM MONEY MARKET FUND and Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND), it is disadvantageous to effect such purchases while a
Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable month, a draft is
drawn on the shareholder's bank account in the amount specified by the
shareholder (minimum $50 per investment, per account). The proceeds of the draft
are invested in shares of the designated AIM Fund at the applicable offering
price determined on the date of the draft. An Automatic Investment Plan may be
discontinued upon 10 days' prior notice to the Transfer Agent or AIM
Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
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<PAGE> 31
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; IRA plans; SARSEP plans; and SEP
plans (collectively, "retirement accounts"). Information concerning these plans,
including the custodian's fees and the forms necessary to adopt such plans, can
be obtained by calling or writing the AIM Funds or AIM Distributors. Shares of
the AIM Funds are also available for investment through existing 401(k) plans
(for both individuals and employers) adopted under the Code. The plan custodian
currently imposes an annual $10 maintenance fee with respect to each retirement
account for which it serves as the custodian. This fee is generally charged in
December. Each AIM Fund and/or the custodian reserve the right to change this
maintenance fee and to initiate an establishment fee (not to exceed its cost).
MCF-A 10/97
A-10
<PAGE> 32
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds (except AIM
ADVISOR CASH MANAGEMENT FUND), listed below and referred to herein as the "Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 5.50% or 4.75% of the public offering price of such shares; Class A shares
(or shares which normally involve the payment of initial sales charges) of
certain of the AIM Funds, listed below and referred to herein as the "Lower Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 1.00% of the public offering price of such shares; and Class A shares or
shares of certain other funds, listed below and referred to herein as the "No
Load Funds," are sold at net asset value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY SHARE
CLASS A FUND -- CLASS A AIM TAX-FREE INTERMEDIATE
AIM ADVISOR INCOME FUND -- AIM GLOBAL INCOME SHARES -- CLASS A
CLASS A FUND -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR LARGE CAP AIM GROWTH FUND -- CLASS A -- CLASS A
VALUE FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM MONEY MARKET FUND
AIM ADVISOR MULTIFLEX AIM INCOME FUND -- CLASS A -- AIM CASH RESERVE SHARES
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-EXEMPT CASH FUND -- CLASS A
AIM ADVISOR REAL ESTATE FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MONEY MARKET
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM MUNICIPAL BOND
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM CHARTER FUND -- CLASS A OF CONNECTICUT -- CLASS A
AIM CONSTELLATION AIM VALUE FUND -- CLASS A
FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) effective August 4, 1997
(except with respect to shares of AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR
FLEX FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM
ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL
ESTATE FUND), no shares of any Load Fund, Class C of a Multiple Class Fund,
Lower Load Fund or No Load Fund may be exchanged for shares of AIM ADVISOR CASH
MANAGEMENT FUND or AIM ADVISOR INCOME FUND; (ii) effective October 3, 1997 no
share of any Load Fund, Class C of a Multiple Class Fund, Lower Load Fund or No
Load Fund may be exchanged for shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM
ADVISOR INCOME FUND; (iii) Load Fund share purchases of $1,000,000 or more which
are subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND; (iv) LOWER LOAD FUND SHARE PURCHASES
OF $1,000,000 OR MORE AND AIM Cash Reserve Shares of AIM MONEY MARKET FUND and
AIM TAX-EXEMPT CASH FUND PURCHASES MAY BE EXCHANGED FOR LOAD FUND SHARES IN
AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE CONTINGENT
DEFERRED SALES CHARGE ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH PERIOD
SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (v) Class A shares and AIM
LIMITED MATURITY TREASURY SHARES may be exchanged for Class A shares or AIM
LIMITED MATURITY TREASURY SHARES, (vi) Class B shares may be exchanged only for
Class B shares; (vii) Class C shares may only be exchanged for Class C shares;
(viii) Class A shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged for
Class A shares of any Load Fund, Lower Load Fund or No-Load Fund at net asset
value; (ix) Class C shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged
for Class C shares of any Multiple Class Fund at net asset value; and (x) AIM
Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged for Class A
shares of AIM MONEY MARKET FUND or for Class B or Class C shares.
MCF-A 10/97
A-11
<PAGE> 33
Broker-dealers and institutions of record for Class A or Class C shares
purchased pursuant to an exchange from Class A or Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND will be compensated according to the sales commission or
concession that would apply if these Class A or Class C share purchases had been
purchased in a manner other than pursuant to an exchange.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise, Of-
apply if No Load shares were fering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged. There is no fee for exchanges among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
MCF-A 10/97
A-12
<PAGE> 34
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares (except for Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF-A 10/97
A-13
<PAGE> 35
utable to Class B shares or (iii) on amounts that represent capital appreciation
in the shareholder's account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, and AIM ADVISOR REAL ESTATE FUND, by shareholders of record on
April 30, 1995 of these funds. Shareholders whose broker/dealers maintain a
single omnibus account with the Transfer Agent on behalf of those shareholders,
perform sub-accounting functions with respect to those shareholders, and are
unable to segregate shareholders of record prior to April 30, 1995 from
shareholders whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996; or (v) on Class C shares of AIM
ADVISOR CASH MANAGEMENT FUND except in certain cases when the shares were
purchased in an exchange. Redemptions of shares of AIM ADVISOR CASH MANAGEMENT
FUND are generally not subject to a contingent deferred sales charge; however, a
contingent deferred sales charge may be applicable to redemptions of shares of
AIM ADVISOR CASH MANAGEMENT FUND if the redeemed shares were exchanged from
another Class C share fund and the one year holding period in such fund has not
been completed.
Contingent deferred sales charges on Class B and Class C shares will be waived
on redemptions (1) following the death or post-purchase disability, as defined
in Section 72(m)(7) of the Code, of a shareholder or a settlor of a living trust
(provided AIM Distributors is notified of such death or post-purchase disability
at the time of the redemption request and is provided with satisfactory evidence
of such death or post-purchase disability), (2) in connection with certain
distributions from individual retirement accounts, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the fifth paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds.".
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70- 1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value;
(ii) in kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
MCF-A 10/97
A-14
<PAGE> 36
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund, Class A shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM Cash Reserve
Shares of AIM MONEY MARKET FUND which were acquired through an exchange of
shares which previously were subject to the 1% contingent deferred sales charge
will be credited with the period of time such exchanged shares were held, and
(ii) shares of any Load Fund which are subject to the 1% contingent deferred
sales charge and which were acquired through an exchange of shares of a Lower
Load Fund or a No Load Fund which previously were not subject to the 1%
contingent deferred sales charge will not be credited with the period of time
such exchanged shares were held. The charge will be waived in the following
circumstances: (1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under Section
403(b) of the Code and sponsored by nonprofit organizations as defined under
Section 501(c)(3) of the Code, where shares are being redeemed in connection
with employee terminations or withdrawals, and (a) the total amount invested in
a Plan is at least $1,000,000, (b) the sponsor of a Plan signs a letter of
intent to invest at least $1,000,000 in one or more of the AIM Funds, or (c) the
shares being redeemed were purchased by an employer-sponsored Plan with at least
100 eligible employees; provided, however, that Plans created under Section
403(b) of the Code which are sponsored by public educational institutions shall
qualify under (a), (b) or (c) above on the basis of the value of each Plan
participant's aggregate investment in the AIM Funds, and not on the aggregate
investment made by the Plan or on the number of eligible employees; (2)
redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59- 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM
MCF-A 10/97
A-15
<PAGE> 37
Distributors has made arrangements with certain dealers and investment advisors
to accept telephone instructions for the redemption of shares. AIM Distributors
reserves the right to impose conditions on these dealers and investment
advisors, including the condition that they enter into agreements (which contain
additional conditions with respect to the redemption of shares) with AIM
Distributors. The Transfer Agent and AIM Distributors will not be liable for any
loss, expense or cost arising out of any telephone redemption request effected
in accordance with the authorization set forth at that item of the account
application if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions if they do not follow reasonable procedures for verification of
telephone transactions. Such reasonable procedures may include recordings of
telephone transactions (maintained for six months), requests for confirmation of
the shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT FUND and
the AIM Cash Reserve Shares of AIM MONEY MARKET FUND. This privilege does not
apply to retirement accounts or qualified plans. Checks may be drawn in any
amount of $250 or more. Checks drawn against insufficient shares in the account,
against shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented to the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Terms and Conditions
of Purchase of the AIM Funds -- Timing of Purchase Orders." A charge for special
handling (such as wiring of funds or expedited delivery services) may be made by
the Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as
MCF-A 10/97
A-16
<PAGE> 38
certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES AND LIMITED MATURITY TREASURY SHARES
ONLY). Within 90 days of a redemption, a shareholder may invest all or part of
the redemption proceeds in Class A shares of any AIM Fund (except Class A shares
of AIM ADVISOR CASH MANAGEMENT FUND) and AIM Limited Maturity Treasury Shares at
the net asset value next computed after receipt by the Transfer Agent of the
funds to be reinvested; provided, however, if the redemption was made from AIM
Limited Maturity Treasury Shares or Class A shares of AIM TAX-FREE INTERMEDIATE
SHARES, the reinvested proceeds will be subject to the difference in sales
charge between the shares redeemed and the shares the proceeds are reinvested
in. The shareholder must ask the Transfer Agent for such privilege at the time
of reinvestment. A realized gain on the redemption is taxable, and reinvestment
may alter any capital gains payable. If there has been a loss on the redemption
and shares of the same fund are repurchased, all of the loss may not be tax
deductible, depending on the timing and amount reinvested. Under the Code, if
the redemption proceeds of fund shares on which a sales charge was paid are
reinvested in (or exchanged for) shares of another AIM Fund at a reduced sales
charge within 90 days of the payment of the sales charge, the shareholder's
basis in the fund shares redeemed may not include the amount of the sales charge
paid, thereby reducing the loss or increasing the gain recognized from the
redemption; however, the shareholder's basis in the fund shares purchased will
include the sales charge. Each AIM Fund may amend, suspend or cease offering
this privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. This privilege may only be exercised once
each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
90 days after such redemption may do so at net asset value if such privilege is
claimed at the time of reinvestment. Such reinvested proceeds will not be
subject to either a front-end sales charge at the time of reinvestment or an
additional contingent deferred sales charge upon subsequent redemption. In order
to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an AIM Fund's share
will be determined as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE. The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and total assets include portfolio
securities valued at their market value, as well as income accrued but not yet
received. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the fund's officers and in accordance with methods which are specifically
authorized by its governing Board of Directors or Trustees. Short-term
obligations with maturities of 60 days or less, and the securities held by the
Money Market Funds, are valued at amortized cost as reflecting fair value. AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE SHARES value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
MCF-A 10/97
A-17
<PAGE> 39
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR CASH MANAGEMENT FUND.......... declared daily; paid monthly annually annually
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INCOME FUND................... declared and paid monthly monthly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM GROWTH FUND........................... declared and paid annually annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY SHARES...... declared daily; paid monthly annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE SHARES.......... declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares (except Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND) (iii) dividends and distributions attributable to Class A
shares or AIM Limited Maturity Treasury Shares may not be reinvested in Class A
shares of AIM ADVISOR CASH MANAGEMENT FUND or Class B or Class C shares, and
(iv) dividends and distributions attributable to the AIM Cash Reserve Shares of
AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund
or in any Class B or Class C shares. Investors who have not previously selected
such a reinvestment option on the account application form may contact the
Transfer Agent at any time to obtain a form to authorize such reinvestments in
another AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) are expected to be lower than those for Class A shares or
AIM Cash Reserve Shares because of higher distribution fees paid by Class B and
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND).
Dividends on all shares may also be affected by other class-specific expenses.
MCF-A 10/97
A-18
<PAGE> 40
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM ADVISOR CASH
MANAGEMENT FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND,
AIM ADVISOR REAL ESTATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED
MATURITY TREASURY SHARES, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE
INTERMEDIATE SHARES will qualify for this dividends received deduction. Shortly
after the end of each year, shareholders will receive information regarding the
amount and federal income tax treatment of all distributions paid during the
year. Certain dividends declared in October, November or December of a calendar
year are taxable to shareholders as though received on December 31 of that year
if paid to shareholders during January of the following calendar year. No gain
or loss will be recognized by shareholders upon the automatic conversion of
Class B shares of a Multiple Class Fund into Class A shares of such Fund. With
respect to tax-exempt shareholders, distributions from the Funds will not be
subject to federal income taxation to the extent permitted under the applicable
tax-exemption.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and
MCF-A 10/97
A-19
<PAGE> 41
other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM INTERNATIONAL EQUITY FUND, AIM
GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND
AND AIM GLOBAL UTILITIES FUND -- SPECIAL TAX INFORMATION. For taxable years in
which it is eligible to do so, each of these funds may elect to pass through to
shareholders credits for foreign taxes paid. If the fund makes such an election,
a shareholder who receives a distribution (1) will be required to include in
gross income his proportionate share of foreign taxes allocable to the
distribution and (2) may claim a credit or deduction for such share for his
taxable year in which the distribution is received, subject to the general
limitations imposed on the allowance of foreign tax credits and deductions.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of the fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the fund would not be able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM MUNICIPAL BOND
FUND, AIM LIMITED MATURITY TREASURY SHARES AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE SHARES, for
which The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, serves as custodian. Texas Commerce Bank National Association, P.O. Box
2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail purchases of
the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF-A 10/97
A-20
<PAGE> 42
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-A 10/97
B-1
<PAGE> 43
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
MCF-A 10/97
B-2
<PAGE> 44
[AIM LOGO] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Investment Sub-Advisor
A I M Capital Management, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Principal Underwriter
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
For more complete information about any other Fund in The AIM Family of Funds,
including charges and expenses, please call (800) 347-4246 or write to A I M
Distributors, Inc. and request a free prospectus. Please read the prospectus
carefully before you invest or send money.
AEF-PRO-1
<PAGE> 45
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
any offers to buy be accepted prior to the time the registration statement
becomes effective. This Statement of Additional Information does not constitute
a prospectus.
SUBJECT TO COMPLETION
OCTOBER 9, 1997
STATEMENT OF
ADDITIONAL INFORMATION
RETAIL CLASSES OF
AIM BLUE CHIP FUND
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
AIM AGGRESSIVE GROWTH FUND
AIM CAPITAL DEVELOPMENT FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS, INC.)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE
FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246.
STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 3, 1997,
RELATING TO THE AIM AGGRESSIVE GROWTH FUND PROSPECTUS,
THE AIM BLUE CHIP FUND PROSPECTUS, AND
THE AIM CAPITAL DEVELOPMENT FUND PROSPECTUS
EACH DATED AUGUST 4, 1997 and to
THE AIM CHARTER FUND, AIM WEINGARTEN FUND
AND AIM CONSTELLATION FUND PROSPECTUSES, dated November 3, 1997
<PAGE> 46
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION ........................................................................ 1
GENERAL INFORMATION ABOUT THE FUNDS ................................................. 1
The Company and Its Shares ................................................. 1
PERFORMANCE ......................................................................... 2
Total Return Calculations .................................................. 2
Yield Quotations ........................................................... 3
Historical Portfolio Results ............................................... 3
PORTFOLIO TRANSACTIONS AND BROKERAGE ................................................ 5
General Brokerage Policy ................................................... 5
Section 28(e) Standards .................................................... 7
Brokerage Commissions Paid ................................................. 8
Portfolio Turnover ......................................................... 9
INVESTMENT OBJECTIVES AND POLICIES .................................................. 9
Foreign Securities ......................................................... 10
Foreign Exchange Transactions .............................................. 11
Rule 144A Securities ....................................................... 11
Lending of Portfolio Securities ............................................ 11
Repurchase Agreements ...................................................... 12
Special Situations ......................................................... 12
Short Sales ................................................................ 12
Warrants ................................................................... 13
Options .................................................................... 13
Combined Option Positions................................................... 14
Futures Contracts .......................................................... 14
Stock Index Futures Contracts ..................................... 14
Foreign Currency Futures Contracts ................................ 15
Options on Futures Contracts ............................................... 15
Risks as to Futures Contracts and Related Options .......................... 15
Investment in Unseasoned Issuers ........................................... 16
INVESTMENT RESTRICTIONS ............................................................. 16
Blue Chip .................................................................. 17
Charter .................................................................... 18
Weingarten ................................................................. 19
Constellation .............................................................. 20
Aggressive Growth .......................................................... 21
Capital Development ........................................................ 22
Additional Restrictions .................................................... 23
MANAGEMENT .......................................................................... 23
Directors and Officers ..................................................... 23
Remuneration of Directors ......................................... 27
AIM Funds Retirement Plan for Eligible Directors/Trustees ......... 28
Deferred Compensation Agreements .................................. 29
Investment Advisory, Administrative Services and Sub-Advisory Agreements ... 30
</TABLE>
i
<PAGE> 47
<TABLE>
<S> <C>
DISTRIBUTION PLANS ................................................................. 34
The Class A and C Plan .................................................... 34
The Class B Plan ........................................................... 34
Both Plans ................................................................. 34
THE DISTRIBUTOR ..................................................................... 38
HOW TO PURCHASE AND REDEEM SHARES ................................................... 40
NET ASSET VALUE DETERMINATION ....................................................... 41
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ............................................ 42
Reinvestment of Dividends and Distributions ................................ 42
Tax Matters ................................................................ 42
Qualification as a Regulated Investment Company ............................ 42
Excise Tax on Regulated Investment Companies ............................... 44
Fund Distributions ......................................................... 44
Sale or Redemption of Shares ............................................... 46
Foreign Shareholders ....................................................... 46
Effect of Future Legislation; Local Tax Considerations ..................... 47
MISCELLANEOUS INFORMATION ........................................................... 47
Shareholder Inquiries ...................................................... 47
Audit Reports .............................................................. 47
Legal Matters .............................................................. 47
Custodian and Transfer Agent ............................................... 47
Principal Holders of Securities ............................................ 48
Other Information .......................................................... 55
APPENDIX ............................................................................ 56
Description of Commercial Paper Ratings .................................... 56
Description of Corporate Bond Ratings ...................................... 56
FINANCIAL STATEMENTS ................................................................ FS
</TABLE>
ii
<PAGE> 48
INTRODUCTION
AIM Equity Funds, Inc. (the "Company") is a series mutual fund. The
rules and regulations of the United States Securities and Exchange Commission
(the "SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information for AIM Charter Fund ("Charter"), AIM Weingarten
Fund ("Weingarten") and AIM Constellation Fund ("Constellation") is included in
a Prospectus dated November 3, 1997 (the "Prospectus"), which relates to the
Retail Classes of the Funds (defined below). The information for the Retail
Class of AIM Aggressive Growth Fund ("Aggressive Growth") is contained in a
separate prospectus dated August 4, 1997. The information for the Retail Class
of AIM Blue Chip Fund ("Blue Chip") is contained in a separate prospectus dated
August 4, 1997. The information for the Retail Class of AIM Capital Development
Fund ("Capital Development") is contained in a separate prospectus dated August
4, 1997. Additional copies of the Prospectuses and this Statement of Additional
Information may be obtained without charge by writing the principal distributor
of the Funds' shares, A I M Distributors, Inc. ("AIM Distributors"), P.O. Box
4739, Houston, TX 77210-4739 or by calling (800) 347-4246. Investors must
receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus; and, in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omit certain information contained in
the Registration Statement filed with the SEC. Copies of the Registration
Statement, including items omitted from the Prospectus and this Statement of
Additional Information, may be obtained from the SEC by paying the charges
described under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE COMPANY AND ITS SHARES
The Company was organized in 1988 as a Maryland corporation, and is
registered with the SEC as a diversified open-end series management investment
company. The Company currently consists of six separate portfolios: Aggressive
Growth, Blue Chip, Capital Development, Charter, Constellation, and Weingarten
(each a "Fund" and collectively, the "Funds"). Charter, Weingarten and
Constellation each have four separate classes: Class A, Class B and Class C and
an Institutional Class. Aggressive Growth has Class A shares only. Blue Chip
and Capital Development each have three classes of shares: Class A, and Class B
and Class C shares. Class A shares (sold with a front-end sales charge) and
Class B and Class C shares (each sold with a contingent deferred sales charge)
of the Funds are also referred to as the Retail Classes. Prior to October 15,
1993, Aggressive Growth was a portfolio of AIM Funds Group ("AFG"), a
Massachusetts business trust. Pursuant to an Agreement and Plan of
Reorganization between AFG and the Company, Aggressive Growth was
redomesticated as a portfolio of the Company. All historical financial and
other information contained in this Statement of Additional Information for
periods prior to October 15, 1993, relating to Aggressive Growth is that of
AFG's Aggressive Growth. Blue Chip acquired the investment portfolio of Baird
Blue Chip Fund, Inc. (the "BBC Fund"), a registered management investment
company, on June 3, 1996, in a corporate reorganization. All historical
financial information contained in this Statement of Additional Information for
periods prior to June 3, 1996, relating to Blue Chip is that of the BBC Fund.
Capital Development acquired substantially all of the assets of Baird Capital
Development Fund, Inc., a registered management investment company, on August
12, 1996 in a corporate reorganization.
This Statement of Additional Information relates solely to the Retail
Classes of the Funds.
The term "majority of the outstanding shares" of the Company, of a
particular Fund or of a particular class of a Fund means, respectively, the
vote of the lesser of (a) 67% or more of the shares of the Company,
1
<PAGE> 49
such Fund or such class present at a meeting of the Company's shareholders,
if the holders of more than 50% of the outstanding shares of the Company,
such Fund or such class are present or represented by proxy, or (b) more than
50% of the outstanding shares of the Company, such Fund or such class.
Shares of the Retail Class and the Institutional Class of each Fund
have equal rights and privileges. Each share of a particular class is entitled
to one vote, to participate equally in dividends and distributions declared by
the Company's Board of Directors with respect to the class of such Fund and,
upon liquidation of the Fund, to participate proportionately in the net assets
of the Fund allocable to such class remaining after satisfaction of outstanding
liabilities of the Fund allocable to such class. Fund shares are fully paid,
non-assessable and fully transferable when issued and have no preemptive rights
and have such conversion and exchange rights as set forth in the Prospectus and
this Statement of Additional Information. Fractional shares have
proportionately the same rights, including voting rights, as are provided for a
full share.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of directors may elect all of the members of the
Board of Directors of the Company. In such event, the remaining holders cannot
elect any directors of the Company.
PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical investment in a particular Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that a Fund's performance is not constant over time, but changes from year to
year, and that average annual returns do not represent the actual year-to-year
performance of such Fund.
In addition to average annual returns, the Retail Class of each Fund
may quote unaveraged or cumulative total returns reflecting the simple change
in value of an investment over a stated period. Average annual and cumulative
total returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions, over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph or similar
illustration. Total returns may be quoted with or without taking the applicable
Fund's maximum applicable Class A front-end sales charge or Class B or Class C
contingent deferred sales charge into account. Excluding sales charges from a
total return calculation produces a higher total return figure.
2
<PAGE> 50
YIELD QUOTATIONS
The standard formula for calculating yield, as described in the
Prospectus, is as follows:
6
YIELD = 2[((a-b) divided by (c x d) + 1) power of -1]
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued rather
than recorded on the ex-dividend date. Interest earned under
this formula must generally be calculated based on the yield to
maturity of each obligation (or, if more appropriate, based on
yield to call date).
b = expense accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the
period.
d = the maximum offering price per share on the last day of the
period.
HISTORICAL PORTFOLIO RESULTS
Blue Chip, Charter, Weingarten, Aggressive Growth and Constellation's
total returns for Class A shares for the following periods ended October 31,
1996 (which include the maximum sales charge of 5.50% and reinvestment of all
dividends and distributions), and Capital Development's total returns for Class
A shares for the period June 17, 1996 (inception date for Class A shares)
through October 31, 1996 (which includes the maximum sales charge of 5.50% and
reinvestment of all dividends and distributions) were as follows:
<TABLE>
<CAPTION>
CLASS A AVERAGE ANNUAL RETURNS
------------------------------
ONE FIVE TEN FIFTEEN TWENTY
YEAR YEARS YEARS YEARS YEARS
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
BLUE CHIP 18.95% 12.95% N/A N/A N/A
CAPITAL DEVELOPMENT N/A N/A N/A N/A N/A
CHARTER 10.28% 10.70% 13.64% 13.87% 16.76%
WEINGARTEN 8.49% 10.36% 13.88% 16.31% 19.86%
CONSTELLATION 5.14% 17.35% 18.40% 16.80% 19.38%
AGGRESSIVE GROWTH 8.46% 24.73% 17.84% N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS A CUMULATIVE RETURNS
--------------------------
SINCE ONE FIVE TEN FIFTEEN TWENTY
INCEPTION YEAR YEARS YEARS YEARS YEARS
--------- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
BLUE CHIP N/A 18.95% 83.86% N/A N/A N/A
CAPITAL DEVELOPMENT 4.80% N/A N/A N/A N/A N/A
CHARTER N/A 10.28% 66.27% 259.11% 601.35% 2,116.69%
WEINGARTEN N/A 8.49% 63.73% 266.84% 864.21% 3,643.60%
CONSTELLATION N/A 5.14% 122.59% 441.18% 926.94% 3,356.76%
AGGRESSIVE GROWTH N/A 8.46% 201.86% 416.32% N/A N/A
</TABLE>
Blue Chip acquired the investment portfolio of the BBC Fund on June 3,
1996. The performance data set forth above for Blue Chip includes performance
data of the BBC Fund for periods prior to June 3, 1996. The performance data is
not necessarily indicative of the future performance of Blue Chip.
3
<PAGE> 51
During the 10-year period ended October 31, 1996, a hypothetical
$1,000 investment at the beginning of such period in Class A shares of Charter,
Weingarten, Constellation and Aggressive Growth would have been worth $3,591,
$3,668, $5,411 and $5,163, respectively, assuming all distributions were
reinvested.
During the 15-year period ended October 31, 1996, a hypothetical
$1,000 investment at the beginning of such period in Class A shares of Charter,
Weingarten and Constellation would have been worth $7,013, $9,642 and $10,269,
respectively, assuming all dividends were reinvested.
During the 20-year period ended October 31, 1996 a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter,
Constellation and Weingarten would have been worth $37,436, $34,568 and
$22,167, respectively, assuming all distributions were reinvested. This was a
period of widely fluctuating stock and bond prices and interest rates, and
should not necessarily be considered a representation of the income or capital
gain or loss that may be realized from an investment in any of the Funds today.
Charter and Weingarten's total returns for Class B shares for the
period June 26, 1995 (inception date for Class B shares of Charter and
Weingarten) through October 31, 1996 (which include the maximum contingent
deferred sales charge of 5% and reinvestment of all dividends and
distributions), and Blue Chip and Capital Development's total returns for Class
B shares for the period October 1, 1996 (inception date for Class B shares)
through October 31, 1996 (which include the maximum contingent deferred sales
charge of 5% and reinvestment of all dividends and distributions) were as
follows:
CLASS B AVERAGE ANNUAL RETURNS
------------------------------
<TABLE>
<CAPTION>
Since
Inception One Year
--------- --------
<S> <C> <C>
BLUE CHIP N/A N/A
CAPITAL DEVELOPMENT N/A N/A
CHARTER 15.68% 10.90%
WEINGARTEN 14.82% 8.95%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CUMULATIVE RETURNS
--------------------------
Since
Inception One Year
--------- --------
<S> <C> <C>
BLUE CHIP .29% N/A
CAPITAL DEVELOPMENT 1.98% N/A
CHARTER 21.72% 10.90%
WEINGARTEN 20.51% 8.95%
</TABLE>
Average annual total return is not available for Class B shares of
Blue Chip and Capital Development as the effective date of the Class B shares
was October 1, 1996. Average annual total return is also not available for
Class B shares of Constellation as the effective date of the Class B Shares was
November 3, 1997.
Average annual total return is not available for Class C shares of
Blue Chip, Capital Development, Charter, Constellation or Weingarten, as the
effective date of Class C shares was August 2, 1997.
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Analytical Services, Inc. and other independent services
which monitor the performance of mutual funds. The Funds may also advertise
mutual fund performance rankings which have been assigned to each respective
Fund by such monitoring services.
4
<PAGE> 52
Each Fund's performance may also be compared in advertising and other
materials to the performance of comparative benchmarks such as the Consumer
Price Index ("CPI"), the Standard & Poor's 500 Stock Index, and
fixed-price investments such as bank certificates of deposit and/or savings
accounts.
The CPI, published by the U.S. Bureau of Labor Statistics, is a
statistical measure of changes, over time, in the prices of goods and services.
Standard & Poor's 500 Stock Index is a group of unmanaged securities widely
regarded by investors as representative of the stock market in general.
Comparisons assume the reinvestment of dividends. Fixed Price Investments, such
as bank certificates of deposits and savings accounts, are generally backed by
federal agencies for up to $100,000. Class A shares of Charter, Weingarten and
Constellation are not insured and their value will vary with market conditions.
In addition, each Fund's long-term performance may be described in
advertising in relation to historical, political and/or economic events. For
instance, Charter's Class A shares performance since its inception has been
accomplished through various years in which there have been recessions, a
presidential assassination attempt, a 20% prime rate, an 13% annual inflation
rate, and significant stock market declines. The performance of Class A shares
of Weingarten, Aggressive Growth and Constellation has been achieved through
years in which similar events occurred.
Each Fund's advertising may from time to time include discussions of
general economic conditions and interest rates. Each Fund's advertising may
also include references to the use of the Fund as part of an individual's
overall retirement investment program.
From time to time, Fund sales literature and/or advertisements may
disclose (i) top holdings included in the Fund's portfolio, (ii) certain
selling group members, and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. These topics
include, but are not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning and inflation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Directors of the
Company, A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and
sell securities for each Fund, for the selection of broker-dealers, for the
execution of each Fund's investment portfolio transactions, and for the
allocation of brokerage fees in connection with such transactions. AIM's
primary consideration in effecting a security transaction is to obtain the best
net price and the most favorable execution of the order. While AIM generally
seeks reasonably competitive commission rates, each Fund does not necessarily
pay the lowest commission or spread available.
A portion of the securities in which each Fund invests are traded in
over-the-counter markets, and in such transactions, a Fund deals directly with
the dealers who make markets in the securities involved, except in those
circumstances where better prices and executions are available elsewhere.
Portfolio transactions placed through dealers serving as primary market makers
are effected at net prices, generally without commissions as such, but which
include compensation in the form of mark up or mark down.
5
<PAGE> 53
AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Funds) over a certain time period. The target levels will be
determined based upon the following factors, among others: (a) the execution
services by the broker; (b) the research services provided by the broker; (c)
certain products and/or services provided to the Funds, the cost of which will
be included in Fund expenses reported to shareholders; and (d) the broker's
attitude toward an interest in mutual funds in general and in the Funds and
other AIM Funds in particular. No specific formula will be used in connection
with any of the foregoing considerations in determining the target levels.
However, if a broker has indicated a certain level of desired commissions in
return for certain research services provided by the broker, this factor will be
taken into consideration by AIM. Subject to the overall objective of obtaining
best price and execution for the Funds, AIM may also consider sales of shares of
the Funds and of the other mutual funds managed or advised by AIM and AIM
Capital as a factor in the selection of broker-dealers to execute portfolio
transactions for the Funds. In such cases, Fund trades may be executed directly
by selling dealers or by other broker-dealers with which selling dealers have
clearing arrangements. AIM will seek, whenever possible, to recapture for the
benefit of each Fund any commission, fee, brokerage or similar payment paid by
such Fund on portfolio transactions. Normally, the only fees which may be
recaptured are the soliciting dealer fees on the tender of an account's
portfolio securities in a tender or exchange offer.
None of the Funds is under any obligation to deal with any broker or
group of brokers in the execution of transactions in portfolio securities.
Brokers who provide supplemental investment research to AIM and AIM Capital may
receive orders for transactions by the Funds. Information so received will be
in addition to and not in lieu of the services required to be performed by AIM
and AIM Capital under their agreements with the Funds and the expenses of AIM
and AIM Capital will not necessarily be reduced as a result of the receipt of
such supplemental information. Certain research services furnished by
broker-dealers may be useful to AIM and AIM Capital in connection with their
services to other advisory clients, including the investment companies which
they advise. Also, each Fund may pay a higher price for securities or higher
commissions in recognition of research services furnished by broker-dealers.
Provisions of the Investment Company Act of 1940, as amended ("1940
Act") and rules and regulations thereunder have been construed to prohibit the
Company from purchasing securities or instruments from, or selling securities
or instruments to, any holder of 5% or more of the voting securities of any
investment company managed or advised by AIM. The Company has obtained an order
of exemption from the SEC which permits the Company to engage in certain
transactions with such 5% holder, if the Company complies with conditions and
procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM, AIM Capital and their affiliates manage several other investment
accounts, some of which may have investment objectives similar to those of one
or more of the Funds. It is possible that, at times, identical securities will
be appropriate for investment by one or more of the Funds and by one or more of
such investment accounts. The position of each account, however, in the
securities of the same issue may vary and the length of time that each account
may choose to hold its investment in the securities of the same issue may
likewise vary. The timing and amount of purchase by each account will be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of a Fund and one or more of these
accounts is considered at or about the same time, transactions in such
securities will be allocated among the Fund(s) and such accounts in a manner
deemed equitable by AIM. AIM may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Simultaneous transactions could, however, adversely affect
the ability of a Fund to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Company are prohibited
from dealing with the Funds as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
The Board of Directors has adopted procedures pursuant to Rule 17a-7 under the
1940 Act relating to portfolio transactions among the Funds and other accounts
advised by AIM or AIM Capital and each of the Funds may from time to time enter
into transactions in accordance with such Rule and procedures.
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From time to time, a Fund may sell a security to, or purchase a
security from, an AIM Fund or another investment account advised by AIM or AIM
Capital when such transactions comply with applicable rules and regulations and
are deemed consistent with the investment objective(s) and policies of the
investment accounts involved. Procedures pursuant to Rule 17a-7 under the 1940
Act regarding transactions between investment accounts advised by AIM or AIM
Capital have been adopted by the Board of Directors/Trustees of the various AIM
Funds including the Company. Although such transactions may result in
custodian, tax or other related expenses, no brokerage commissions or other
direct transaction costs are generated by transactions among the investment
accounts advised by AIM or AIM Capital.
In some cases the procedure for allocating portfolio transactions
among the various investment accounts advised by AIM and AIM Capital could have
an adverse effect on the price or amount of securities available to a Fund. In
making such allocations, the main factors considered by AIM are the respective
investment objectives and policies of its advisory clients, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
judgments of the persons responsible for recommending the investment.
SECTION 28(e) STANDARDS
Under Section 28(e) of the Securities Exchange Act of 1934, AIM shall
not be "deemed to have acted unlawfully or to have breached its fiduciary duty"
solely because under certain circumstances it has caused the account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), AIM must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or [its]
overall responsibilities with respect to the accounts as to which [it]
exercises investment discretion," and that the services provided by a broker
provide AIM and AIM Capital with lawful and appropriate assistance in the
performance of their investment decision-making responsibilities. Accordingly,
the price to a Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM and AIM Capital to be
beneficial to the Funds' investment programs. Research services received from
brokers supplement AIM's and AIM Capital's own research (and the research of
sub-advisors to other clients of AIM and AIM Capital), and may include the
following types of information: statistical and background information on
industry groups and individual companies; forecasts and interpretations with
respect to U.S. and foreign economies, securities, markets, specific industry
groups and individual companies; information on political developments;
portfolio management strategies; performance information on securities and
information concerning prices of securities; and information supplied by
specialized services to AIM and AIM Capital and to the Company's directors with
respect to the performance, investment activities and fees and expenses of
other mutual funds. Such information may be communicated electronically, orally
or in written form. Research services may also include the providing of
equipment used to communicate research information, the arranging of meetings
with management of companies and the providing of access to consultants who
supply research information.
The outside research assistance is useful to AIM and AIM Capital since
the brokers utilized by AIM as a group tend to follow a broader universe of
securities and other matters than AIM's and AIM Capital's staff can follow. In
addition, this research provides AIM and AIM Capital with a diverse perspective
on financial markets. Research services which are provided to AIM and AIM
Capital by brokers are available for the benefit of all accounts managed or
advised by AIM and AIM Capital or by sub-advisors to other accounts managed or
advised by AIM and AIM Capital. In some cases, the research services are
available only from the broker providing such services. In other cases, the
research services may be obtainable from alternative sources in return for cash
payments. AIM is of the opinion that because the broker research supplements,
rather than replaces, its research, the receipt of such research does not tend
to decrease its expenses, but tends to improve the quality of its investment
advice. However, to the extent that AIM or AIM Capital would have
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purchased any such research services had such services not been provided by
brokers, the expenses of such services to AIM or AIM Capital could be
considered to have been reduced accordingly. Certain research services
furnished by broker-dealers may be useful to AIM or AIM Capital with clients
other than the Funds. Similarly, any research services received by AIM or AIM
Capital through the placement of portfolio transactions of other clients may be
of value to AIM or AIM Capital in fulfilling their obligations to the Funds.
AIM is of the opinion that this material is beneficial in supplementing AIM's
and AIM Capital's research and analysis; and, therefore, it may benefit the
Funds by improving the quality of the investment advice. The advisory fees paid
by the Funds are not reduced because AIM and AIM Capital receive such services.
Some broker-dealers may indicate that the provision of research services is
dependent upon the generation of certain specified levels of commissions and
underwriting concessions by AIM's and AIM Capital's clients, including the
Funds.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1996, 1995 and 1994, Charter
paid brokerage commissions of $9,213,125, $14,960,600, and $4,188,695,
respectively. For the fiscal year ended October 31, 1996, AIM allocated certain
of Charter's brokerage transactions to certain broker-dealers that provided AIM
with certain research, statistical and other information. Such transactions
amounted to $435,792,811 and the related brokerage commissions were $475,824.
For the fiscal years ended October 31, 1996, 1995 and 1994, Weingarten
paid brokerage commissions of $21,795,437, $21,766,760, and $17,841,982,
respectively. For the fiscal year ended October 31, 1996, AIM allocated certain
of Weingarten's brokerage transactions to certain broker-dealers that provided
AIM with certain research, statistical and other information. Such transactions
amounted to $1,102,413,275 and the related brokerage commissions were
$1,330,688.
For the fiscal years ended October 31, 1996, 1995 and 1994,
Constellation paid brokerage commissions of $13,032,299, $15,359,510, and
$6,921,543 respectively. For the fiscal year ended October 31, 1996 AIM
allocated certain of Constellation's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $923,417,535 and the related
brokerage commissions were $1,267,557.
For the fiscal years ended October 31, 1996, 1995, and 1994 Aggressive
Growth paid brokerage commissions of $3,244,570, $9,917,185, and $1,180,323,
respectively. For the fiscal year ended October 31, 1996, AIM allocated certain
of Aggressive Growth's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $280,907,229 and the related brokerage commissions
were $549,006.
For the fiscal years ended September 30, 1996 and October 31, 1996,
Blue Chip paid brokerage commissions of $121,246 and $39,153, respectively. For
the fiscal year ended October 31, 1996, AIM allocated certain of Blue Chip's
brokerage transactions to certain broker-dealers that provide AIM with certain
research, statistical and other information. Such transactions amounted to
$8,234,550 and the related brokerage commissions were $9,592.
Brokerage commissions paid by the BBC Fund during the fiscal year
ended September 30, 1995, to brokers, other than its investment adviser Robert
W. Baird & Co. Incorporated ("Baird"), totaled $45,867. All of such brokers
provided research services to Baird. During such year, the BBC Fund did not pay
brokerage commissions to Baird. Brokerage commissions paid by the BBC Fund
during the fiscal year ended September 30, 1994 to brokers, other than Baird,
totaled $37,864. All of such brokers provided research services to Baird.
During such year, the BBC Fund did not pay Baird any brokerage commissions.
For the fiscal year ended October 31, 1996, Capital Development paid
brokerage commissions of $219,931. For the fiscal year ended October 31, 1996,
AIM allocated certain of Capital Development's
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brokerage transactions to certain broker-dealers that provide AIM with certain
research, statistical and other information. Such transactions amounted to
$3,951,579 and the related brokerage commissions were $8,944.
PORTFOLIO TURNOVER
The portfolio turnover rate of Aggressive Growth, Capital Development,
Charter, Constellation, Weingarten and Blue Chip is shown under "Financial
Highlights" in the applicable Prospectus. Higher portfolio turnover increases
transaction costs to the Fund.
INVESTMENT OBJECTIVES AND POLICIES
The following discussion of investment policies supplements the
discussion of the investment objectives and policies set forth in the
Prospectus under the heading "Investment Program(s)."
Each of the Funds may invest, for temporary or defensive purposes, all
or substantially all of their assets in investment grade (high quality)
corporate bonds, commercial paper, or U.S. Government obligations. In addition,
a portion of each Fund's assets may be held, from time to time, in cash,
repurchase agreements or other short-term debt securities when such positions
are deemed advisable in light of economic or market conditions. For a
description of the various rating categories of corporate bonds and commercial
paper in which the Funds may invest, see the Appendix to this Statement of
Additional Information.
COMMON STOCKS -- The Funds will invest in common stocks. Common stocks
represent the residual ownership interest in the issuer and are entitled to the
income and increase in the value of the assets and business of the entity after
all of its obligations and preferred stocks are satisfied. Common stocks
generally have voting rights. Common stocks fluctuate in price in response to
many factors including historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
PREFERRED STOCKS -- The Funds may invest in preferred stocks.
Preferred stock has a preference over common stock in liquidation (and
generally dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convertible
preferred stock generally also reflects some element of conversion value.
Because preferred stock is junior to debt securities and other obligations of
the issuer, deterioration in the credit quality of the issuer will cause
greater changes in the value of a preferred stock than in a more senior debt
security with similar stated yield characteristics. Unlike interest payments on
debt securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions.
CONVERTIBLE SECURITIES -- The Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to nonconvertible income securities in
that they ordinarily provide a stable stream of income with generally higher
yields than those of common stocks of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure but
are usually subordinated to comparable nonconvertible securities. Convertible
securities may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. Although each
Fund will only purchase convertible securities that AIM considers to have
adequate protection parameters, including an adequate capacity to pay
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interest and repay principal in a timely manner, it invests without regard to
corporate bond ratings. Capital Development does not intend to invest more
than 5% of its net assets in convertible securities.
CORPORATE DEBT SECURITIES -- The Funds may invest in corporate debt
securities. Corporations issue debt securities of various types, including
bonds and debentures (which are long-term), notes (which may be short- or
long-term), bankers acceptances (indirectly secured borrowings to facilitate
commercial transactions) and commercial paper (short-term unsecured notes).
These securities typically provide for periodic payments of interest, at a rate
which may be fixed or adjustable, with payment of principal upon maturity and
are generally not secured by assets of the issuer or otherwise guaranteed. The
values of fixed rate income securities tend to vary inversely with changes in
interest rates, with longer-term securities generally being more volatile than
shorter-term securities. Corporate securities frequently are subject to call
provisions that entitle the issuer to repurchase such securities at a
predetermined price prior to their stated maturity. In the event that a
security is called during a period of declining interest rates, the Fund may be
required to reinvest the proceeds in securities having a lower yield. In
addition, in the event that a security was purchased at a premium over the call
price, a Fund will experience a capital loss if the security is called.
Adjustable rate corporate debt securities may have interest rate caps and
floors.
Blue Chip will not invest in non-convertible corporate debt securities
rated below investment grade by Standard and Poor's Ratings Services ("S&P") and
Moody's Investors Service ("Moody's") or in unrated non-convertible corporate
debt securities believed by the Fund's investment adviser to be below investment
grade quality. Securities rated in the four highest long-term rating categories
by S&P and Moody's are considered to be "investment grade." S&P's fourth highest
long-term rating category is "BBB", with BBB being the lowest investment grade
rating. Moody's fourth highest long-term rating category is "Baa", with Baa3
being the lowest investment grade rating. Publications of S&P indicate that it
assigns securities to the "BBB" rating category when such securities are
"regarded as having an adequate capacity to pay interest and repay principal.
Such securities normally exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay," whereas securities rated AAA by S&P are regarded as
having "capacity to pay interest and repay principal [that] is extremely
strong." Publications of Moody's indicate that it assigns securities to the "Baa
rating category when such securities are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well," whereas securities rated Aaa by
Moody's "are judged to be of the best quality" and "carry the smallest degree of
investment risk."
U.S. GOVERNMENT SECURITIES -- The Funds may invest in securities
issued or guaranteed by the United States government or its agencies or
instrumentalities. These include Treasury securities (bills, notes, bonds and
other debt securities) which differ only in their interest rates, maturities
and times of issuance. U.S. Government agency and instrumentality securities
include securities which are supported by the full faith and credit of the
U.S., securities that are supported by the right of the agency to borrow from
the U.S. Treasury, securities that are supported by the discretionary authority
of the U.S. Government to purchase certain obligations of the agency or
instrumentality and securities that are supported only by the credit of such
agencies. While the U.S. Government may provide financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it always will do so. The U.S. government, its' agencies and
instrumentalities do not guarantee the market value of their securities and
consequently the values of such securities fluctuate.
FOREIGN SECURITIES
Each of Aggressive Growth, Blue Chip and Capital Development may
invest up to 25% of its total assets in foreign securities. Each of Charter,
Weingarten and Constellation may invest up to 20% of its total assets in
foreign securities. For purposes of computing such limitation American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") and other
securities representing underlying securities of foreign
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issuers are treated as foreign securities. These securities may not necessarily
be denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered form, are designed for
use in the United States securities markets, and EDRs, in bearer form, are
designed for use in European securities markets. ADRs and EDRs may be listed on
stock exchanges, or traded in OTC markets in the United States or Europe, as
the case may be. ADRs, like other securities traded in the United States, will
be subject to negotiated commission rates. Investments by the Fund in
securities of foreign corporations may involve considerations and risks that
are different in certain respects from an investment in securities of U.S.
companies. Such risks include possible imposition of withholding taxes on
interest or dividends, possible adoption of foreign governmental restrictions
on repatriation of income or capital invested, or other adverse political or
economic developments. Additionally, it may be more difficult to enforce the
rights of a security holder against a foreign corporation, and information
about the operations of foreign corporations may be more difficult to obtain
and evaluate.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with
foreign currencies, and consequently the Funds may from time to time hold cash
balances in the form of foreign currencies and multinational currency units.
Such foreign currencies and multinational currency units will usually be
acquired on a spot (i.e. cash) basis at the spot rate prevailing in foreign
exchange markets and will result in currency conversion costs to the Funds. The
Funds attempt to purchase and sell foreign currencies on as favorable a basis
as practicable; however, some price spread on foreign exchange transactions (to
cover service charges) may be incurred, particularly when the Funds change
investments from one country to another, or when U.S. dollars are used to
purchase foreign securities. Certain countries could adopt policies which would
prevent the Funds from transferring cash out of such countries, and the Funds
may be affected either favorably or unfavorably by fluctuations in relative
exchange rates while the Funds hold foreign currencies.
RULE 144A SECURITIES
The Funds may each purchase securities which, while privately placed,
are eligible for purchase and sale pursuant to Rule 144A under the Securities
Act of 1933 (the "1933 Act"). This Rule permits certain qualified institutional
buyers, such as a Fund, to trade in privately placed securities even though
such securities are not registered under the 1933 Act. AIM, under the
supervision of the Company's Board of Directors, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the
Fund's restriction of investing no more than 15% of its assets in illiquid
securities. Determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination AIM will consider the trading
markets for the specific security taking into account the unregistered nature
of a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii)
dealer undertakings to make a market, and (iv) nature of the security and of
market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). The liquidity
of Rule 144A securities will also be monitored by AIM and, if as a result of
changed conditions, it is determined that a Rule 144A security is no longer
liquid, the Fund's holdings of illiquid securities will be reviewed to
determine what, if any, action is required to assure that the Fund does not
invest more than 15% of its assets in illiquid securities. Investing in Rule
144A securities could have the effect of increasing the amount of the Fund's
investments in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Funds may each
make secured loans of portfolio securities amounting to not more than 33-1/3%
of its total assets. None of the Funds currently intend to engage in this
investment practice. Securities loans are made to banks, brokers and other
financial institutions pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times
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to the value of the securities lent marked to market on a daily basis. The
collateral received will consist of cash, U.S. Government securities, letters
of credit or such other collateral as may be permitted under the Fund's
investment program. While the securities are being lent, the Fund will continue
to receive the equivalent of the interest or dividends paid by the issuer on
the securities, as well as interest on the investment of the collateral or a
fee from the borrower. The Fund has a right to call each loan and obtain the
securities on five business days' notice or, in connection with securities
trading on foreign markets, within such longer period of time which coincides
with the normal settlement period for purchases and sales of such securities in
such foreign markets. The Fund will not have the right to vote securities while
they are being lent, but it will call a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. Loans will only be made to persons deemed by AIM to be of good
standing and will not be made unless, in the judgment of AIM, the consideration
to be earned from such loans would justify the risk.
REPURCHASE AGREEMENTS
The Funds may each enter into repurchase agreements. A repurchase
agreement is an instrument under which a Fund acquires ownership of a debt
security and the seller (usually a broker or bank) agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security
during the period in which the Fund seeks to enforce its rights thereto; (b) a
possible subnormal level of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. A repurchase agreement is
collateralized by the security acquired by the Fund and its value is marked to
market daily in order to minimize the Fund's risk. Repurchase agreements
usually are for short periods, such as one or two days, but may be entered into
for longer periods of time.
Charter may enter into repurchase agreements (at any time, up to 50%
of its net assets), using only U.S. Government securities, for the sole purpose
of increasing its yield on idle cash. Charter will not invest in a repurchase
agreement of more than seven days' duration if, as a result of that investment,
the amount of repurchase agreements of more than seven days' duration would
exceed 15% of the assets of Charter.
SPECIAL SITUATIONS
Although Constellation does not currently intend to do so, it may
invest in "special situations." A special situation arises when, in the opinion
of the Fund's management, the securities of a particular company will, within a
reasonably estimable period of time, be accorded market recognition at an
appreciated value solely by reason of a development applicable to that company,
and regardless of general business conditions or movements of the market as a
whole. Developments creating special situations might include, among others:
liquidations, reorganizations, recapitalizations, mergers, material litigation,
technical breakthroughs, and new management or management policies. Although
large and well-known companies may be involved, special situations more often
involve comparatively small or unseasoned companies. Investments in unseasoned
companies and special situations often involve much greater risk than is
inherent in ordinary investment securities. Constellation will not, however,
purchase securities of any company with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the Fund's investment in all such companies, taken at cost, to exceed 5%
of the value of the Fund's total assets.
SHORT SALES
Although Blue Chip, Weingarten, Constellation and Aggressive Growth
do not currently intend to do so, they and Capital Development may each enter
into short sales transactions. None of Blue Chip,
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Weingarten, Constellation, Aggressive Growth or Capital Development will make
short sales of securities nor maintain a short position unless at all times
when a short position is open, the Fund owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short. This is a technique known as selling short "against
the box." Such short sales will be used by each of Blue Chip, Weingarten,
Constellation, Aggressive Growth and Capital Development for the purpose of
deferring recognition of gain or loss for federal income tax purposes. In no
event may more than 10% of the value of the respective Fund's net assets (10%
of the value of total assets of Aggressive Growth) be deposited or pledged as
collateral for such sales at any time.
WARRANTS
The Funds may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the
underlying security, the life of the warrant and various other investment
factors. The investment in warrants by the Funds, valued at the lower of cost
or market, may not exceed 5% of the value of their net assets and not more than
2% of such value may be warrants which are not listed on the New York or
American Stock Exchanges.
OPTIONS
Each of the Funds is authorized to write (sell) covered call options
on the securities in which it may invest and to enter into closing purchase
transactions with respect to such options. A call option is "covered" if
the Fund owns or has the right to acquire the underlying security subject to
the call. Writing a call option obligates a Fund to sell or deliver the
option's underlying security, in return for the strike price, upon exercise
of the option. By writing a call option, the Fund receives an option premium
from the purchaser of the call option. Writing covered call options is
generally a profitable strategy if prices remain the same or fall. Through
receipt of the option premium, the Fund would seek to mitigate the effects of
a price decline. By writing covered call options, however, the Fund gives up
the opportunity, while the option is in effect, to profit from any price
increase in the underlying security above the option exercise price. In
addition, the Fund's ability to sell the underlying security will be limited
while the option is in effect unless the Fund effects a closing purchase
transaction.
Charter, Capital Development, Blue Chip and Weingarten may purchase
put options. A put purchased by the Fund constitutes a hedge against a
decline in the price of a security owned by the Fund. It may be sold at a
profit or loss depending upon changes in the price of the underlying security.
It may be exercised at a profit provided that the amount of the decline in the
price of the underlying security below the exercise price during the option
period exceeds the option premium, or it may expire without value. A call
constitutes a hedge against an increase in the price of a security which the
Fund has sold short, it may be sold at a profit or loss depending upon
changes in the price of the underlying security, it may be exercised at a
profit provided that the amount of the increase in the price of the underlying
security over the exercise price during the option period exceeds the option
premium, or it may expire without value. The maximum loss exposure involved
in the purchase of an option is the cost of the option contract. Capital
Development and Blue Chip may engage in strategies employing combinations of
covered put and call options.
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The Funds do not intend to engage in such transactions for speculative
purposes and will engage in such transactions only for hedging purposes.
COMBINED OPTION POSITIONS
Each Fund, for hedging purposes, may purchase and write options in
combination with each other to adjust the risk and return characteristics of
the Fund's overall position. For example, the Fund may purchase a put option
and write a covered call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. This technique, called a "straddle," enables the
Fund to offset the cost of purchasing a put option with the premium received
from writing the call option. However, by selling the call option, the Fund
gives up the ability for potentially unlimited profit from the put option.
Another possible combined position would involve writing a covered call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written covered call option in the event of a
substantial price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.
FUTURES CONTRACTS
Each of the Funds may purchase and sell futures contracts in order to
hedge the value of its portfolio against changes in market conditions. In cases
of purchases of futures contracts, an amount of cash and cash equivalents,
equal to the cost of the futures contracts (less any related margin deposits),
will be segregated with the Funds' custodian to collateralize the position and
ensure that the use of such futures contracts is unleveraged. Unlike when a
Fund purchases or sells a security, no price is paid or received by a Fund upon
the purchase or sale of a futures contract. Initially, a Fund will be required
to deposit with its custodian for the account of the broker a stated amount, as
called for by the particular contract, of cash or U.S. Treasury bills. This
amount is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in securities transactions in
that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
"variation margin," to and from the broker will be made on a daily basis as the
price of the futures contract fluctuates making the long and short positions in
the futures contract more or less valuable, a process known as
"marking-to-market." For example, when a Fund has purchased a stock index
futures contract and the price of the underlying stock index has risen, that
position will have increased in value and the Fund will receive from the broker
a variation margin payment with respect to that increase in value. Conversely,
where a Fund has purchased a stock index futures contract and the price of the
underlying stock index has declined, that position would be less valuable and
the Fund would be required to make a variation margin payment to the broker.
Variation margin payments would be made in a similar fashion when a Fund has
purchased an interest rate futures contract. At any time prior to expiration of
the futures contract, a Fund may elect to close the position by taking an
opposite position which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund and the Fund
realizes a loss or gain.
A description of the various types of futures contracts that may be
utilized by the Funds is as follows:
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar (or, in the case of Aggressive Growth or
Capital Development, other currency) amount times the difference between the
stock index value at the close of the last trading day of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the underlying stocks in the index is made. Currently, stock index futures
contracts can be purchased or sold primarily with respect to broad based stock
indices such as the Standard & Poor's 500 Stock Index, the New York Stock
Exchange Composite Index, the American Stock Exchange Major Market Index, the
NASDAQ -- 100 Stock Index and the Value Line Stock Index. The stock indices
listed above consist of a spectrum of stocks not limited to any one industry
such as utility stocks. Utility stocks, at most, would be expected to comprise a
minority of the stocks comprising the portfolio of the index. The Funds will
only enter into stock index futures contracts in order to hedge the value of its
portfolio against changes in market conditions. When a Fund anticipates a
significant market or market sector advance, the purchase of a stock index
futures contract affords a hedge against not participating in such advance.
Conversely, in anticipation of or in a general market or market sector decline
that adversely affects the market values of a Fund's portfolio of securities,
the Fund may sell stock index futures contracts.
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Foreign Currency Futures Contracts
With respect to Aggressive Growth and Capital Development only,
futures contracts may also be used to hedge the risk of changes in the exchange
rate of foreign currencies.
OPTIONS ON FUTURES CONTRACTS
Blue Chip, Aggressive Growth and Capital Development may purchase
options on futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon exercise to
assume an offsetting futures position (a short position if the option is a call
and a long position if the option is a put) at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. If an option on a futures contract is exercised on the last
trading date prior to the expiration date of the option, the settlement will be
made entirely in cash equal to the difference between the exercise price of the
option and the closing price of the futures contract on the expiration date.
Blue Chip, Aggressive Growth and Capital Development will purchase put
options on futures contracts to hedge against the risk of falling prices for
their respective portfolio securities. Blue Chip, Aggressive Growth and Capital
Development will purchase call options on futures contracts as a hedge against
a rise in the price of securities which it intends to purchase. Options on
futures contracts may also be used to hedge the risks of changes in the
exchange rate of foreign currencies. The purchase of a put option on a futures
contract is similar to the purchase of protective put options on a portfolio
security or a foreign currency. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security or a foreign currency. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based or the price of the underlying securities or currency, it may or may not
be less risky than ownership of the futures contract or underlying securities
or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks in connection with the use of futures
contracts and related options as hedging devices. One risk arises because of
the imperfect correlation between movements in the price of hedging instruments
and movements in the price of the stock, debt security or foreign currency
which are the subject of the hedge. If the price of a hedging instrument moves
less than the price of the stock, debt security or foreign currency which is
the subject of the hedge, the hedge will not be fully effective. If the price
of a hedging instrument moves more than the price of the stock, debt security
or foreign currency, a Fund will experience either a loss or gain on the
hedging instrument which will not be completely offset by movements in the
price of the stock, debt security or foreign currency which is the subject of
the hedge. The use of options on futures contracts involves the additional risk
that changes in the value of the underlying futures contract will not be fully
reflected in the value of the option.
Successful use of hedging instruments by the Funds is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of foreign exchange rates. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments
and the investments being hedged, even a correct forecast by AIM of general
market trends may not result in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in its portfolio may
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decline. If this occurred, a Fund would lose money on the futures contracts
and also experience a decline in the value of its portfolio securities.
Similar risks exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or, in the case of Blue Chip,
Aggressive Growth and Capital Development, purchase options only on
exchanges or boards of trade where there appears to be an active market, there
is no assurance that a liquid market on an exchange or a board of trade will
exist for any particular contract at any particular time. If there is not a
liquid market, it may not be possible to close a futures position or purchase
an option at such time. In the event of adverse price movements under those
circumstances, the Fund would continue to be required to make daily cash
payments of maintenance margin on its futures positions. The extent to which a
Fund may engage in futures contracts or, in the case of Blue Chip, Aggressive
Growth and Capital Development, related options, will be limited by Internal
Revenue Code requirements for qualification as a regulated investment company
and a Fund's intent to continue to qualify as such. The result of a hedging
program cannot be foreseen and may cause a Fund to suffer losses which it would
not otherwise sustain.
Securities Issued on a When-Issued or Delayed Delivery Basis -
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund's
custodian bank will segregate cash or other high grade securities (including
temporary investments and Municipal Securities) in an amount equal to the
when-issued commitment. If the market value of such securities declines,
additional cash or securities will be segregated on a daily basis so that the
market value of the segregated assets will equal the amount of the Fund's
when-issued commitments. To the extent cash and securities are segregated, they
will not be available for new investments or to meet redemptions. Securities
purchased on a delayed delivery basis may require a similar segregation of cash
or other high grade securities.
INVESTMENT IN UNSEASONED ISSUERS
Charter may purchase securities in unseasoned issuers. Securities in
such issuers may provide opportunities for long term capital growth. Greater
risks are associated with investments in securities of unseasoned issuers than
in the securities of more established companies because unseasoned issuers have
only a brief operating history and may have more limited markets and financial
resources. As a result, securities of unseasoned issuers tend to be more
volatile than securities of more established companies.
INVESTMENT RESTRICTIONS
The following fundamental policies and investment restrictions have
been adopted by each Fund as indicated and, except as noted, such policies
cannot be changed without the approval of a majority of the outstanding voting
securities of the Fund, as defined in the 1940 Act.
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BLUE CHIP
Blue Chip may not:
(a) issue bonds, debentures or senior equity securities;
(b) concentrate its investments; that is, invest 25% or more
of the value of its assets in issuers which conduct their business
operations in the same industry;
(c) invest in real estate, except that this restriction does
not preclude investments in real estate investment trusts;
(d) write, purchase, or sell puts, calls, straddles, spreads
or combinations thereof (other than covered put and call options), or
sell securities short (except against the box collateralized by not
more than 10% of its net assets) or deal in commodities;
(e) make loans, except that the purchase of a portion of an
issue of publicly distributed bonds, debentures or other debt
securities, or purchasing short-term obligations, is not considered to
be a loan for purposes of this restriction, provided that the Fund may
lend its portfolio securities provided the value of such loaned
securities does not exceed 33-1/3% of its total assets;
(f) purchase securities on margin, except that the Fund may
obtain such short term credits as may be necessary for the clearance
of purchases or sales of securities;
(g) borrow money or pledge its assets except that, as a
temporary measure for extraordinary or emergency purposes and not for
investment purposes, the Fund may borrow from banks (including the
Fund's custodian bank) amounts of up to 10% of the value of its total
assets, and may pledge amounts of up to 20% of its total assets to
secure such borrowings; or
(h) act as an underwriter of securities of other issuers.
In addition, Blue Chip may not (a) purchase warrants, valued at the
lower of cost or market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges; (b) purchase or retain the securities of
any issuer, if the officers and directors of the Company, its advisors or
distributor who own individually more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such issuer; (c) with
respect to 75% of the Fund's total assets, invest more than 5% of the total
assets of the Fund (valued at market) in securities of any one issuer (other
than obligations of the U.S. Government and its instrumentalities) or purchase
more than 10% of the outstanding securities of any one issuer or more than 10%
of any class of securities of an issuer; (d) deal in forward contracts; (e)
invest in interests in oil, gas or other mineral exploration or development
programs; or (f) purchase additional securities when any borrowings from banks
exceed 5% of the Fund's total assets. These additional restrictions are not
fundamental, and may be changed by the Board of Directors of the Company
without shareholder approval.
To permit the sale of shares of Blue Chip in Texas, investments by
Blue Chip in warrants, valued at the lower of cost or market, may not exceed 5%
of the value of Blue Chip's net assets. Included within that
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amount, but not to exceed 2% of Blue Chip's net assets, may be warrants which
are not listed on the New York or American Stock Exchanges. This restriction
is not a fundamental policy.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
CHARTER
Charter may not:
(a) purchase the securities of any one issuer (except securities
issued or guaranteed by the U.S. Government) if, immediately after and as a
result of such purchase, (i) the value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the value of the Fund's total assets,
or (ii) the Fund owns more than 10% of the outstanding voting securities of any
one class of securities of such issuer, except that the Fund may purchase
securities of other investment companies to the extent permitted by applicable
law or exemptive order;
(b) concentrate its investments; that is, invest 25% or more of the
value of its assets in any particular industry;
(c) purchase or sell real estate or other interests in real estate
(except that this restriction does not preclude investments in marketable
securities of companies engaged in real estate activities);
(d) buy or sell physical commodities or physical commodity contracts,
including physical commodities futures contracts, or deal in oil, gas, or other
mineral exploration or development programs;
(e) make loans (except that the purchase of a portion of an issue of
publicly distributed bonds, debentures or other debt securities, or entering
into a repurchase agreement, is not considered to be a loan for purposes of
this restriction), provided that the Fund may lend its portfolio securities
provided the value of such loaned securities does not exceed 33-1/3% of its
total assets;
(f) purchase securities on margin or sell short;
(g) borrow money or pledge its assets except that, as a temporary
measure for extraordinary or emergency purposes and not for investment
purposes, the Fund may borrow from banks (including the Fund's custodian bank)
amounts of up to 10% of the value of its total assets, and may pledge amounts
of up to 20% of its total assets to secure such borrowings;
(h) invest in companies for the purpose of exercising control or
management, except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive order;
(i) act as an underwriter of securities of other issuers;
(j) purchase from or sell to any officer, director or employee of the
Fund, or its advisors or distributor, or to any of their officers or directors,
any securities other than shares of the capital stock of Charter; or
(k) purchase or retain the securities of any issuer if those officers
and directors of the Company, its advisors or distributor owning individually
more than 1/2 of 1% of the securities of such issuer, together own more than 5%
of the securities of such issuer.
To permit the sale of shares of Charter in Texas, investments by
Charter in warrants, valued at the lower of cost or market, may not exceed 5%
of the value of Charter's net assets. Included within that amount,
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but not to exceed 2% of Charter's net assets, may be warrants which are not
listed on the New York or American Stock Exchanges. In addition, Charter may not
(a) write covered call options in excess of 25% of the value of the Fund's net
assets, (b) purchase put options in excess of 25% of the value of the Fund's net
assets, (c) engage in the writing and sale of put options and the writing, sale
or purchase of uncovered call options, straddles, spreads or combinations
thereof; (d) issue senior securities, except to the extent permitted by
applicable law or exemptive order; or (e) purchase additional securities when
any borrowings from banks exceed 5% of the Fund's total assets. These
restrictions are not fundamental and may be changed by the Board of Directors of
the Company without shareholder approval.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
WEINGARTEN
Weingarten may not:
(a) issue bonds, debentures or senior equity securities;
(b) underwrite securities of other companies or purchase restricted
securities ("letter stock");
(c) invest in real estate, except that the Fund may purchase
securities of real estate investment trusts;
(d) lend money, except in connection with the acquisition of a portion
of an issue of publicly distributed bonds, debentures or other corporate or
governmental obligations, provided that the Fund may lend its portfolio
securities provided the value of such loaned securities does not exceed 33-1/3%
of its total assets;
(e) purchase securities on margin, except that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities;
(f) purchase shares in order to control management of a company,
except that the Fund may purchase securities of other investment companies to
the extent permitted by applicable law or exemptive order;
(g) buy or sell physical commodities or physical commodity contracts,
including physical commodities futures contracts;
(h) invest 25% or more of the value of its total assets in securities
of issuers all of which conduct their principal business activities in the same
industry; or
(i) borrow money or pledge its assets, except that, as a temporary
measure for extraordinary or emergency purposes and not for investment
purposes, the Fund may borrow from banks (including the Fund's custodian bank)
amounts of up to 10% of the value of its total assets, and may pledge amounts
of up to 20% of its total assets to secure such borrowings.
In addition, Weingarten may not (a) purchase warrants, valued at the
lower of cost or market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges; (b) purchase or retain the securities of
any issuer, if the officers and directors of the Company, its advisors or
distributor who own individually more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such issuer; (c) invest
more than 5% of the total assets of the Fund (valued at market) in securities
of any one issuer (other than obligations of the U.S. Government and its
instrumentalities); (d) purchase more than 10% of the outstanding securities of
any one issuer or more than 10% of any class of securities of an issuer; (e)
deal in forward contracts; (f) invest in interests in oil, gas or other mineral
exploration or development programs;
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(g) write covered call options in excess of 25% of the value of the Fund's net
assets; (h) purchase put options in excess of 25% of the value of the Fund's net
assets; (i) engage in the writing and sale of put options and the writing,
sale or purchase of uncovered call options, straddles, spreads or combinations
thereof; or (j) purchase additional securities when any borrowings from banks
exceed 5% of the Fund's total assets. These additional restrictions are not
fundamental, and may be changed by the Board of Directors of the Company
without shareholder approval.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
CONSTELLATION
Constellation may not:
(a) invest for the purpose of exercising control over or management
of any company, except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order;
(b) engage in the underwriting of securities of other issuers;
(c) purchase and sell real estate or commodities or commodity
contracts;
(d) make loans, except by the purchase of a portion of an issue of
publicly distributed bonds, debentures or other obligations, provided that the
Fund may lend its portfolio securities provided the value of such loaned
securities does not exceed 33-1/3% of its total assets;
(e) invest in interests in oil, gas or other mineral exploration or
development programs; or
(f) invest 25% or more of the value of its total assets in securities
of issuers all of which conduct their principal business activities in the same
industry.
In addition, Constellation treats as fundamental its policy concerning
borrowing described under the caption "Investment Programs - Investment
Restrictions - Borrowing" in the Prospectus. In accordance with this policy,
the Fund may borrow funds from a bank (including its custodian bank) to
purchase or carry securities only if, immediately after such borrowing, the
value of the Fund's assets, including the amount borrowed, less its
liabilities, is equal to at least 300% of the amount borrowed, plus all
outstanding borrowings. For the purpose of determining this 300% asset coverage
requirement, the Fund's liabilities will not include the amount borrowed but
will include the market value, at the time of computation, of all securities
borrowed by the Fund in connection with short sales. The amount of borrowing
will also be limited by the applicable margin limitations imposed by the
Federal Reserve Board. If at any time the value of the Fund's assets should
fail to meet the 300% asset coverage requirement, the Fund will, within three
days, reduce its borrowings to the extent necessary. The Fund may be required
to eliminate partially or totally its outstanding borrowings at times when it
may not be desirable for it to do so.
The Board of Directors of the Company has also adopted the following
limitations which are not matters of fundamental policy of Constellation and
which may be changed without shareholder approval:
(a) the Fund may not purchase or retain the securities of any issuer,
if those officers and directors of the Company, its advisors or distributor
owning individually more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;
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(b) the Fund may not purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of the Fund's net assets, and no more than
2% of such value may be warrants which are not listed on the New York or
American Stock Exchanges;
(c) the Fund may not issue senior securities, except to the extent
permitted by applicable law or exemptive order; or
(d) the Fund may not purchase additional securities when any
borrowings from banks exceed 5% of the Fund's total assets.
Except for the borrowing policy, if a percentage restriction is
adhered to at the time of investment, a later change in the percentage of such
investment held by a Fund resulting solely from changes in values or assets,
will not be considered to be a violation of the restriction.
AGGRESSIVE GROWTH
Aggressive Growth may not:
(a) with respect to 75% of the total assets of the Fund, purchase the
securities of any issuer if such purchase would cause more than 5% of the value
of its assets to be invested in the securities of such issuer (except U.S.
Government securities including securities issued by its agencies and
instrumentalities and except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order);
(b) concentrate 25% or more of its investments in a particular
industry;
(c) make short sales of securities (unless at all times when a short
position is open it either owns an amount of such securities or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short, and unless not more than 10% of the Fund's total assets
(taken at current value) is held for such sales at any one time) or purchase
securities on margin, but it may obtain such short-term credit as is necessary
for the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures contracts and
options thereon;
(d) act as a securities underwriter under the 1933 Act;
(e) make loans, except (i) through the purchase of a portion of an
issue of bonds or other obligations of types commonly offered publicly and
purchased by financial institutions, and (ii) through the purchase of
short-term obligations (maturing within a year), including repurchase
agreements, provided that the Fund may lend its portfolio securities provided
the value of such loaned securities does not exceed 33-1/3% of its total
assets;
(f) borrow, except that the Fund may enter into stock index futures
contracts and that the right is reserved to borrow from banks, provided that no
borrowing may exceed one-third of the value of its total assets (including the
proceeds of such borrowing) and may secure such borrowings by pledging up to
one-third of the value of its total assets. (For the purposes of this
restriction, neither collateral arrangements with respect to margin for a stock
index futures contracts nor the segregation of securities in connection with
short sales are deemed to be a pledge of assets); or
(g) buy or sell commodities, commodity contracts or real estate.
Aggressive Growth does not intend (a) to invest for the purposes of
influencing management or exercising control; (b) to purchase interests in oil,
gas or other mineral exploration or development programs; (c) to purchase
securities which are subject to restrictions on disposition under the 1933 Act;
(d) to buy or sell mortgages; (e) to purchase or retain the securities of any
issuer if the officers or directors of the Company and its investment advisor
who own beneficially more than 1/2 of 1% of the securities of such issuer
together own more than 5%
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of the securities of such issuer; and (f) to purchase additional securities
when any borrowings from banks exceed 5% of the Fund's total assets. Aggressive
Growth may purchase securities directly from an issuer for its own portfolio and
may dispose of such securities. The investment policies stated in this paragraph
are not fundamental policies of the Funds and may be changed by the Board of
Directors of the Company without shareholder approval. Shareholders will be
notified before any material change in the investment policies stated above
become effective.
To permit the sale of shares of Aggressive Growth in Texas, Aggressive
Growth may not: (a) purchase warrants, valued at the lower of cost or market,
in excess of 5% of the value of the Fund's net assets, and no more than 2% of
such value may be warrants which are not listed on the New York or American
Stock Exchanges; (b) invest more than 15% of its average net assets at the time
of purchase of investments which are not readily marketable. These restrictions
are not fundamental policies and may be changed by the directors without
shareholder approval.
Except for the borrowing policy, if a percentage restriction is
adhered to at the time of investment, a later change in the percentage of such
investment held by a Fund resulting solely from changes in values or assets
will not be considered to be a violation of the restriction.
CAPITAL DEVELOPMENT
Capital Development may not:
(a) with respect to 75% of the total assets of the Fund, purchase the
securities of any one issuer (except securities issued or guaranteed by the
U.S. Government) if, immediately after and as a result of such purchase, (i)
the value of the holdings of the Fund in the securities of such issuer exceeds
5% of the value of the Fund's total assets, or (ii) the Fund owns more than 10%
of the outstanding voting securities of any one class of securities of such
issuer, except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive order;
(b) concentrate its investments; that is, invest 25% or more of the
value of its total assets in issuers who conduct their business operations in
the same industry;
(c) buy or sell commodities or commodity contracts or purchase or sell
real estate or other interests in real estate including real estate limited
partnership interests, except that this restriction does not preclude
investments in marketable securities of companies engaged in real estate
activities or in master limited partnership interests that are traded on a
national securities exchange;
(d) make loans, except that the purchase of a portion of an issue of
publicly distributed bonds, debentures or other debt securities, or purchasing
short-term obligations, is not considered to be a loan for purposes of this
restriction, provided that the Fund may lend its portfolio securities provided
the value of such loaned securities does not exceed 33-1/3% of its total
assets;
(e) purchase securities on margin, except that the Fund may obtain
such short term credits as may be necessary for the clearance of purchases or
sales of securities, or sell securities short (except against the box and
collateralized by not more than 10% of its net assets);
(f) borrow money or pledge its assets except that, as a temporary
measure for extraordinary or emergency purposes and not for investment
purposes, the Fund may borrow from banks (including the Fund's custodian bank)
provided that no borrowing may exceed one-third of the value of its total
assets, including the proceeds of such borrowings, and may secure such
borrowings by pledging up to one-third of the value of its total assets;
(g) act as an underwriter of securities of other issuers; or
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(h) issue bonds, debentures, or senior equity securities.
In addition, Capital Development may not (a) purchase warrants, valued
at the lower of cost or market, in excess of 5% of the value of the Fund's net
assets, and no more than 2% of such value may be warrants which are not listed
on the New York or American Stock Exchanges; (b) purchase or retain the
securities of any issuer, if the officers and directors of the Company, its
advisors or distributor who own individually more than 1/2 of 1% of the
securities of such issuer, together own more than 5% of the securities of such
issuer; (c) deal in forward contracts (other than foreign exchange
transactions for hedging purposes); (d) invest in interests in oil, gas or
other mineral exploration or development programs; or (e) purchase additional
securities when any borrowings from banks exceed 5% of the Fund's total assets.
These additional restrictions are not fundamental, and may be changed by the
Board of Directors of the Company without shareholder approval.
To permit the sale of shares of Capital Development in Texas,
investments by the Fund in warrants, valued at the lower of cost or market, may
not exceed 5% of the value of the Fund's net assets. Included within that
amount, but not to exceed 2% of the Fund's net assets, may be warrants which
are not listed on the New York or American Stock Exchanges. This restriction is
not a fundamental policy.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values or assets will not
be considered a violation of the restriction.
ADDITIONAL RESTRICTIONS
In order to permit the sale of the Funds' shares in certain states,
each Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of
fundamental policy, and should a Fund determine that any such commitment is no
longer in the best interests of the Fund and its shareholders, it will revoke
the commitment by terminating sales of its shares in the states involved.
In order to comply with an undertaking to the State of Texas, each
Fund has agreed that any restriction on investments in "oil, gas and other
mineral exploration or development programs" shall include mineral leases and
any restriction on investments in "real estate or other interests in real
estate" shall include real estate limited partnerships.
In order to comply with an undertaking to the State of Arkansas, Blue
Chip and Capital Development have agreed to limit investments in securities
which the Company is restricted from selling to the public without registration
under the 1933 Act to 10% of their respective total assets.
For purposes of the investment restrictions described above, the Funds
do not consider investments in financial futures to be investments in
commodities.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during the last five years are set forth below. Unless otherwise
indicated, the address of each director and officer is 11 Greenway Plaza,
23
<PAGE> 71
Suite 100, Houston, TX 77046-1173. All of the Company's executive officers
hold similar offices with some or all of the other AIM Funds.
*CHARLES T. BAUER, Director and Chairman (78)
Chairman of the Board of Directors, A I M Management Group Inc., A I M
Advisors, Inc., A I M Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc., A I M Institutional Fund Services, Inc. and Fund Management
Company; and Vice Chairman and Director, AMVESCAP PLC.
BRUCE L. CROCKETT, Director (53)
906 Frome Lane
McLean, VA 22102
Director, ACE Limited (insurance company). Formerly, Director,
President and Chief Executive Officer, COMSAT Corporation; and Chairman, Board
of Governors of INTELSAT (international communications company).
OWEN DALY II, Director (73)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF& I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.
JACK FIELDS, Director (45)
2607 Old Humble Rd.
Humble, Texas 77396
Formerly, Member of the U.S. House of Representatives.
**CARL FRISCHLING, Director (60)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & Frankel (law firm). Director, ERD
Waste, Inc. (waste management company), Aegis Consumer Finance (auto leasing
company) and Lazard Funds, Inc. (investment companies). Formerly, Partner,
Reid & Priest (law firm); and prior thereto, Partner, Spengler Carlson Gubar
Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Director and President (50)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; Director and Senior
Vice President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc., A I M Institutional Fund Services, Inc. and Fund
Management Company; and Director, AMVESCAP PLC.
- --------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
** A director who is an "interested person" of the Company as defined in the
1940 Act.
24
<PAGE> 72
JOHN F. KROEGER, Director (73)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Fund, Inc. Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund,
Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (54)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (74)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (58)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
***JOHN J. ARTHUR, Senior Vice President and Treasurer (53)
Senior Vice President and Treasurer, A I M Advisors, Inc.; and Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company.
GARY T. CRUM, Senior Vice President (50)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc. and A I M Advisors, Inc.;
and Director, A I M Distributors, Inc. and AMVESCAP PLC.
- --------
*** Mr. Arthur and Ms. Relihan are married to each other.
25
<PAGE> 73
JONATHAN C. SCHOOLAR, Senior Vice President (36)
Director and Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
***CAROL F. RELIHAN, Senior Vice President and Secretary (42)
Senior Vice President, General Counsel and Secretary, A I M Advisors
Inc.; Vice President, General Counsel and Secretary, A I M Management Group
Inc.; Vice President and General Counsel, Fund Management Company; and Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc.
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (38)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (54)
Vice President and Chief Compliance Officer, A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services,
Inc. and A I M Institutional Fund Services, Inc. and Fund Management Company.
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. The Audit Committee
is responsible for meeting with the Company's auditors to review audit
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the directors as a whole with respect to the
Company's fund accounting or its internal accounting controls, and considering
such matters as may from time to time be set forth in a charter adopted by the
Board of Directors and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. The
Investment Committee is responsible for reviewing portfolio compliance,
brokerage allocation, portfolio investment pricing issues, interim dividend and
distribution issues, and considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Fields, Kroeger, Pennock (Chairman), Robinson and Sklar. The
Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as directors who are not interested
persons as long as the Company maintains a distribution plan pursuant to Rule
12b-1 under the 1940 Act, reviewing from time to time the compensation payable
to the disinterested directors, and considering such matters as may from time to
time be set forth in a charter adopted by the Board of Directors and such
committee.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee attended. Each director
who is not also an officer of the Company is compensated
*** Mr. Arthur and Ms. Relihan are married to each other.
26
<PAGE> 74
for his or her services according to a fee schedule which recognizes the fact
that such director also serves as a director or trustee of other AIM Funds.
Each such director receives a fee, allocated among the AIM Funds for which he
or she serves as a director or trustee, which consists of an annual retainer
component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each director of the Company:
<TABLE>
<CAPTION>
===============================================================================================================
RETIREMENT
AGGREGATE BENEFITS
COMPENSATION ACCRUED TOTAL
FROM THE BY ALL AIM COMPENSATION
DIRECTOR COMPANY(1) FUNDS(2) FROM ALL AIM FUNDS(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------------
Bruce L. Crockett 17,587 3,655 68,000
- ---------------------------------------------------------------------------------------------------------------
Owen Daly II 19,846 18,662 68,000
- ---------------------------------------------------------------------------------------------------------------
Jack Fields(4) 0 0 0
- ---------------------------------------------------------------------------------------------------------------
Carl Frischling 19,315 11,323 68,000
- ---------------------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ---------------------------------------------------------------------------------------------------------------
John F. Kroeger 18,858 22,313 66,000
- ---------------------------------------------------------------------------------------------------------------
Lewis F. Pennock 17,250 5,067 67,000
- ---------------------------------------------------------------------------------------------------------------
Ian Robinson 17,620 15,381 68,000
- ---------------------------------------------------------------------------------------------------------------
Louis S. Sklar 19,477 6,632 66,500
===============================================================================================================
</TABLE>
(1) The total amount of compensation deferred by all Directors of the Company
during the fiscal year ended October 31, 1996, including interest earned
thereon, was $69,742.
(2) During the fiscal year ended October 31, 1996, the total amount of
expenses allocated to the Company in respect of such retirement benefits
was $141,139. Data reflects compensation for the calendar year ended
December 31, 1996.
(3) Each Director serves as director or trustee of a total of 11 registered
investment companies advised by AIM. Data reflects compensation for the
calendar year ended December 31, 1996.
(4) Mr. Fields was not serving as a Director during the fiscal year ended
October 31, 1996.
(5) See also page 29 regarding fees earned by Mr. Frischling's law firm.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may
be entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the
27
<PAGE> 75
calendar quarter coincident with or following his date of retirement equal to
75% of the retainer paid or accrued by the Applicable AIM Funds for such
director during the twelve-month period immediately preceding the director's
retirement (including amounts deferred under a separate agreement between the
Applicable AIM Funds and the director) for the number of such director's years
of service (not in excess of 10 years of service) completed with respect to any
of the Applicable AIM Funds. Such benefit is payable to each eligible director
in quarterly installments. If an eligible director dies after attaining the
normal retirement date but before receipt of any benefits under the Plan
commences, the director's surviving spouse (if any) shall receive a quarterly
survivor's benefit equal to 50% of the amount payable to the deceased director
for no more than ten years beginning the first day of the calendar quarter
following the date of the director's death. Payments under the Plan are not
secured or funded by any Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Fields, Frischling, Kroeger, Pennock, Robinson and
Sklar are 10, 10, 0, 20, 19, 15, 10 and 7 years, respectively.
<TABLE>
<CAPTION>
ESTIMATED BENEFITS UPON RETIREMENT
==============================================================================
Number of Annual Compensation
Years of Paid By All AIM Funds
Service With
the AIM Fund $80,000
- ------------------------------------------------------------------------------
<S> <C> <C>
10 $60,000
- ------------------------------------------------------------------------------
9 $54,000
- ------------------------------------------------------------------------------
8 $48,000
- ------------------------------------------------------------------------------
7 $42,000
- ------------------------------------------------------------------------------
6 $36,000
- ------------------------------------------------------------------------------
5 $30,000
==============================================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Company, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring director's retirement benefits commence under the Plan. The Company's
Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Company. If a deferring director
dies prior to the distribution of amounts in his deferral account, the balance
of the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after such deferring director's
death. The Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Company and of each other AIM Fund from which
they are deferring compensation.
28
<PAGE> 76
The Company paid the law firm of Kramer, Levin, Naftalis & Frankel
$8,908, $14,974, $12,003 and $21,521 in legal fees for services provided to
Charter, Weingarten, Aggressive Growth and Constellation, respectively, during
the fiscal year ended October 31, 1996, and $428 in legal fees for services
provided to Blue Chip during the period June 3, 1996 through October 31, 1996,
and $415 in legal fees for services provided to Capital Development during the
period June 17, 1996 through October 31, 1996. Mr. Carl Frischling, a director
of the Company, is a partner in such firm.
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES AND SUB-ADVISORY AGREEMENTS
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046. AIM
Management, an indirect wholly owned subsidiary of AMVESCAP PLC. is a holding
company that has been engaged in the financial services business since 1976.
AMVESCAP and its subsidiaries are an independent investment management group
engaged in institutional investment management and retail mutual fund
businesses in the United States, Europe and the Pacific Region. Certain of the
directors and officers of AIM are also executive officers of the Company and
their affiliations are shown under "Directors and Officers". AIM Capital, a
wholly owned subsidiary of AIM, is engaged in the business of providing
investment advisory services to investment companies, corporations, institutions
and other accounts.
AIM was organized in 1976, and, together with its subsidiaries, advises
or manages 55 investment company portfolios. As of October 1, 1997, the total
assets of the investment company portfolios advised or managed by AIM and its
affiliates were approximately $81.6 billion.
AIM and the Company have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund, and (d) abide by certain other provisions under the
Code of Ethics. The Code of Ethics also prohibits investment personnel and all
other AIM employees from purchasing securities in an initial public offering.
Personal trading reports are reviewed periodically by AIM, and the Board of
Directors reviews quarterly and annual reports (including information on any
substantial violations of the Code of Ethics). Sanctions for violations of the
Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
The Funds have entered into a Master Investment Advisory Agreement
dated as of February 28, 1997, as amended (the "Master Advisory Agreement") and
a Master Administrative Services Agreement dated as of February 28, 1997, as
amended (the "Master Administrative Services Agreement") with AIM. In addition,
AIM has entered into a Master Sub-Advisory Agreement dated as of February 28,
1997 (the "Master Sub-Advisory Agreement") with AIM Capital with respect to
Charter, Weingarten and Constellation. Prior to June 30, 1992, Aggressive
Growth's investment advisor was CIGNA Investments, Inc. ("CII") (such agreement
hereinafter referred to as the "CII Agreement").
Both the Master Advisory Agreement and the Master Sub-Advisory
Agreement provide that the Fund will pay or cause to be paid all expenses of
the Fund not assumed by AIM or AIM Capital, including, without limitation:
brokerage commissions, taxes, legal, auditing or governmental fees, the cost of
preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption, and repurchase of shares, expenses
of registering and qualifying shares for sale, expenses relating to directors
and shareholder meetings, the cost of preparing and distributing reports and
notices to shareholders, the fees and other expenses incurred by the Company on
behalf of the Fund in connection with membership in investment company
organizations, the cost of printing copies of prospectuses and statements of
additional information distributed to the Funds' shareholders and all other
charges and costs of the Funds' operations unless otherwise explicitly
provided.
The Master Advisory Agreement and the Master Sub-Advisory Agreement
each provide that if, for any fiscal year, the total of all ordinary business
expenses of any Fund, including all investment advisory fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses,
such as litigation,
29
<PAGE> 77
exceed the applicable expense limitations imposed by state
securities regulations in any state in which such Fund's shares are qualified
for sale, as such limitations may be raised or lowered from time to time, the
aggregate of all such investment advisory fees with respect to such Fund shall
be reduced by the amount of such excess. The amount of any such reduction to be
borne by AIM shall be deducted from the monthly investment advisory fees
otherwise payable to AIM with respect to such Fund during such fiscal year. If
required pursuant to such state securities regulations, AIM will reimburse each
Fund, no later than the last day of the first month of the next succeeding
fiscal year, for any such annual operating expenses (after reduction of all
investment advisory fees in excess of such limitation).
The Master Advisory Agreement and the Master Sub-Advisory Agreement
became effective on February 28, 1997 and will continue in effect until
February 28, 1999 and from year to year thereafter only if such continuance
is specifically approved at least annually by (i) the Company's Board of
Directors or the vote of a "majority of the outstanding voting securities" of
the Funds (as defined in the 1940 Act), and (ii) the affirmative vote of a
majority of the directors who are not parties to the agreements or
"interested persons" of any such party (the "Non-Interested Directors")
by votes cast in person at a meeting called for such purpose. Each agreement
provides that the Funds, AIM (in the case of the Master Advisory Agreement)
or AIM Capital (in the case of the Master Sub-Advisory Agreement) may
terminate such agreement on 60 days' written notice without penalty. Each
agreement terminates automatically in the event of its assignment.
AIM may from time to time waive or reduce its fee. Fee waivers or
reductions, other than those set forth in the Master Advisory Agreement, may be
rescinded, however, at any time without further notice to investors, provided
however, that the discontinuance of each fee waiver described below will be
approved by the Board of Directors of AIM. AIM has agreed to waive fees for two
years to the extent necessary to keep the expense ratio for Class A shares of
Blue Chip at 1.31%. AIM has agreed to waive fees for one year to the extent
necessary to keep the expense ratio for Class A shares of Capital Development
at 1.34%.
AIM has initiated a voluntary reduction of advisory fees for Charter,
Constellation and Weingarten at net asset levels higher than those currently
incorporated in the advisory fee schedule. Accordingly, with respect to each of
Charter and Constellation, AIM receives a fee calculated at an annual rate of
1.0% of the first $30 million of such Fund's average daily net assets, plus
0.75% of such Fund's average daily net assets in excess of $30 million to and
including $150 million, plus 0.625% of such Fund's average daily net assets in
excess of $150 million. With respect to Weingarten, AIM's fee is calculated at
an annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $350 million, plus 0.625% of the Fund's average daily
net assets in excess of $350 million. With respect to Aggressive Growth, AIM's
fee is calculated at an annual rate of 0.80% of the first $150 million of the
Fund's average daily net assets, plus 0.625% of the Fund's average daily net
assets in excess of $150 million. With respect to Blue Chip and Capital
Development, AIM is entitled to receive a fee calculated at an annual rate of
0.75% of the first $350 million of such Fund's average daily net assets, plus
0.625% of such Fund's average daily net assets in excess of $350 million. As
compensation for its services, AIM pays 50% of the advisory fees it receives
pursuant to the Master Advisory Agreement with respect to Charter, Weingarten
and Constellation to AIM Capital.
Each Fund paid to AIM the following advisory fees net of any expense
limitations (fee waivers) for the years ended October 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Blue Chip.............................. $ 256,773* N/A N/A
Capital Development.................... 280,248** N/A N/A
Charter................................ 16,529,891 $ 10,890,335 $ 10,447,924
Weingarten............................. 29,960,379 25,448,131 6,472,250
Constellation.......................... 57,614,412 31,042,229 19,926,116
Aggressive Growth...................... 16,492,564 6,974,263 1,903,277
</TABLE>
- -------------
30
<PAGE> 78
* For the period from June 3, 1996 (date of acquisition) through
September 30, 1996 it was $188,544, and for the period October 1,
1996 through October 31, 1996 it was $68,229.
** For the period from June 17, 1996 (date operations commenced) through
October 31, 1996.
For the fiscal year ended October 31, 1996, 1995 and 1994, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Blue Chip ..................... $ 26,433* N/A N/A
Capital Development ........... 144,946** N/A N/A
Charter ....................... 156,975 $ 0 $ 0
Weingarten .................... 1,458,804 843,494 981,836
Constellation ................. 1,869,383 761,655 298,484
Aggressive Growth ............. 0 788,943 0***
</TABLE>
- -------------
* For the period from June 3, 1996 (date of acquisition) through
September 30, 1996 it was $19,409, and for the period October 1, 1996
through October 31, 1996 it was $7,024.
** For the period from June 17, 1996 (date operations commenced) through
October 31, 1996.
*** AIM reimbursed expenses of $133,000 during the year ended October 31,
1994.
Prior to June 3, 1996, the investment adviser to Blue Chip was Baird.
Baird was also the Fund's distributor. Baird is an indirect partially-owned
subsidiary of, and controlled by, The Northwestern Mutual Life Insurance
Company. The BBC Fund and Baird entered into an investment advisory agreement
pursuant to which Baird furnished continuous investment advisory services to
the BBC Fund. That investment advisory agreement was terminated in connection
with the reorganization of the BBC Fund. For the period October 1, 1995 through
June 3, 1996 and during the fiscal years ended September 30, 1995 and September
30, 1994, the BBC Fund paid Baird fees of $370,615, $469,802, and $454,724,
respectively.
AIM, in turn, paid the following sub-advisory fees to AIM Capital, as
sub-advisor for Charter, Constellation and Weingarten, for the years ended
October 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Charter................................ $ 8,264,946 $ 5,445,168 $ 5,223,962
Weingarten............................. 14,980,190 12,724,066 13,236,125
Constellation.......................... 28,807,206 15,521,115 9,963,058
</TABLE>
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting and, shareholder
services and other administrative services to each Fund which are not required
to be performed by AIM under the Master Advisory Agreement. For such services,
AIM would be entitled to receive from each Fund reimbursement of its costs or
such reasonable compensation as may be approved by the Company's Board of
Directors. The Master Administrative Services Agreement became effective on
February 28, 1997 and will continue in effect until February 28, 1999 and from
year to year thereafter only if such continuance is specifically approved at
least annually by (i) the Company's Board of Directors or the vote of a
"majority of the outstanding voting securities" of the Funds (as defined in
the 1940 Act), and (ii) the affirmative vote of a majority of the
Non-Interested Directors by votes cast in person at a meeting called for such
purpose.
31
<PAGE> 79
In addition, the Transfer Agency and Service agreement for the Fund
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent
and wholly-owned subsidiary of AIM, will perform certain shareholder services
for the Fund for a fee per account serviced. The Transfer Agency and Service
Agreement provides that AFS will receive a per account fee plus out-of-pocket
expenses to process orders for purchases, redemptions and exchanges of shares,
prepare and transmit payments for dividends and distributions declared by the
Fund, maintain shareholder accounts and provide shareholders with information
regarding the Fund and their accounts. The Transfer Agency and Service
Agreement became effective on November 1, 1994.
The Funds paid AIM the following amounts as reimbursement of
administrative services costs for the years ended October 31, 1996, 1995 and
1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Blue Chip........................... $ 20,545* N/A N/A
Capital Development................. 19,841** N/A N/A
Charter............................. 114,489 $ 109,054 $ 980,837
Weingarten.......................... 132,643 182,595 3,161,130
Constellation....................... 212,800 173,257 2,196,752
Aggressive Growth................... 97,857 71,528 472,140
</TABLE>
- -------------
* For the period from June 3, 1996 (date of acquisition) through
September 30, 1996 it was $16,236 and for the period October 1, 1996
through October 31, 1996 it was $4,309.
** For the period from June 17, 1996 (date operations commenced) through
October 31, 1996.
For the period from November 1, 1993 through October 31, 1994, AFS
received shareholder services fees from AIM with respect to Class A shares of
Charter, Weingarten, Aggressive Growth and Constellation in the amount of
$890,434, $3,015,921, $424,814 and $2,080,638, respectively, under the AFS
Administrative Services Agreement between AIM and AFS. The agreement was
terminated November 1, 1994.
AFS received transfer agency and shareholder services fees with
respect to Class A and Class B shares for the fiscal years ended October 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995*
---- ----
<S> <C> <C>
Blue Chip .......................... $ 20,982* N/A
Capital Development................... 75,666** N/A
Charter............................... 2,264,602 $ 1,568,721
Weingarten............................ 4,391,918 4,016,831
Constellation......................... 8,671,663 4,943,213
Aggressive Growth..................... 2,047,282 1,198,145
</TABLE>
- -------------
* For the period June 3, 1996 through October 31, 1996.
** For the period from June 17, 1996 through October 31, 1996.
Prior to June 3, 1996, FMI served as the administrator to the BBC
Fund. Pursuant to the administration agreement between FMI and the BBC Fund,
FMI prepared and maintained the books, accounts and other documents required by
the 1940 Act, determined the fund's net asset value, responded to shareholder
inquiries, prepared the fund's financial statements and excise tax returns,
prepared reports and filings with the Securities and Exchange Commission,
furnished statistical and research data, clerical, accounting and
32
<PAGE> 80
bookkeeping services and stationery and office supplies, and maintained the
fund's financial accounts and records and generally assisted in all aspects of
the fund's operations other than portfolio management. This administration
agreement terminated in connection with the corporate reorganization of the BBC
Fund. During the fiscal years ended September 30, 1995 and September 30, 1994,
the BBC Fund paid FMI fees of $46,743 and $45,724, respectively.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN. The Company has adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to the Class A and Class
C shares of the Funds (the "Class A and C Plan"). The Class A and C Plan
provides that the Class A shares pay 0.35% per annum of their daily average net
assets in the case of Blue Chip and Capital Development, 0.30% per annum of
their average daily net assets in the case of Charter, Weingarten and
Constellation and 0.25% per annum of the average net assets of Aggressive
Growth as compensation to AIM Distributors for the purpose of financing any
activity which is primarily intended to result in the sale of Class A shares.
Under the Class A and C Plan, Class C shares of Blue Chip, Capital Development,
Charter, Constellation and Weingarten pay compensation to AIM Distributors at
an annual rate of 1.00% of the average daily net assets attributable to Class C
shares. Of such amount, Blue Chip, Capital Development, Charter, Constellation
and Weingarten pay a service fee of 0.25% of the average daily net assets
attributable to Class C shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who
purchase and own Class C shares. Activities appropriate for financing under the
Class A and C Plan include, but are not limited to, the following: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales literature; expenses of organizing and conducting sales
seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class A and C Plan.
THE CLASS B PLAN. The Company has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
Blue Chip, Capital Development, Charter, Weingarten and Constellation (the
"Class B Plan", and collectively with the Class A and C Plan, the "Plans").
Under the Class B Plan, Blue Chip, Capital Development, Charter, Weingarten and
Constellation pay compensation to AIM Distributors at an annual rate of 1.00%
of the average daily net assets attributable to Class B shares. Of such amount,
Charter, Weingarten and Constellation pay a service fee of 0.25% of the
average daily net assets attributable to Class B shares to selected dealers and
other institutions which furnish continuing personal shareholder services to
their customers who purchase and own Class B shares. Amounts paid in accordance
with the Class B Plan may be used to finance any activity primarily intended to
result in the sale of Class B shares, including, but not limited to, printing
of prospectuses and statements of additional information and reports for other
than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and
conducting sales seminars; supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements; and costs of administering the Class B
Plan. AIM Distributors may transfer and sell its right under the Class B Plan
in order to finance distribution expenditures in respect of Class B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment
dealers selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Fund's shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Funds. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Funds; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Fund's shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Fund's
shares; and providing such other information and services as the Funds or the
customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be
33
<PAGE> 81
made to banks which provide services to their customers who have purchased
shares. Services provided pursuant to Shareholder Service Agreements with banks
may include some or all of the following: answering shareholder inquiries
regarding the Funds and the Company; performing sub-accounting; establishing
and maintaining shareholder accounts and records; processing customer purchase
and redemption transactions; providing periodic statements showing a
shareholder's account balance and the integration of such statements with those
of other transactions and balances in the shareholder's other accounts serviced
by the bank; forwarding applicable prospectuses, proxy statements, reports and
notices to bank clients who hold shares of the Funds; and such other
administrative services as the Funds reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Similar agreements may be
permitted under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
The Company may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of Charter,
Weingarten and Constellation authorizing payments to selected insurance
companies offering variable annuity contracts to employers as funding vehicles
for retirement plans qualified under Section 401(a) of the Internal Revenue
Code. Services provided pursuant to such Variable Contract Agreements may
include some or all of the following: answering inquiries regarding the Fund
and the Company; performing sub-accounting; establishing and maintaining
Contractholder accounts and records; processing and bunching purchase and
redemption transactions; providing periodic statements of contract account
balances; forwarding such reports and notices to Contractholders relative to
the Fund as deemed necessary; generally, facilitating communications with
Contractholders concerning investments in a Fund on behalf of Plan
participants; and performing such other administrative services as deemed to be
necessary or desirable, to the extent permitted by applicable statute, rule or
regulation to provide such services.
Financial intermediaries and any other person entitled to receive
compensation for selling shares of the Funds may receive different compensation
for selling shares of one particular class over another.
Under a Shareholder Service Agreement, the Funds agree to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment
period for each business day of the Funds during such period at the annual rate
of 0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid
only to those selected dealers or other institutions who are dealers or
institutions of record at the close of business on the last business day of the
applicable payment period for the account in which the Funds' shares are held.
The Plans are subject to any applicable limitations imposed from time
to time by rules of the National Association of Securities Dealers, Inc.
AIM Distributors does not act as principal, but rather as agent for
the Funds, in making dealer incentive and shareholder servicing payments under
the Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
For the period June 3, 1996 through September 30, 1996, with respect
to its Class A shares, Blue Chip paid AIM Distributors under the Plan $97,045,
or an amount equal to 0.35% of the Fund's average daily net assets.
For the fiscal year ended October 31, 1996, with respect to Class A
shares, Blue Chip (for the period October 1, 1996 through October 31, 1996),
Capital Development (for the period June 17, 1996 through October 31, 1996),
Charter, Weingarten, Aggressive Growth and Constellation paid AIM Distributors
under the Plan $34,010, $195,157, $6,952,782, $14,212,254, $6,492,025 and
$27,788,170, respectively, or an amount equal to 0.35% (annualized), 0.35%
(annualized), 0.30%, 0.30%, 0.25%, and 0.30%, respectively, of the Fund's Class
A shares average daily net assets.
34
<PAGE> 82
For the fiscal year ended October 31, 1996, with respect to Class B
shares, Blue Chip (for the period October 1, 1996 through October 31, 1996),
Capital Development (for the period October 1, 1996 through October 31, 1996),
Charter and Weingarten paid AIM Distributors under the Plan $3,166, $9,333,
$2,831,042, and $1,514,633 respectively, or an amount equal to 1.00%
(annualized), 1.00% (annualized), 1.00% (annualized) and 1.00% (annualized),
respectively, of the Fund's Class B shares average daily net assets.
An estimate by category of actual fees paid by the following Funds
under the Class A and C Plan during the year ended October 31, 1996 were
allocated as follows:
<TABLE>
<CAPTION>
JUNE 17-
OCT 1 - JUNE 3 - OCT 31
AGGRESSIVE OCT 31 SEPT 30 CAPITAL
GROWTH BLUE CHIP BLUE CHIP DEVELOPMENT CHARTER CONSTELLATION WEINGARTEN
----------- ----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Advertising $ 189,780 $ 4,348 $ 13,198 $ 38,247 $ 732,176 $ 2,749,793 $ 1,330,208
Printing and mailing 28,966 870 2,031 6,039 113,027 421,968 205,032
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 65,924 1,740 5,077 13,084 251,060 944,929 454,071
Compensation to 841,131
Underwriters to partially
offset other marketing
expenses
Compensation to 6,207,355 27,052 76,739 137,787 5,856,519 23,671,480 11,381,812
Dealers including
finder's fees
Compensation to
Sales Personnel
Annual Report Total 6,492,025 34,010 97,045 195,157 6,952,782 27,788,170 14,212,254
</TABLE>
No fees were paid by the Funds for Class C shares as during the fiscal
year ended October 31, 1996 operations commenced on August 2, 1997.
35
<PAGE> 83
An estimate by category of actual fees paid by the following Funds
under the Class B Plan during the year ended October 31, 1996 were allocated
as follows:
<TABLE>
<CAPTION>
OCT 1 -
OCT 1 - OCT 31
OCT 31 CAPITAL
BLUE CHIP DEVELOPMENT CHARTER WEINGARTEN
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS B
Advertising $ 791 $ 2,352 $ 571,306 $ 229,414
Printing and mailing 0 0 86,994 34,911
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 0 0 196 78,799
Compensation to 2,375 6,981 2,126,052 1,137,408
Underwriters to partially
offset upfront dealer
commissions and other
marketing costs
Compensation to Dealers 0 0 46,494 34,101
Compensation to 0 0
Sales Personnel
Annual Report Total 3,166 9,333 2,831,042 1,514,633
</TABLE>
No fees were paid by the Constellation Class B shares of Constellation
during the fiscal year ended October 31, 1996, as operations commenced on
Novermber 3, 1997.
The Plans require AIM Distributors to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Qualified Directors"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the directors considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Fund and its respective shareholders.
The Plans do not obligate the Fund to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less
than the fee it receives, AIM Distributors will retain the full amount of the
fee.
Unless the Plans are terminated earlier in accordance with their
terms, the Class B Plan continues in effect until June 30, 1998, and
thereafter, both Plans continue as long as such continuance is specifically
approved at least annually by the Board of Directors, including a majority of
the Qualified Directors.
The Plans may be terminated by the vote of a majority of the Qualified
Directors, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
36
<PAGE> 84
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the directors, including a majority of the Qualified
Directors, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Directors is committed to the discretion of the
Qualified Directors. In the event the Class A and C Plan is amended in a manner
which the Board of Directors determines would materially increase the charges
paid by holders of Class A shares under the Class A and C Plan, the Class B
shares of the Fund will no longer convert into Class A shares of the Fund
unless the Class B shares, voting separately, approve such amendment. If the
Class B shareholders do not approve such amendment, the Board of Directors will
(i) create a new class of shares of the Fund which is identical in all material
respects to the Class A shares as they existed prior to the implementation of
the amendment, and (ii) ensure that the existing Class B shares of the Fund
will be exchanged or converted into such new class of shares no later than the
date the Class B shares were scheduled to convert into Class A shares.
The principal differences between the Class A and C Plan and the Class
B Plan are: (i) the Class A and C Plan allows payment to AIM Distributors or to
dealers or financial institutions of up to .35% of average daily net assets of
Blue Chip and Capital Development Class A shares, .30% of average daily net
assets of Charter, Weingarten and Constellation's Class A shares and up to .25%
of average daily net assets of Aggressive Growth's Class A shares as compared
to 1.00% of such assets of Blue Chip, Capital Development, Charter, Weingarten
and Constellation's Class B shares; (ii) the Class B Plan obligates the Class B
shares to continue to make payments to AIM Distributors following termination
of the Class B shares Distribution Agreement with respect to Class B shares
sold by or attributable to the distribution efforts of AIM Distributors unless
there has been a complete termination of the Class B Plan (as defined in such
Plan); and (iii) the Class B Plan expressly authorizes AIM Distributors to
assign, transfer or pledge its rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
the Funds' shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement with AIM Distributors relating to the Class A
shares of the Funds and Class C shares of Blue Chip, Capital Development,
Charter, Constellation and Weingarten was approved by the Board of Directors on
June 11, 1997. A Master Distribution Agreement with AIM Distributors relating
to the Class B shares of Charter and Weingarten was also approved by the Board
of Directors on February 28, 1997, and the Board of Directors approved
Amendment No. 1, adding Constellation to the Master Distribution Agreement, on
September 19, 1997. Both such Master Distribution Agreements are hereinafter
collectively, referred to as the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to public offerings
made by AIM Distributors pursuant to the Distribution Agreements (other than
those prospectuses and statements of additional information distributed to
existing shareholders of the Funds), and any promotional or sales literature
used by AIM Distributors or furnished by AIM Distributors to dealers in
connection with the public offering of the Funds' shares, including expenses of
advertising in connection with such public offerings. AIM Distributors has not
undertaken to sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of Charter,
Weingarten, Blue Chip and Capital Development at the time of such sales.
Payments with respect to Class B shares will equal 4.0% of the purchase price
of the Class B shares sold by the dealer or institution, and will consist of a
sales commission equal to 3.75% of the purchase price of the Class B shares
sold plus an advance of the first year service fee of 0.25% with respect to
such shares. The portion of the payments to AIM Distributors under the Class B
Plan which constitutes an asset-based sales charge (0.75%) is intended in part
to permit AIM Distributors to recoup a portion of such sales commissions plus
financing costs. AIM Distributors anticipates that it will require a number of
years to recoup from Class B Plan payments the sales commissions paid to
dealers and institutions in connection with sales of Class B shares.
37
<PAGE> 85
In the future, if multiple distributors serve Charter, Weingarten,
Constellation, Blue Chip or Capital Development, each such distributor (or its
assignee or transferee) would receive a share of the payments under the Class B
Plan based on the portion of such Fund's Class B shares sold by or attributable
to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares.
After the first full year, AIM Distributors will make such payments quarterly to
dealers and institutions based on the average net asset value of Class C shares
which are attributable to shareholders for whom the dealers and institutions
are designated as dealers of record. The portion of the payments to AIM
Distributors under the Class C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) intended in part to permit AIM
Distributors to recoup a portion of such on-going sales commission plus
financing costs, if any.
The Company (on behalf of any class of the Funds) or AIM Distributors
may terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate in the event of
their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors; provided, however, that a
complete termination of the Class B Plan (as defined in such Plan) would
terminate all payments to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not effect the obligations of Class B shareholders
to pay Contingent Deferred Sales Charges.
The following chart reflects the total sales charges paid in
connection with the sale of Class A shares of each Fund and the amount retained
by AIM Distributors for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Blue Chip........... .............. $ 1,000,546 $ 144,343 N/A N/A N/A N/A
Capital Development ............... 6,850,693 926,213 N/A N/A N/A N/A
Charter ........................... 16,469,061 2,705,618 $ 9,068,400 $ 1,316,019 $10,252,200 $ 1,386,255
Weingarten ........................ 13,202,260 2,259,328 11,992,225 1,767,515 10,398,176 1,494,020
Constellation ..................... 105,245,937 19,558,836 88,958,038 13,097,651 42,593,206 6,482,169
Aggressive Growth* ............... 11,683,056 2,111,788 57,745,243 8,232,597 11,846,706 1,975,968
</TABLE>
The following chart reflects the contingent deferred sales charges
paid by Class A and Class B shareholders for the fiscal years ended October 31,
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995*
---- -----
<S> <C> <C>
Blue Chip................................................ N/A N/A
Capital Development...................................... $ 733** N/A
Charter.................................................. $32,497 $55
Weingarten............................................... $34,185 $60
</TABLE>
- -------------
* For the period from June 26, 1995 (inception date of Class B shares)
through October 31, 1995.
** For the period from October 1, 1996 (inception date for Class B
shares) through October 31, 1996.
No contingent deferred sales charges were paid by the Class B shares
of AIM Constellation Fund as operations commenced on November 3, 1997.
Shares of the BBC Fund were sold at a public offering price which
included a sales charge. The BBC Fund waived its sales charge in connection
with sales to specified types of investors and on purchases of $1,000,000 or
more, but imposed a contingent deferred sales charge upon the redemption of
certain shares so purchased, which contingent deferred sales charge was paid to
Baird. During the fiscal years ended September 30, 1995 and September 30, 1994,
Baird received approximately $126,853 and $109,000, respectively in front-end
sales commissions in connection with the sales of BBC Fund shares, all of which
it retained. During the fiscal years ended September 30, 1995 and September 30,
1994, Baird received $346 and $141 in deferred sales commissions in connection
with sales of BBC Fund shares, respectively, all of which it retained.
38
<PAGE> 86
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may
be purchased appears in the Prospectus under the caption "How to Purchase
Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed
directly with AIM Distributors by persons, who because of their relationship
with the Funds or with AIM and its affiliates, are familiar with the Funds, or
whose programs for purchase involve little expense (e.g., because of the size
of the transaction and shareholder records required), AIM Distributors believes
that it is appropriate and in the Funds' best interests that such persons be
permitted to purchase Class A shares of the Funds through AIM Distributors
without payment of a sales charge. The persons who may purchase Class A shares
of the Funds without a sales charge are shown in the Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in the Prospectus under the caption "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the caption "How to Redeem Shares." AIM intends to redeem
all shares of the Funds in cash. In addition to the Funds' obligation to
redeem shares, AIM Distributors may also repurchase shares as an
accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone
orders to the order desk of the Fund telephone: (713) 626-1919, Extension 5001
(in Houston) or (800) 347-4246 (elsewhere) and guarantee delivery of all
required documents in good order. A repurchase is effected at the net asset
value of the Fund next determined after such order is received. Such
arrangement is subject to timely receipt by A I M Fund Services, Inc. of all
required documents in good order. If such documents are not received within a
reasonable time after the order is placed, the order is subject to
cancellation. While there is no charge imposed by the Funds or by AIM
Distributors (other than any applicable CDSC) when shares are redeemed or
repurchased, dealers may charge a fair service fee for handling the
transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange is restricted, as
determined by applicable rules and regulations of the SEC, (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings,
(c) the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of the
close of trading of the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern Time), on each business day of the Fund. In the event the NYSE closes
early (i.e., before 4:00 p.m. Eastern Time) on a particular day, the net asset
value of a Fund share is determined as of the close of the NYSE on such day.
For purposes of determining net asset value per share, futures and options
contract closing prices which are available fifteen (15) minutes after the
close of trading on the NYSE will generally be used. The net asset values per
share of the Retail Classes and the Institutional Class will differ because
different expenses are attributable to each class. The income or loss and the
expenses (except those listed below) of a Fund are allocated to each class on
the basis of the net assets of the Fund allocable to each such class, calculated
as of the close of business on the previous business day, as adjusted for the
current day's shareholder activity of each class. Distribution and service
fees and Transfer Agency fees (to the extent different rates are charged to
different classes) are allocated only to the class to which such expenses
relate. The net asset value per share of a class is determined by subtracting
the liabilities (e.g., the expenses) of the Fund allocated to the class from
the assets of the Fund
39
<PAGE> 87
allocated to the class and dividing the result by the total number of shares
outstanding of such class. Determination of each Fund's net asset value per
share is made in accordance with generally accepted accounting principles.
Except as provided in the next sentence, a security listed or traded
on an exchange is valued at its last sales price on the exchange where the
security is principally traded or, lacking any sales on a particular day, the
security is valued at the mean between the closing bid and asked prices on that
day. 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. Option contracts are valued at the mean between the
closing bid and asked prices on the exchange where the contracts are
principally traded. Each security reported on the NASDAQ National Market System
is valued at the last sales price on the valuation date, or lacking a last
sale, at the mean between the last bid and asked price on that day; securities
for which market quotations are not readily available 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 sixty (60) days or less
to maturity are valued at amortized cost, which approximates market value. (See
also "How to Purchase Shares," "How to Redeem Shares" and "Determination of Net
Asset Value" in the Prospectus.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of a Fund's shares are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the NYSE which will not be
reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in good
faith by or under the supervision of the Board of Directors.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund,
subject to the terms and conditions set forth in the Prospectus under the
caption "Special Plans - Automatic Dividend Investment Plan." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
40
<PAGE> 88
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, each Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess
of net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by a Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"), and (b) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts,
will not be characterized as Short-Short Gain if they are directly related to
the regulated investment company's principal business of investing in stock or
securities (or options or futures thereon). Because of the Short-Short Gain
Test, a Fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a Fund from disposing of investments at a loss, since the recognition
of a loss before the expiration of the three-month holding period is
disregarded. Interest (including original issue discount) received by a Fund at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of a security within the meaning of the Short-Short Gain Test. However, any
other income that is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract or of foreign currency itself, will generally
be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (b) the
asset is otherwise held by the Fund as part of a "straddle", or (c) the asset
is stock and the Fund grants certain call options with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of is reduced only in the case described in clause (a) above. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
41
<PAGE> 89
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by certain of the Funds (such as
futures contracts and options on stock indexes and futures contracts) will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date.
The net amount of such gain or loss for the entire taxable year from
transactions involving Section 1256 contracts (including gain or loss arising
as a consequence of the year-end deemed sale of Section 1256 contracts) is
treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. A Fund may elect not to have this special tax treatment apply to
Section 1256 contracts that are part of a "mixed straddle" with other
investments of the Fund that are not Section 1256 contracts. The Internal
Revenue Service has held in several private rulings that gains arising from
Section 1256 contracts will be treated for purposes of the Short-Short Gain
Test as being derived from securities held for not less than three months if
the gains arise as a result of a constructive sale under Code Section 1256.
In addition to satisfying the requirement described above, each Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of each
Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the companies, and securities of other issuers, the Fund has not invested more
than 5% of the value of the Fund's total assets in securities of such issuer
and as to which the Fund does not hold more than 10% of the outstanding voting
securities of such issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies),
or in two or more issuers which the Fund controls and which are engaged in the
same or similar trades or businesses.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of such Fund's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable
year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(a) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year, and (b) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
42
<PAGE> 90
Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that a Fund may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will qualify for the 70% dividends received
deduction for corporations only to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. Conversely, if a Fund elects to retain its net capital
gain, the Fund will be taxed thereon (except to the extent of any available
capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to
retain its net capital gain, it is expected that the Fund also will elect to
have shareholders treated as if each received a distribution of its pro rata
share of such gain, with the result that each shareholder will be required to
report its pro rata share of such gain on its tax return as long-term capital
gain, will receive a refundable tax credit for its share of tax paid by the
Fund on the gain, and will increase the tax basis for its shares by an amount
equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend
(a) if it has been received with respect to any share of stock that the Fund
has held for less than 46 days (91 days in the case of certain preferred
stock), excluding for this purpose under the rules of Code Section
246(c)(3)and(4) (i) any day more than 45 days (or 90 days in the case of
certain preferred stock) after the date on which the stock becomes ex-dividend,
and (ii) any period during which the Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, has
granted certain options to buy or has otherwise diminished its risk of loss by
holding other positions with respect to, such (or substantially identical)
stock; (b) to the extent that the Fund is under an obligation (pursuant to a
short sale or otherwise) to make related payments with respect to positions in
substantially similar or related property; or (c) to the extent the stock on
which the dividend is paid is treated as debt-financed under the rules of Code
Section 246A. Moreover, the dividends received deduction for a corporate
shareholder may be disallowed or reduced (a) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the Fund,
or (b) by application of Code Section 246(b) which in general limits the
dividends received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends received deduction and certain
other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's
43
<PAGE> 91
adjusted current earnings over its AMTI (determined without regard to this item
and the AMTI net operating loss deduction)) that is includable in AMTI.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at
the source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be
invested in various countries is not known.
Distributions by a Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date.
In addition, if the net asset value at the time a shareholder
purchases shares of a Fund reflects undistributed net investment income or
recognized capital gain net income, or unrealized appreciation in the value of
the assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Funds will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (a) who has
provided either an incorrect tax identification number or no number at all, (b)
who is subject to backup withholding by the Internal Revenue Service for
failure to report the receipt of interest or dividend income properly, or (c)
who has failed to certify to a Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within thirty (30) days before or after the
sale or redemption. In general, any gain or loss arising from (or treated as
arising from) the sale or redemption of shares of a Fund will be considered
capital gain or loss and will be long-term capital gain or loss if the shares
were held for longer than one year. However, any capital loss arising from the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on such shares. For this purpose, the special holding period rules of
Code Section 246(c)(3) and (4) (discussed above in connection with the
dividends received deduction for corporations) generally will apply in
determining the holding period of shares. Long-term capital gains of
non-corporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
non-corporate taxpayer, $3,000 of ordinary income.
44
<PAGE> 92
If a shareholder (a) incurs a sales load in acquiring shares of a
Fund, (b) disposes of such shares less then 91 days after they are acquired,
and (c) subsequently acquires shares of the Fund or another Fund at a reduced
sales load pursuant to a right to reinvest at such reduced sales load acquired
in connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales
load on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of, but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
a Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder. If the income from a Fund is not effectively connected with a
U.S. trade or business carried on by a foreign shareholder, dividends and
return of capital distributions (other than distributions of long-term capital
gain) will be subject to U.S. withholding tax at the rate of 30% (or lower
treaty rate) upon the gross amount of the distribution. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of a Fund, capital gain dividends and amounts
retained by a Fund that are designated as undistributed net capital gains.
If the income from a Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends and any gains realized upon the sale or
redemption of shares of the Fund will be subject to U.S. federal income tax at
the rates applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from
the rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in the Funds.
45
<PAGE> 93
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Directors will issue semi-annual reports of the
transactions of the Funds to the shareholders. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG Peat Marwick
LLP, 700 Louisiana, NationsBank Building, Houston, Texas 77002, has served as
the auditors for Aggressive Growth, Blue Chip, Capital Development, Charter,
Constellation and Weingarten for the fiscal year ended October 31, 1996. Price
Waterhouse LLP served as the auditors for Baird Blue Chip Fund, Inc., the
predecessor of Blue Chip, for fiscal years ended September 30, 1995.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby is being passed upon by Ballard Spahr Andrews & Ingersoll, 1735 Market
Street, Philadelphia, Pennsylvania.
On October 25, 1996 a shareholder of Aggressive Growth filed a lawsuit
in United States District Court, Southern District of Texas, against the
Company, AIM, AIM Distributors, the directors and certain officers of
Aggressive Growth, and the portfolio managers of Aggressive Growth. The action
was instituted under Section 36(b) of the Investment Company Act of 1940 and
seeks to recover damages allegedly suffered by Aggressive Growth in connection
with fees paid for marketing and shareholder services after Aggressive Growth
was closed to new investors.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The custodian attends to the collection of principal and income,
pays and collects all monies for securities bought and sold by the Funds and
performs certain other ministerial duties. A I M Fund Services, Inc.,11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173 (the "Transfer Agent"),
acts as transfer and dividend disbursing agent for the Funds. These services do
not include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and
the Transfer Agent such compensation as may be agreed upon from time to time.
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, serves as Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has
entered into an agreement with the Company (and certain other AIM Funds), First
Data Investor Service Group (formerly The Shareholder Services Group, Inc. and
Financial Data Services, Inc., pursuant to which MLPF&S has agreed to perform
certain shareholder sub-accounting services for its customers who beneficially
own shares of the Fund(s).
46
<PAGE> 94
PRINCIPAL HOLDERS OF SECURITIES
BLUE CHIP
To the best of the knowledge of the Company, the names and addresses
of the holders of 5% or more of the outstanding Class A shares of Blue Chip as
of October 1, 1997, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS A SHARES
- ---------------------
Robert W. Baird, Inc. 11.52% -0-
Attn: Mutual Fund Operations
777 E. Wisconsin Ave.
Milwaukee, WI 53202
Merrill Lynch Pierce Fenner & Smith -0- 6.53%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
RETAIL CLASS B SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 11.03%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
RETAIL CLASS C SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 38.49%**
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
</TABLE>
CHARTER
To the best of the knowledge of the Company, the names and addresses
of the holders of 5% or more of the outstanding shares of the Retail Classes of
Charter as of October 1, 1997, and the Institutional Class of Charter as of
October 1, 1997, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below:
- ------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
47
<PAGE> 95
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS A SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 11.82%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Great-West Life and Annuity Insurance Co. 7.54% -0-
401(k) Unit Valuations
Attn: Rod Switzer 2T2
8515 E. Orchard
Englewood, CO 80111
RETAIL CLASS B SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 9.79%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
RETAIL CLASS C SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 30.50%**
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Kathleen McLanahan -0- 9.84%
2601 NW Lookout Ridge
Less Summit, MO 64081-1829
PaineWebber For The Benefit of -0- 5.76%
First Trust Corp. Ttee FBO
Richard A. Sindler
P.O. Box 173301
Denver, CO 80217-3301
</TABLE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
Commonwealth of Massachusetts 94.11** -0-
One Ashburton Place
12th Floor
Boston, MA 02108
</TABLE>
- -----------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
48
<PAGE> 96
WEINGARTEN
To the best of the knowledge of the Company, the names and addresses
of the holders of 5% or more of the outstanding shares of the Retail Classes of
Weingarten as of October 1, 1997, and the Institutional Class of Weingarten
as of October 1, 1997, and the amount of the outstanding shares held of record
and beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS A SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 18.00%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Great-West Life Annuity Insurance Co. -0- 5.10%
401(k) Unit Valuations
Attn: Rod Switzer 2T2
8515 E. Orchard
Englewood, CO 80111
</TABLE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS B SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 11.50%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
</TABLE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS C SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 30.22%**
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
James E. Whitmore -0- 5.50%
and Vicki L. Whitmore Fam. Ttees
The James & Vicki Whitmore Fam. Tr.
1395 S. Meadowbrook
Coeur D'Alene, ID 83814
John C. Sells and -0- 5.48%
Frances H. Sells Ttees
The Sells Fam. Tr.
6552 Petit Ave.
Van Nuys, CA 91406-5625
</TABLE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
Commonwealth of Massachusetts 76.12%** -0-
One Ashburton Place
12th Floor
Boston, MA 02108
Union Planters NationsBank -0- 7.40%
P. O. Box 387
Memphis, TN 38147
City of Milwaukee Deferred Comp. 5.23% -0-
P. O. Box 2054
Milwaukee, IL 53201
</TABLE>
- -----------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
49
<PAGE> 97
CONSTELLATION
To the best of the knowledge of the Company, the names and
addresses of the holders of 5% or more of the outstanding shares of the Retail
Classes of Constellation as of October 1, 1997, and of the Institutional Class
of Constellation as of October 1, 1997, and the amount of the outstanding
shares held of record and beneficially owned by such holders are set forth
below:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS A SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 14.94%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
RETAIL CLASS C SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 32.53% **
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
</TABLE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
Nationwide Ohio Variable Account 58.96% ** -0-
P.O. Box 182029
Columbus, Ohio 43218
Commonwealth of Massachusetts 28.68% ** -0-
One Ashburton Place
12th Floor
Boston, MA 02108
</TABLE>
- ------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
50
<PAGE> 98
AGGRESSIVE GROWTH
To the best of the knowledge of the Company, the names and addresses
of the holders of 5% or more of the outstanding Class A shares of Aggressive
Growth as of October 1, 1997, and the amount of the outstanding shares held of
record and beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- --------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS A SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 18.94%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
</TABLE>
CAPITAL DEVELOPMENT
To the best of the knowledge of the Company, the names and addresses
of the holders of 5% or more of the outstanding Class A shares of Capital
Development as of October 1, 1997, and the amount of the outstanding shares
held of record and beneficially owned by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---------------- ------------ ------------
<S> <C> <C>
RETAIL CLASS A SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 17.50%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Robert W. Baird Inc. 6.73% -0-
Attn: Mutual Fund Operations
777 E. Wisconsin Avenue
Milwaukee, WI 53202
RETAIL CLASS B SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 20.78%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
RETAIL CLASS C SHARES
- ---------------------
Merrill Lynch Pierce Fenner & Smith -0- 48.52%**
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Prudential Securities Inc. FBO -0- 7.19%
Ms. Jennifer C. Carter
120 East End Ave.
New York, NY 10028-7552
</TABLE>
As of October 1, 1997, the directors/trustees and officers of the
Company as a group owned beneficially less than 1% of the outstanding shares of
each class of Blue Chip, Charter, Weingarten, Constellation, Aggressive Growth
and Capital Development.
- --------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
51
<PAGE> 99
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Company
has filed with the SEC under the 1933 Act and reference is hereby made to the
Registration Statement for further information with respect to the Funds and
the securities offered hereby. The Registration Statement is available for
inspection by the public at the SEC in Washington, D.C.
52
<PAGE> 100
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S
Commercial paper rated by Standard & Poor's has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well-established, and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's Commercial Paper is rated A-1 or A-2. A-1 indicates the
degree of safety regarding time of payment is very strong. A-2 indicates that
the capacity for timely payment is strong, but that the relative degree of
safety is not as overwhelming as for issues designated A-1.
MOODY'S
Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service. Among the factors considered by Moody's
in assigning ratings are the following: (a) evaluation of the management of the
issuer; (b) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and customer
acceptance; (d) liquidity; (e) amount and quality of long-term debt; (f) trend
of earnings over a period of ten years; (g) financial strength of a parent
company and the relationships which exist with the issuer; and (h) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated Prime-1 or Prime-2.
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
MOODY'S
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
53
<PAGE> 101
FINANCIAL STATEMENTS
FS
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Blue Chip Fund:
We have audited the accompanying statements of assets and liabilities of the AIM
Blue Chip Fund (a portfolio of AIM Equity Funds, Inc.), including the schedule
of investments, as of October 31, 1996 and September 30, 1996, the related
statements of operations for the one-month period ended October 31, 1996 and the
year ended September 30, 1996, the statements of changes in net assets for the
one-month period ended October 31, 1996 and the year ended September 30, 1996
and the financial highlights for the one-month period ended October 31, 1996 and
the year ended September 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the years in the eight
year period ended September 30, 1995 and the period from December 31, 1986 (date
operations commenced) to September 30, 1987 were audited by other auditors whose
report thereon, dated October 25, 1995, expressed an unqualified opinion on
those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 and September 30, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Blue Chip Fund as of October 31, 1996 and September 30, 1996, the results of its
operations for the one-month period ended October 31, 1996 and the year ended
September 30, 1996, the changes in its net assets for the one-month period ended
October 31, 1996 and the year ended September 30, 1996 and the financial
highlights for the one-month period ended October 31, 1996 and the year ended
September 30, 1996, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
November 22, 1996
FS-1
<PAGE> 103
Financials
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS-81.74%
ADVERTISING/BROADCASTING-0.75%
20,000 Interpublic Group of Companies, Inc. $ 970,000
- ----------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-2.52%
23,900 Boeing Co. (The) 2,279,463
- ----------------------------------------------------------------------------------------------
7,500 United Technologies Corp. 965,625
- ----------------------------------------------------------------------------------------------
3,245,088
- ----------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.67%
16,000 General Motors Corp. 862,000
- ----------------------------------------------------------------------------------------------
BANKING-3.80%
31,000 Fifth Third Bancorp 1,941,375
- ----------------------------------------------------------------------------------------------
25,000 Norwest Bank Corp. 1,096,875
- ----------------------------------------------------------------------------------------------
29,200 State Street Boston Corp. 1,850,550
- ----------------------------------------------------------------------------------------------
4,888,800
- ----------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.81%
10,500 Citicorp 1,039,500
- ----------------------------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.37%
16,000 PepsiCo, Inc. 474,000
- ----------------------------------------------------------------------------------------------
BIOTECHNOLOGY-0.93%
26,000 Guidant Corp. 1,199,250
- ----------------------------------------------------------------------------------------------
BUSINESS SERVICES-4.24%
8,500 AccuStaff, Inc.(a) 227,375
- ----------------------------------------------------------------------------------------------
10,000 Dun & Bradstreet Corp. 578,750
- ----------------------------------------------------------------------------------------------
35,000 Equifax, Inc. 1,041,250
- ----------------------------------------------------------------------------------------------
55,450 Olsten Corp. 1,109,000
- ----------------------------------------------------------------------------------------------
33,600 Reuters Holdings PLC-Sponsored ADR (United Kingdom) 2,499,000
- ----------------------------------------------------------------------------------------------
5,455,375
- ----------------------------------------------------------------------------------------------
CHEMICALS-0.80%
18,000 PPG Industries, Inc. 1,026,000
- ----------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.82%
28,000 IMC Global, Inc. 1,050,000
- ----------------------------------------------------------------------------------------------
COMPUTER MAINFRAMES-1.00%
10,000 International Business Machines Corp. 1,290,000
- ----------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-1.55%
16,000 COMPAQ Computer Corp.(a) 1,114,000
- ----------------------------------------------------------------------------------------------
10,600 Dell Computer Corp.(a) 862,575
- ----------------------------------------------------------------------------------------------
1,976,575
- ----------------------------------------------------------------------------------------------
COMPUTER NETWORKING-1.65%
9,000 Ascend Communications, Inc.(a) 588,375
- ----------------------------------------------------------------------------------------------
16,500 Cisco Systems, Inc.(a) 1,020,937
- ----------------------------------------------------------------------------------------------
13,000 FORE Systems, Inc.(a) 516,750
- ----------------------------------------------------------------------------------------------
2,126,062
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 104
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-5.86%
20,500 Computer Associates International, Inc. $ 1,212,062
- ----------------------------------------------------------------------------------------------
7,000 Computer Sciences Corp.(a) 519,750
- ----------------------------------------------------------------------------------------------
8,000 Electronic Data Systems Corp. 360,000
- ----------------------------------------------------------------------------------------------
51,100 Fiserv, Inc.(a) 1,960,962
- ----------------------------------------------------------------------------------------------
12,000 Microsoft, Corp.(a) 1,647,000
- ----------------------------------------------------------------------------------------------
31,950 Oracle Systems Corp.(a) 1,351,884
- ----------------------------------------------------------------------------------------------
7,000 PairGain Technologies, Inc.(a) 482,125
- ----------------------------------------------------------------------------------------------
7,533,783
- ----------------------------------------------------------------------------------------------
CONGLOMERATES-1.20%
16,600 Du Pont (E.I.) de Nemours & Co. 1,539,650
- ----------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-2.74%
18,000 Avon Products, Inc. 976,500
- ----------------------------------------------------------------------------------------------
34,000 Gillette Co. (The) 2,541,500
- ----------------------------------------------------------------------------------------------
3,518,000
- ----------------------------------------------------------------------------------------------
ELECTRIC POWER-3.05%
26,000 Allegheny Power System, Inc. 776,750
- ----------------------------------------------------------------------------------------------
27,500 Consolidated Edison Co. of New York, Inc. 804,375
- ----------------------------------------------------------------------------------------------
28,000 Entergy Corp. 784,000
- ----------------------------------------------------------------------------------------------
34,000 Houston Industries Inc. 777,750
- ----------------------------------------------------------------------------------------------
28,600 Illinova Corp. 779,350
- ----------------------------------------------------------------------------------------------
3,922,225
- ----------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-3.56%
22,000 Emerson Electric Co. 1,958,000
- ----------------------------------------------------------------------------------------------
27,000 General Electric Co. 2,612,250
- ----------------------------------------------------------------------------------------------
4,570,250
- ----------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.61%
9,000 Federal Home Loan Mortgage Corp. 909,000
- ----------------------------------------------------------------------------------------------
14,000 Student Loan Marketing Association 1,158,500
- ----------------------------------------------------------------------------------------------
2,067,500
- ----------------------------------------------------------------------------------------------
FOOD/PROCESSING-1.95%
30,000 Archer-Daniels-Midland Co. 652,500
- ----------------------------------------------------------------------------------------------
52,200 Sara Lee Corp. 1,853,100
- ----------------------------------------------------------------------------------------------
2,505,600
- ----------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.76%
32,000 Hilton Hotels Corp. 972,000
- ----------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.28%
22,000 Conseco, Inc. 1,177,000
- ----------------------------------------------------------------------------------------------
20,000 Equitable Companies Inc. 470,000
- ----------------------------------------------------------------------------------------------
1,647,000
- ----------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-5.04%
23,500 Allstate Corp. 1,318,938
- ----------------------------------------------------------------------------------------------
21,000 American International Group, Inc. 2,281,125
- ----------------------------------------------------------------------------------------------
6,800 CIGNA Corp. 887,400
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 105
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(Continued)
13,200 MGIC Investment Corp. $ 905,850
- ----------------------------------------------------------------------------------------------
20,000 Travelers Group, Inc. 1,085,000
- ----------------------------------------------------------------------------------------------
6,478,313
- ----------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.74%
21,000 Harley-Davidson, Inc. 947,625
- ----------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-5.40%
25,000 Abbott Laboratories 1,265,625
- ----------------------------------------------------------------------------------------------
51,200 Johnson & Johnson 2,521,600
- ----------------------------------------------------------------------------------------------
42,500 Merck & Co., Inc. 3,150,313
- ----------------------------------------------------------------------------------------------
6,937,538
- ----------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-3.17%
32,000 Baxter International Inc. 1,332,000
- ----------------------------------------------------------------------------------------------
33,900 Medtronic, Inc. 2,182,313
- ----------------------------------------------------------------------------------------------
14,300 St. Jude Medical, Inc.(a) 564,850
- ----------------------------------------------------------------------------------------------
4,079,163
- ----------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.39%
24,000 Columbia/HCA Healthcare Corp. 858,000
- ----------------------------------------------------------------------------------------------
32,000 Sybron International Corp.(a) 932,000
- ----------------------------------------------------------------------------------------------
1,790,000
- ----------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-0.29%
6,200 Columbia Gas System, Inc. 376,650
- ----------------------------------------------------------------------------------------------
OFFICE AUTOMATION-0.52%
17,000 Danka Business Systems PLC-ADR (United Kingdom) 673,625
- ----------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-2.70%
15,000 Halliburton Co. 849,375
- ----------------------------------------------------------------------------------------------
10,000 Royal Dutch Petroleum Co.-ADR-New York shares (Netherlands) 1,653,750
- ----------------------------------------------------------------------------------------------
9,500 Texaco, Inc. 965,438
- ----------------------------------------------------------------------------------------------
3,468,563
- ----------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.36%
17,700 Schlumberger Ltd. 1,754,512
- ----------------------------------------------------------------------------------------------
PUBLISHING-0.70%
25,000 New York Times Co. 903,125
- ----------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.23%
6,600 Kroger Co.(a) 294,525
- ----------------------------------------------------------------------------------------------
RETAIL (STORES)-6.24%
21,500 Lowe's Companies, Inc. 868,062
- ----------------------------------------------------------------------------------------------
38,000 Pep Boys-Manny, Moe & Jack 1,330,000
- ----------------------------------------------------------------------------------------------
45,000 Staples, Inc.(a) 838,125
- ----------------------------------------------------------------------------------------------
35,000 Sysco Corp. 1,190,000
- ----------------------------------------------------------------------------------------------
43,000 Toys "R" Us, Inc.(a) 1,456,625
- ----------------------------------------------------------------------------------------------
50,000 Viking Office Products Inc.(a) 1,456,250
- ----------------------------------------------------------------------------------------------
33,000 Wal-Mart Stores, Inc. 878,625
- ----------------------------------------------------------------------------------------------
8,017,687
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 106
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS-2.45%
10,000 Altera Corp.(a) $ 620,000
- ----------------------------------------------------------------------------------------------
23,000 Intel Corp. 2,527,125
- ----------------------------------------------------------------------------------------------
3,147,125
- ----------------------------------------------------------------------------------------------
SHOES & RELATED APPAREL-0.78%
17,000 NIKE, Inc.-Class B 1,000,875
- ----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.77%
25,000 Lucent Technologies, Inc. 1,175,000
- ----------------------------------------------------------------------------------------------
20,400 MFS Communications Co., Inc.(a) 1,022,550
- ----------------------------------------------------------------------------------------------
56,000 WorldCom, Inc.(a) 1,365,000
- ----------------------------------------------------------------------------------------------
3,562,550
- ----------------------------------------------------------------------------------------------
TELEPHONE-1.88%
19,000 BellSouth Corp. 774,250
- ----------------------------------------------------------------------------------------------
18,000 Cincinnati Bell, Inc. 888,750
- ----------------------------------------------------------------------------------------------
15,400 SBC Communications, Inc. 748,825
- ----------------------------------------------------------------------------------------------
2,411,825
- ----------------------------------------------------------------------------------------------
TEXTILES-0.38%
7,000 Gucci Group NV-ADR-New York shares (Netherlands) 483,000
- ----------------------------------------------------------------------------------------------
TOBACCO-2.41%
20,000 Philip Morris Companies, Inc. 1,852,500
- ----------------------------------------------------------------------------------------------
43,100 RJR Nabisco Holdings Corp. 1,244,513
- ----------------------------------------------------------------------------------------------
3,097,013
- ----------------------------------------------------------------------------------------------
TRANSPORTATION-1.37%
70,000 Canadian Pacific, Ltd. (Canada) 1,767,500
- ----------------------------------------------------------------------------------------------
Total Common Stocks 105,069,872
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS-13.10%(b)
$17,210,000(c) 5.17%, 04/03/97 16,845,664
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-5.40%(d)
939,177 Daiwa Securities America, Inc., 5.53%, 11/01/96(e) 939,177
- ----------------------------------------------------------------------------------------------
6,000,000 SBC Capital Markets, Inc., 5.55%, 11/01/96(f) 6,000,000
- ----------------------------------------------------------------------------------------------
Total Repurchase Agreements 6,939,177
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.24% 128,854,713
- ----------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.24)% (306,359)
- ----------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 128,548,354
==============================================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount. In such cases the interest
rate shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(c) A portion of the principal was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to insure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 08/15/23.
(f) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collateralized by $691,506,000 U.S. Treasury obligations, 0%
to 9.125% due 11/30/96 to 10/31/01.
See Notes to Financial Statements.
FS-5
<PAGE> 107
Financials
SCHEDULE OF INVESTMENTS
September 30, 1996
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS-89.03%
ADVERTISING/BROADCASTING-0.89%
20,000 Interpublic Group of Companies, Inc. $ 945,000
- ----------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-2.97%
23,900 Boeing Co. (The) 2,258,550
- ----------------------------------------------------------------------------------------------
7,500 United Technologies Corp. 900,938
- ----------------------------------------------------------------------------------------------
3,159,488
- ----------------------------------------------------------------------------------------------
AIRLINES-0.88%
41,000 Southwest Airlines Co. 937,875
- ----------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.72%
16,000 General Motors Corp. 768,000
- ----------------------------------------------------------------------------------------------
BANKING-4.23%
31,000 Fifth Third Bancorp 1,801,875
- ----------------------------------------------------------------------------------------------
25,000 Norwest Bank Corp. 1,021,875
- ----------------------------------------------------------------------------------------------
29,200 State Street Boston Corp. 1,675,350
- ----------------------------------------------------------------------------------------------
4,499,100
- ----------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.89%
10,500 Citicorp 951,563
- ----------------------------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.76%
28,500 PepsiCo, Inc. 805,125
- ----------------------------------------------------------------------------------------------
BIOTECHNOLOGY-1.04%
20,000 Guidant Corp. 1,105,000
- ----------------------------------------------------------------------------------------------
BUSINESS SERVICES-4.35%
35,000 Equifax, Inc. 923,125
- ----------------------------------------------------------------------------------------------
55,450 Olsten Corp. 1,379,319
- ----------------------------------------------------------------------------------------------
33,600 Reuters Holdings PLC-Sponsored ADR (United Kingdom) 2,326,800
- ----------------------------------------------------------------------------------------------
4,629,244
- ----------------------------------------------------------------------------------------------
CHEMICALS-1.34%
26,300 PPG Industries, Inc. 1,430,063
- ----------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.74%
13,500 Air Products & Chemicals, Inc. 786,375
- ----------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-0.78%
10,600 Dell Computer Corp.(a) 824,150
- ----------------------------------------------------------------------------------------------
COMPUTER NETWORKING-2.03%
9,000 Ascend Communications, Inc.(a) 595,125
- ----------------------------------------------------------------------------------------------
16,500 Cisco Systems, Inc.(a) 1,024,031
- ----------------------------------------------------------------------------------------------
13,000 FORE Systems, Inc.(a) 537,875
- ----------------------------------------------------------------------------------------------
2,157,031
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 108
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-7.55%
18,000 Computer Associates International, Inc. $ 1,075,500
- ----------------------------------------------------------------------------------------------
7,000 Computer Sciences Corp.(a) 538,125
- ----------------------------------------------------------------------------------------------
16,000 Electronic Data Systems Corp. 982,000
- ----------------------------------------------------------------------------------------------
51,100 Fiserv, Inc.(a) 1,954,575
- ----------------------------------------------------------------------------------------------
12,000 Microsoft, Corp.(a) 1,582,500
- ----------------------------------------------------------------------------------------------
31,950 Oracle Systems Corp.(a) 1,359,872
- ----------------------------------------------------------------------------------------------
7,000 PairGain Technologies, Inc.(a) 546,875
- ----------------------------------------------------------------------------------------------
8,039,447
- ----------------------------------------------------------------------------------------------
CONGLOMERATES-1.38%
16,600 Du Pont (E.I.) de Nemours & Co. 1,464,950
- ----------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-4.47%
10,000 Avon Products, Inc. 496,250
- ----------------------------------------------------------------------------------------------
34,000 Gillette Co. (The) 2,452,250
- ----------------------------------------------------------------------------------------------
18,500 Procter & Gamble Co. 1,803,750
- ----------------------------------------------------------------------------------------------
4,752,250
- ----------------------------------------------------------------------------------------------
ELECTRIC POWER-3.56%
26,000 Allegheny Power System, Inc. 754,000
- ----------------------------------------------------------------------------------------------
27,500 Consolidated Edison Co. of New York, Inc. 763,125
- ----------------------------------------------------------------------------------------------
28,000 Entergy Corp. 756,000
- ----------------------------------------------------------------------------------------------
34,000 Houston Industries Inc. 752,250
- ----------------------------------------------------------------------------------------------
28,600 Illinova Corp. 757,900
- ----------------------------------------------------------------------------------------------
3,783,275
- ----------------------------------------------------------------------------------------------
ELECTRIC COMPONENTS/MISCELLANEOUS-4.17%
22,000 Emerson Electric Co. 1,982,750
- ----------------------------------------------------------------------------------------------
27,000 General Electric Co. 2,457,000
- ----------------------------------------------------------------------------------------------
4,439,750
- ----------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.69%
10,000 Federal Home Loan Mortgage Corp. 978,750
- ----------------------------------------------------------------------------------------------
11,000 Student Loan Marketing Association 820,875
- ----------------------------------------------------------------------------------------------
1,799,625
- ----------------------------------------------------------------------------------------------
FOOD/PROCESSING-1.75%
52,200 Sara Lee Corp. 1,866,150
- ----------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.85%
32,000 Hilton Hotels Corp. 908,000
- ----------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.50%
22,000 Conseco, Inc. 1,083,500
- ----------------------------------------------------------------------------------------------
20,000 Equitable Companies Inc. 515,000
- ----------------------------------------------------------------------------------------------
1,598,500
- ----------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-6.59%
21,000 American International Group, Inc. 2,115,750
- ----------------------------------------------------------------------------------------------
32,400 Chubb Corp. 1,490,400
- ----------------------------------------------------------------------------------------------
6,800 CIGNA Corp. 815,150
- ----------------------------------------------------------------------------------------------
5,200 General Re Corp. 737,100
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 109
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
Insurance (Multi-Line Property)-continued
13,000 MGIC Investment Corp. $ 875,875
- ----------------------------------------------------------------------------------------------
20,000 Travelers Group, Inc. 982,500
- ----------------------------------------------------------------------------------------------
7,016,775
- ----------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.85%
21,000 Harley-Davidson, Inc. 903,000
- ----------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-6.43%
25,000 Abbott Laboratories 1,231,250
- ----------------------------------------------------------------------------------------------
51,200 Johnson & Johnson 2,624,000
- ----------------------------------------------------------------------------------------------
42,500 Merck & Co., Inc. 2,990,937
- ----------------------------------------------------------------------------------------------
6,846,187
- ----------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-2.04%
33,900 Medtronic, Inc. 2,173,837
- ----------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.61%
13,800 Columbia/HCA Healthcare Corp. 784,875
- ----------------------------------------------------------------------------------------------
32,000 Sybron International Corp.(a) 928,000
- ----------------------------------------------------------------------------------------------
1,712,875
- ----------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-0.33%
6,200 Columbia Gas System, Inc. 347,200
- ----------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-3.02%
15,000 Halliburton Co. 774,375
- ----------------------------------------------------------------------------------------------
10,000 Royal Dutch Petroleum Co.-ADR-New York shares (Netherlands) 1,561,250
- ----------------------------------------------------------------------------------------------
9,500 Texaco, Inc. 874,000
- ----------------------------------------------------------------------------------------------
3,209,625
- ----------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.41%
17,700 Schlumberger Ltd. 1,495,650
- ----------------------------------------------------------------------------------------------
PUBLISHING-0.79%
25,000 New York Times Co. 843,750
- ----------------------------------------------------------------------------------------------
RESTAURANTS-0.76%
17,000 McDonald's Corp. 805,375
- ----------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.12%
28,300 Albertson's, Inc. 1,192,137
- ----------------------------------------------------------------------------------------------
RETAIL (STORES)-5.63%
15,700 Lowe's Companies, Inc. 641,738
- ----------------------------------------------------------------------------------------------
30,000 Pep Boys-Manny, Moe & Jack 1,068,750
- ----------------------------------------------------------------------------------------------
45,000 Staples, Inc.(a) 998,437
- ----------------------------------------------------------------------------------------------
27,000 Sysco Corp. 907,875
- ----------------------------------------------------------------------------------------------
50,000 Viking Office Products, Inc.(a) 1,500,000
- ----------------------------------------------------------------------------------------------
33,000 Wal-Mart Stores, Inc. 870,375
- ----------------------------------------------------------------------------------------------
5,987,175
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 110
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS-1.91%
10,000 Altera Corp.(a) $ 506,250
- ----------------------------------------------------------------------------------------------
10,500 Intel Corp. 1,002,094
- ----------------------------------------------------------------------------------------------
9,500 Texas Instruments, Inc. 523,688
- ----------------------------------------------------------------------------------------------
2,032,032
- ----------------------------------------------------------------------------------------------
SHOES & RELATED APPAREL-0.97%
8,500 NIKE, Inc.-Class B 1,032,750
- ----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-1.91%
25,000 Lucent Technologies, Inc. 1,146,875
- ----------------------------------------------------------------------------------------------
20,400 MFS Communications Co., Inc.(a) 889,950
- ----------------------------------------------------------------------------------------------
2,036,825
- ----------------------------------------------------------------------------------------------
TELEPHONE-2.25%
19,000 BellSouth Corp. 703,000
- ----------------------------------------------------------------------------------------------
18,000 Cincinnati Bell, Inc. 954,000
- ----------------------------------------------------------------------------------------------
15,400 SBC Communications, Inc. 741,125
- ----------------------------------------------------------------------------------------------
2,398,125
- ----------------------------------------------------------------------------------------------
TEXTILES-0.95%
14,000 Gucci Group NV-ADR-New York shares (Netherlands) 1,015,000
- ----------------------------------------------------------------------------------------------
TOBACCO-1.92%
13,500 Philip Morris Companies, Inc. 1,211,625
- ----------------------------------------------------------------------------------------------
32,000 RJR Nabisco Holdings Corp. 832,000
- ----------------------------------------------------------------------------------------------
2,043,625
- ----------------------------------------------------------------------------------------------
Total Common Stocks 94,741,904
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS-4.49%(b)
$ 4,910,000(c) 5.17%, 04/03/97 4,783,027
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-5.42%(d)
766,387 Daiwa Securities America, Inc., 5.80%, 10/01/96(e) 766,387
- ----------------------------------------------------------------------------------------------
5,000,000 UBS Securities Inc., 5.90%, 10/01/96(f) 5,000,000
- ----------------------------------------------------------------------------------------------
Total Repurchase Agreements 5,766,387
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.94% 105,291,318
- ----------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.06% 1,123,392
- ----------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 106,414,710
==============================================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. treasury bills are traded on a discount. In such cases the interest
rate shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(c) A portion of the principal was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) Collateral on repurchase agreements, include the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 09/30/96 with a maturing value of
$750,737,063. Collateralized by $696,875,000 U.S. Treasury obligations,
7.875% to 8.375% due 11/15/07 to 08/15/08.
(f) Joint repurchase agreement entered into 09/30/96 with a maturing value of
$300,049,167. Collateralized by $678,362,131 U.S. Government agency
obligations, 0% to 11.00% due 10/01/00 to 03/01/33.
See Notes to Financial Statements.
FS-9
<PAGE> 111
Financials
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
ASSETS:
Investments, at market value (cost: $101,592,848 and
$78,291,809) $128,854,713 $105,291,318
- --------------------------------------------------------------------------------------------
Receivables for:
Investments sold 1,528,029 --
- --------------------------------------------------------------------------------------------
Capital stock sold 1,934,587 1,144,249
- --------------------------------------------------------------------------------------------
Dividends and interest 65,749 144,747
- --------------------------------------------------------------------------------------------
Variation margin 115,600 --
- --------------------------------------------------------------------------------------------
Investment for deferred compensation plan 1,494 713
- --------------------------------------------------------------------------------------------
Other assets 46,398 48,053
- --------------------------------------------------------------------------------------------
Total assets 132,546,570 106,629,080
- --------------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,150,800 --
- --------------------------------------------------------------------------------------------
Capital stock reacquired 1,692,177 33,810
- --------------------------------------------------------------------------------------------
Deferred compensation 1,494 713
- --------------------------------------------------------------------------------------------
Accrued advisory fees 68,230 60,011
- --------------------------------------------------------------------------------------------
Accrued accounting services fees 4,309 16,263
- --------------------------------------------------------------------------------------------
Accrued directors' fees 595 1,580
- --------------------------------------------------------------------------------------------
Accrued distribution fees 37,233 76,346
- --------------------------------------------------------------------------------------------
Accrued transfer agent fees 9,908 10,150
- --------------------------------------------------------------------------------------------
Accrued operating expenses 33,470 15,497
- --------------------------------------------------------------------------------------------
Total liabilities 3,998,216 214,370
- --------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $128,548,354 $106,414,710
============================================================================================
NET ASSETS:
Class A $120,447,685 $106,414,710
- --------------------------------------------------------------------------------------------
Class B $ 8,100,669 --
- --------------------------------------------------------------------------------------------
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000 750,000,000
- --------------------------------------------------------------------------------------------
Outstanding 4,618,824 4,163,564
- --------------------------------------------------------------------------------------------
Class B:
Authorized 750,000,000 750,000,000
- --------------------------------------------------------------------------------------------
Outstanding 310,679 --
- --------------------------------------------------------------------------------------------
CLASS A:
Net asset value and redemption price per share $ 26.08 $ 25.56
- --------------------------------------------------------------------------------------------
Offering price per share:
(Net asset value divided by 94.50%) $ 27.60 $ 27.05
- --------------------------------------------------------------------------------------------
CLASS B:
Net asset value and offering price per share $ 26.07 --
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE> 112
Financials
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ONE MONTH ENDED YEAR ENDED
OCTOBER 31, SEPTEMBER 30,
1996 1996
----------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of $2,518 and $23,207 foreign withholding tax) $ 60,573 $ 1,208,166
- -----------------------------------------------------------------------------------------------------------
Interest 79,751 166,454
- -----------------------------------------------------------------------------------------------------------
Total investment income 140,324 1,374,620
- -----------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 75,253 578,569
- -----------------------------------------------------------------------------------------------------------
Custodian fees 2,838 19,467
- -----------------------------------------------------------------------------------------------------------
Distribution fees -- Class A 34,010 190,772
- -----------------------------------------------------------------------------------------------------------
Distribution fees -- Class B 3,166 --
- -----------------------------------------------------------------------------------------------------------
Transfer agent fees -- Class A 5,591 57,849
- -----------------------------------------------------------------------------------------------------------
Transfer agent fees -- Class B 1,601 --
- -----------------------------------------------------------------------------------------------------------
Accounting service fees 4,309 51,360
- -----------------------------------------------------------------------------------------------------------
Directors' fees 581 8,111
- -----------------------------------------------------------------------------------------------------------
Other 12,931 73,915
- -----------------------------------------------------------------------------------------------------------
Total expenses 140,280 980,043
- -----------------------------------------------------------------------------------------------------------
Less expenses assumed by advisor (7,024) (19,409)
- -----------------------------------------------------------------------------------------------------------
Net expenses 133,256 960,634
- -----------------------------------------------------------------------------------------------------------
Net investment income 7,068 413,986
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
Net realized gain on sales of investment securities 1,953,887 17,138,864
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 262,356 (1,150,933)
- -----------------------------------------------------------------------------------------------------------
Futures contracts (7,768) (22,050)
- -----------------------------------------------------------------------------------------------------------
254,588 (1,172,983)
- -----------------------------------------------------------------------------------------------------------
Net gain on investment securities and futures contracts 2,208,475 15,965,881
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 2,215,543 $ 16,379,867
==========================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ONE MONTH ENDED YEAR ENDED SEPTEMBER 30,
OCTOBER 31, ---------------------------------------
1996 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 7,068 $ 413,986 $ 435,096
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 1,953,887 17,138,864 3,508,717
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and futures contracts 254,588 (1,172,983) 11,889,076
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,215,543 16,379,867 15,832,889
- -------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (616,045) (358,084)
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains -- (8,878,928) (1,424,952)
- -------------------------------------------------------------------------------------------------------------------------
Capital stock transactions - net:
Class A 11,821,515 28,205,736 (2,840,672)
- -------------------------------------------------------------------------------------------------------------------------
Class B 8,096,586 -- --
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 22,133,644 35,090,630 11,209,181
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 106,414,710 71,324,080 60,114,899
- -------------------------------------------------------------------------------------------------------------------------
End of period $ 128,548,354 $ 106,414,710 $ 71,324,080
=========================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 87,482,889 $ 67,564,788 $ 39,359,052
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 209,005 201,937 403,996
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities 13,624,413 11,670,526 3,410,590
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
futures contracts 27,232,047 26,977,459 28,150,442
- -------------------------------------------------------------------------------------------------------------------------
$ 128,548,354 $ 106,414,710 $ 71,324,080
=========================================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE> 113
Financials
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six operating diversified
portfolios: AIM Blue Chip Fund, AIM Aggressive Growth Fund, AIM Capital
Development Fund, AIM Charter Fund, AIM Constellation Fund, and AIM Weingarten
Fund. Prior to June 3, 1996, the Fund was the Baird Blue Chip Fund, Inc. which
was incorporated under the laws of Wisconsin. Pursuant to an Agreement and Plan
of Reorganization between the Company and the Baird Blue Chip Fund, Inc., the
Fund was reorganized as a portfolio of the Company effective June 3, 1996. As a
result of the reorganization, the Fund's fiscal year was changed from September
30 to October 31. The Fund currently offers two different classes of shares: the
Class A shares and the Class B shares. Class B shares commenced operations on
October 1, 1996. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The Fund's investment objective is long-term growth of
capital. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange is valued at
its last price on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the mean
between the closing bid and asked prices on that day. Each security traded in
the over-the-counter market (but not including securities reported on the
NASDAQ National Market System) is valued at the mean between the last bid and
asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations that
are issued or guaranteed by the U.S. Treasury are valued on the basis of
prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translation--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
FS-12
<PAGE> 114
Financials
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES-continued
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are recorded on a trade date basis. Realized gains or losses on
sales are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and that a change in the value of contracts may not correlate with
changes in the value of the securities being hedged.
G. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g., advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the fund's average daily net assets in excess of $350 million. AIM has agreed to
waive advisory fees for two years to the extent necessary to keep the annual
expense ratio for Class A shares at 1.31% for such period. During the one month
ended October 31, 1996 and the period from June 3, 1996 through September 30,
1996, AIM voluntarily waived advisory fees in the amounts of $7,024 and $19,409,
respectively. Prior to June 3, 1996, the Baird Blue Chip Fund, Inc., ("BBC") had
a management agreement with Robert W. Baird & Co. Incorporated ("RWB") to serve
as investment advisor and manager. Under the terms of the agreement, the BBC
paid RWB an advisory fee at the annual rate of 0.74% of the daily net assets of
the BBC.
At a special meeting held on March 15, 1996, the shareholders of the BBC
approved a transaction whereby the assets (net of liabilities) of the BBC would
be sold to AIM Blue Chip Fund, a newly-created portfolio of AIM Equity Funds,
Inc., pursuant to the Agreement and Plan of Reorganization dated December 20,
1995, as amended, between the BBC and AIM Equity Funds, Inc. (the "Agreement and
Plan of Reorganization"). The requisite vote for approval was a majority of the
shares of the BBC outstanding on the record date (January 25, 1996). Of the
3,085,577 shares outstanding on the record date, 1,925,583 shares (or 62.4% of
the total outstanding shares) were present at the meeting in person or by proxy,
1,773,720 shares (or 57.5% of the total outstanding shares) voted for approval
of the Agreement and Plan of Reorganization and the reorganization transaction,
and 151,863 shares either voted against or abstained from voting on the matter.
The transaction occurred on June 3, 1996.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the one month ended October 31, 1996 and
the period from June 3, 1996 through September 30, 1996, AIM was reimbursed
$4,309 and $16,236, respectively, for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the one month ended October 31,
1996 and the period from June 3, 1996 through September 30, 1996, AFS was paid
$4,759 and $16,223, respectively, for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares
FS-13
<PAGE> 115
Financials
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-continued
(the "Class A Plan") and with respect to the Fund's Class B shares (the "Class B
Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A Plan, pays
AIM Distributors compensation at an annual rate of 0.35% of the average daily
net assets attributable to the Class A shares. The Class A Plan is designed to
compensate AIM Distributors for certain promotional and other sales related
costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges payable to AIM
Distributors related to the Class B shares. During the one month ended October
31, 1996, the Class A shares and the Class B shares paid AIM Distributors
$34,010 and $3,166, respectively, as compensation pursuant to the Plans. During
the period from June 3, 1996 through September 30, 1996, the Class A shares paid
by AIM Distributors $97,045 as compensation pursuant to the Class A Plan. Prior
to June 3, 1996, the BBC had adopted a distribution plan (the "Plan"), pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The Plan provided that
the BBC may incur certain costs which may not exceed the lesser of a monthly
payment amount equal to 0.45% per year of the BBC's daily net assets or the
actual distribution costs incurred by RWB during the year. During the period
October 1, 1995 through June 3, 1996, BBC paid RWB $93,727 as compensation under
the Plan.
AIM Distributors received commissions of $42,859 and $101,484 from sales of
shares of the Class A's capital stock transactions during the one month ended
October 31, 1996 and the period from June 3, 1996 through September 30, 1996,
respectively. Such commissions are not an expense of the Fund. They are deducted
from, and are not included in, the proceeds from sales of capital stock. During
the one month ended October 31, 1996 and the period from June 3, 1996 through
September 30, 1996, AIM Distributors did not receive contingent deferred sales
charges imposed on redemption of Fund Shares. Certain officers and directors of
the Company are officers and directors of AIM, AFS and AIM Distributors. During
the period October 1, 1995 through June 3, 1996, the BBC was advised that RWB
received $51,342 from investors representing commissions on sales of BBC shares
and no brokerage fees on the execution of purchases and sales of portfolio
securities were paid by the BBC.
During the one month ended October 31, 1996 and the period from June 3, 1996
through September 30, 1996, the Fund paid legal fees of $66 and $362,
respectively, for services rendered by Kramer, Levin, Naftalis & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank d/b/a Chemical Bank. The Fund
may borrow up to the lesser of (i) $325,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM which are
parties to the line of credit may borrow on a first come, first served basis.
Interest on borrowings under the line of credit is payable on maturity or
prepayment date. During the one month ended October 31, 1996 and the period from
July 19, 1996 through September 30, 1996, the Fund did not borrow under the line
of credit agreement. The funds which are party to the line of credit are charged
a commitment fee of 0.08% on the unused balance of the committed line. The
commitment fee is allocated among the funds based on their respective average
net assets for the period.
FS-14
<PAGE> 116
Financials
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the one month ended October 31, 1996 were $18,525,377
and $10,284,796, respectively, and during the year ended September 30, 1996 were
$54,111,108 and $43,365,584, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis is as follows:
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
1996 1996
------------ --------------
<S> <C> <C>
Aggregate unrealized appreciation of investment securities $27,860,837 $ 27,738,465
- ----------------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (650,839) (738,956)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $27,209,998 $ 26,999,509
======================================================================================================================
</TABLE>
Costs of investments for tax purposes for the one month ended October 31,
1996 and the period from June 3, 1996 through September 30, 1996 are
$101,644,715 and $78,291,809, respectively.
NOTE 5-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding during the one month ended October 31, 1996
and the years ended September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1996 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
---------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sold:
Class A 620,358 $16,142,093 1,504,902 $ 36,636,393 235,753 $ 4,808,974
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Class B* 313,256 8,163,778 -- -- -- --
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Issued as reinvestment of dividends:
Class A -- -- 178,537 4,200,245 43,313 809,149
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Reacquired:
Class A (165,098) (4,320,578) (513,296) (12,630,902) (414,147) (8,458,795)
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
Class B* (2,577) (67,192) -- -- -- --
- -------------------------------------------------- ---------------------- ------------------------ ----------------------
765,939 $19,918,101 1,170,143 $ 28,205,736 (135,081) $(2,840,672)
================================================== ====================== ======================== ======================
</TABLE>
* Class B shares commenced operations on October 1, 1996.
NOTE 7-OPEN FUTURES CONTRACTS
On October 31, 1996, $473,000, principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
On September 30, 1996, $195,000, principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION/
CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
------------- --------- ------------------ --------------
<S> <C> <C> <C> <C>
Open futures contracts at October 31, 1996: S&P 500 Index 34 March 97/Buy $ (29,818)
Open futures contracts at September 30, 1996: S&P 500 Index 14 March 97/Buy (22,050)
</TABLE>
FS-15
<PAGE> 117
Financials
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the Class A shares during the one month ended October 31, 1996
and each of the years in the nine-year period ended September 30, 1996 and for a
share of capital stock outstanding of the Class B shares during the period
October 1, 1996 (date operations commenced) through October 31, 1996.
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
----------- -----------------------------------------------------------
CLASS A: 1996 1996(a) 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.56 $ 23.83 $ 19.22 $ 18.89 $ 18.24
- ------------------------------------------ --------- ---------- --------- --------- ---------
Income from investment operations:
Net investment income (0.00) 0.33 0.14 0.15 0.19
- ------------------------------------------ --------- ---------- --------- --------- ---------
Net realized and unrealized gains
(losses) on investments 0.52 4.61 5.05 1.24 0.63
- ------------------------------------------ --------- ---------- --------- --------- ---------
Total from investment operations 0.52 4.94 5.19 1.39 0.82
- ------------------------------------------ --------- ---------- --------- --------- ---------
Less distributions:
Dividends from net investment income -- (0.21) (0.12) (0.21) (0.17)
- ------------------------------------------ --------- ---------- --------- --------- ---------
Distributions from net realized gains -- (3.00) (0.46) (0.85) --
- ------------------------------------------ --------- ---------- --------- --------- ---------
Total distributions -- (3.21) (0.58) (1.06) (0.17)
- ------------------------------------------ --------- ---------- --------- --------- ---------
Net asset value, end of period 26.08 25.56 23.83 19.22 18.89
========================================== ========= ========== ========= ========= =========
Total return(b) 2.04% 22.39% 27.84% 7.69% 4.54%
========================================== ========= ========== ========= ========= =========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 120,448 $ 106,415 $ 71,324 $ 60,115 $ 65,112
========================================== ========= ========== ========= ========= =========
Ratio of expenses to average net assets 1.30%(c) 1.26%(d) 1.3% 1.4% 1.3%
========================================== ========= ========== ========= ========= =========
Ratio of net investment income to average
net assets 0.12%(c) 0.53%(d) 0.7% 0.8% 1.0%
========================================== ========= ========== ========= ========= =========
Portfolio turnover rate 10% 58% 17% 13% 25%
========================================== ========= ========== ========= ========= =========
Average Brokerage Commission Rate $ 0.0665 N/A N/A N/A N/A
========================================== ========= ========== ========= ========= =========
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------------------------
CLASS A: 1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.77 $ 13.60 $ 13.82 $ 11.48 $ 13.10
- ------------------------------------------ --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.20 0.23 0.25 0.24 0.12
- ------------------------------------------ --------- --------- --------- --------- ---------
Net realized and unrealized gains
(losses) on investments 1.48 3.19 (0.20) 2.25 (1.68)
- ------------------------------------------ --------- --------- --------- --------- ---------
Total from investment operations 1.68 3.42 0.05 2.49 (1.56)
- ------------------------------------------ --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.21) (0.25) (0.27) (0.15) (0.02)
- ------------------------------------------ --------- --------- --------- --------- ---------
Distributions from net realized gains -- -- -- -- (0.04)
- ------------------------------------------ --------- --------- --------- --------- ---------
Total distributions (0.21) (0.25) (0.27) (0.15) (0.06)
- ------------------------------------------ --------- --------- --------- --------- ---------
Net asset value, end of period 18.24 16.77 13.60 13.82 11.48
========================================== ========= ========= ========= ========= =========
Total return(b) 10.10% 25.52% 0.34% 21.98% (11.81)%
========================================== ========= ========= ========= ========= =========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 61,601 $ 46,958 $ 31,706 $ 21,170 $ 18,681
========================================== ========= ========= ========= ========= =========
Ratio of expenses to average net assets 1.4% 1.5% 1.6% 1.7% 2.2%
========================================== ========= ========= ========= ========= =========
Ratio of net investment income to average
net assets 1.2% 1.6% 2.0% 1.9% 3.3%
========================================== ========= ========= ========= ========= =========
Portfolio turnover rate 5% 9% 12% 15% 15%
========================================== ========= ========= ========= ========= =========
Average Brokerage Commission Rate N/A N/A N/A N/A N/A
========================================== ========= ========= ========= ========= =========
</TABLE>
(a) The Fund changed investment advisors on June 3, 1996.
(b) Does not deduct sales charges and periods for less than one year are not
annualized.
(c) Ratios are based on average net assets of $114,411,384. Ratios of expenses
and net investment income to average net assets prior to fee waivers are
1.37% and 0.05%, respectively.
(d) Ratios are based on average net assets of $77,923,118. Ratios of expenses
and net investment income to average net assets prior to fee waivers are
1.28% and 0.50%, respectively.
<TABLE>
<CAPTION>
OCTOBER 31,
CLASS B: 1996
-----------
<S> <C>
Net asset value, beginning of period $ 25.56
- --------------------------------------------- ---------
Income from investment operations:
Net investment income (0.01)
- --------------------------------------------- ---------
Net realized and unrealized gains (losses)
on investments 0.52
- --------------------------------------------- ---------
Total from investment operations 0.51
- --------------------------------------------- ---------
Net asset value, end of period 26.07
============================================= =========
Total return(a) 2.00%
============================================= =========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 8,101
============================================= =========
Ratio of expenses to average net assets 2.01% (b)
============================================= =========
Ratio of net investment income (loss) to
average net assets (0.58) (b)
============================================= =========
Portfolio turnover rate 10%
============================================= =========
Average Brokerage Commission Rate $ 0.0665
============================================= =========
</TABLE>
(a) Does not deduct sales charges and periods for less
than one year are not annualized.
(b) Ratios are annualized and based on average net assets
of $3,728,067. Ratios of expenses and net investment
income (loss) to average net assets prior to fee
waivers are 2.08% (annualized) and (0.65)%
(annualized), respectively.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an Agreement and Plan of Merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM Funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-16
<PAGE> 118
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Charter Fund:
We have audited the accompanying statement of assets and
liabilities of the AIM Charter Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1996, the related statement
of operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the three-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.
The financial highlights for each of the years in the
seven-year period ended October 31, 1993 were audited by
other auditors whose report thereon, dated November 12,
1993 expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Charter
Fund as of October 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended and
the financial highlights for each of the years in the
three-year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-17
<PAGE> 119
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-75.58%
ADVERTISING/BROADCASTING-0.56%
Eagle River Interactive, Inc.(a) 400,000 $ 3,750,000
- -----------------------------------------------------------------
True North Communications, Inc. 600,000 14,250,000
- -----------------------------------------------------------------
18,000,000
- -----------------------------------------------------------------
AEROSPACE/DEFENSE-2.00%
Boeing Co. (The) 160,000 15,260,000
- -----------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 700,000 16,537,500
- -----------------------------------------------------------------
Northrop Grumman Corp. 100,000 8,075,000
- -----------------------------------------------------------------
Rockwell International Corp. 200,000 11,000,000
- -----------------------------------------------------------------
United Technologies Corp. 100,000 12,875,000
- -----------------------------------------------------------------
63,747,500
- -----------------------------------------------------------------
AIRLINES-0.25%
Sabre Group Holdings Inc.(a) 260,000 7,930,000
- -----------------------------------------------------------------
APPLIANCES-0.31%
Sunbeam Corp., Inc. 400,000 9,850,000
- -----------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.46%
Lear Corp.(a) 400,000 14,800,000
- -----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.84%
General Motors Corp. 500,000 26,937,500
- -----------------------------------------------------------------
BANKING-0.50%
Marshall & Ilsley Corp. 500,000 16,062,500
- -----------------------------------------------------------------
BANKING (MONEY CENTER)-1.11%
BankAmerica Corp. 200,000 18,300,000
- -----------------------------------------------------------------
Chase Manhattan Corp. 200,000 17,150,000
- -----------------------------------------------------------------
35,450,000
- -----------------------------------------------------------------
BEVERAGES-0.24%
PepsiCo. Inc. 260,000 7,702,500
- -----------------------------------------------------------------
BUSINESS SERVICES-2.43%
Accustaff Inc.(a) 300,000 8,025,000
- -----------------------------------------------------------------
CUC International, Inc.(a) 500,000 12,250,000
- -----------------------------------------------------------------
Diebold, Inc. 400,000 23,000,000
- -----------------------------------------------------------------
Dun & Bradstreet Corp. 214,900 12,437,338
- -----------------------------------------------------------------
Equifax, Inc. 600,000 17,850,000
- -----------------------------------------------------------------
Olsten Corp. 200,000 4,000,000
- -----------------------------------------------------------------
77,562,338
- -----------------------------------------------------------------
COMPUTER MAINFRAMES-0.48%
International Business Machines
Corp. 120,000 15,480,000
- -----------------------------------------------------------------
COMPUTER NETWORKING-2.25%
Ascend Communications, Inc.(a) 300,000 19,612,500
- -----------------------------------------------------------------
Cascade Communications Corp.(a) 160,000 11,620,000
- -----------------------------------------------------------------
Cisco Systems, Inc.(a) 400,000 24,750,000
- -----------------------------------------------------------------
ECI Telecommunications Ltd. Designs 800,000 16,000,000
- -----------------------------------------------------------------
71,982,500
- -----------------------------------------------------------------
COMPUTER PERIPHERALS-0.39%
U.S. Robotics Corp.(a) 200,000 12,575,000
- -----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-4.94%
Computer Associates International,
Inc. 300,000 17,737,500
- -----------------------------------------------------------------
Electronic Data Systems Corp. 600,000 27,000,000
- -----------------------------------------------------------------
Farallon Communications(a) 235,000 2,996,250
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Fiserv, Inc.(a) 340,000 $ 13,047,500
- -----------------------------------------------------------------
HBO & Co. 200,000 12,025,000
- -----------------------------------------------------------------
Informix Corp.(a) 300,000 6,656,250
- -----------------------------------------------------------------
Learning Co., Inc. (The)(a) 300,000 6,093,750
- -----------------------------------------------------------------
Microsoft Corp.(a) 120,000 16,470,000
- -----------------------------------------------------------------
Oracle Corp.(a) 300,000 12,693,750
- -----------------------------------------------------------------
Saville Systems Ireland PLC-ADR
(Ireland)(a) 200,000 8,625,000
- -----------------------------------------------------------------
Sterling Commerce, Inc.(a) 700,000 19,687,500
- -----------------------------------------------------------------
Wallace Computer Services, Inc. 500,000 14,687,500
- -----------------------------------------------------------------
157,720,000
- -----------------------------------------------------------------
CONGLOMERATES-2.20%
AlliedSignal Inc. 200,000 13,100,000
- -----------------------------------------------------------------
Corning, Inc. 240,000 9,300,000
- -----------------------------------------------------------------
E.I. du Pont de Nemours and Co. 160,000 14,840,000
- -----------------------------------------------------------------
Loews Corp. 400,000 33,050,000
- -----------------------------------------------------------------
70,290,000
- -----------------------------------------------------------------
COSMETICS & TOILETRIES-1.21%
Avon Products, Inc. 240,000 13,020,000
- -----------------------------------------------------------------
Gillette Co. (The) 140,000 10,465,000
- -----------------------------------------------------------------
Warner-Lambert Co. 240,000 15,270,000
- -----------------------------------------------------------------
38,755,000
- -----------------------------------------------------------------
ELECTRIC POWER-2.22%
Allegheny Power System, Inc. 400,000 11,950,000
- -----------------------------------------------------------------
American Electric Power Co. 360,000 14,940,000
- -----------------------------------------------------------------
Carolina Power & Light Co. 280,000 10,115,000
- -----------------------------------------------------------------
Duke Power Co. 300,000 14,662,500
- -----------------------------------------------------------------
Southern Co. 500,000 11,062,500
- -----------------------------------------------------------------
Texas Utilities Co. 200,000 8,100,000
- -----------------------------------------------------------------
70,830,000
- -----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.49%
General Electric Co. 200,000 19,350,000
- -----------------------------------------------------------------
General Signal Corp. 200,000 8,150,000
- -----------------------------------------------------------------
Honeywell, Inc. 140,000 8,697,500
- -----------------------------------------------------------------
Imation Corp.(a) 58,100 1,590,487
- -----------------------------------------------------------------
Sony Corp.-ADR (Japan) 160,000 9,660,000
- -----------------------------------------------------------------
47,447,987
- -----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-1.40%
Merrill Lynch & Co., Inc. 240,000 16,860,000
- -----------------------------------------------------------------
Morgan Stanley Group, Inc. 220,000 11,055,000
- -----------------------------------------------------------------
Ryder System, Inc. 300,000 8,925,000
- -----------------------------------------------------------------
United Assets Management Corp. 320,000 7,840,000
- -----------------------------------------------------------------
44,680,000
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.58%
American Express Co. 200,000 9,400,000
- -----------------------------------------------------------------
Federal Home Loan Mortgage Corp. 340,000 34,340,000
- -----------------------------------------------------------------
Federal National Mortgage
Association 1,800,000 70,425,000
- -----------------------------------------------------------------
114,165,000
- -----------------------------------------------------------------
</TABLE>
FS-18
<PAGE> 120
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (SAVINGS & LOAN)-0.32%
Washington Mutual, Inc. 240,000 $ 10,140,000
- -----------------------------------------------------------------
FOOD/PROCESSING-0.94%
Dole Food Co. 240,000 9,360,000
- -----------------------------------------------------------------
Interstate Bakeries Corp. 240,000 10,170,000
- -----------------------------------------------------------------
Nabisco Holdings Corp. 277,100 10,321,975
- -----------------------------------------------------------------
29,851,975
- -----------------------------------------------------------------
FUNERAL SERVICES-0.25%
Loewen Group, Inc. 200,000 7,925,000
- -----------------------------------------------------------------
GAMING-0.33%
International Game Technology 500,000 10,562,500
- -----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.23%
Provident Companies, Inc. 200,000 7,425,000
- -----------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-3.90%
Allstate Corp. 400,000 22,450,000
- -----------------------------------------------------------------
CIGNA Corp. 300,000 39,150,000
- -----------------------------------------------------------------
ITT Hartford Group, Inc. 140,000 8,820,000
- -----------------------------------------------------------------
MBIA, Inc. 100,000 8,862,500
- -----------------------------------------------------------------
Travelers Group, Inc. 400,000 21,700,000
- -----------------------------------------------------------------
Travelers/Aetna Property Casualty
Corp. 400,000 12,000,000
- -----------------------------------------------------------------
USF&G Corp. 600,000 11,400,000
- -----------------------------------------------------------------
124,382,500
- -----------------------------------------------------------------
LEISURE & RECREATION-1.16%
Brunswick Corp. 500,000 11,750,000
- -----------------------------------------------------------------
Callaway Golf Co. 300,000 9,187,500
- -----------------------------------------------------------------
Eastman Kodak Co. 200,000 15,950,000
- -----------------------------------------------------------------
36,887,500
- -----------------------------------------------------------------
MACHINE TOOLS-0.48%
Stanley Works 540,000 15,255,000
- -----------------------------------------------------------------
MEDICAL (DRUGS)-8.94%
American Home Products Corp. 360,000 22,050,000
- -----------------------------------------------------------------
Bristol-Myers Squibb Co. 300,000 31,725,000
- -----------------------------------------------------------------
Johnson & Johnson 680,000 33,490,000
- -----------------------------------------------------------------
Lilly (Eli) & Co. 240,000 16,920,000
- -----------------------------------------------------------------
Pfizer Inc. 300,000 24,825,000
- -----------------------------------------------------------------
Pharmacia & Upjohn, Inc. 800,000 28,800,000
- -----------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 480,000 32,220,000
- -----------------------------------------------------------------
Schering-Plough Corp. 500,000 32,000,000
- -----------------------------------------------------------------
SmithKline Beecham PLC-ADR (United
Kingdom) 640,000 40,080,000
- -----------------------------------------------------------------
Teva Pharmaceuticals Industries
Ltd.-ADR (Israel) 320,000 13,400,000
- -----------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 300,000 10,012,500
- -----------------------------------------------------------------
285,522,500
- -----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.12%
American Medical Response, Inc.(a) 300,000 9,000,000
- -----------------------------------------------------------------
Columbia/HCA Healthcare Corp. 900,000 32,175,000
- -----------------------------------------------------------------
MedPartners, Inc.(a) 1,000,000 21,125,000
- -----------------------------------------------------------------
OrNda HealthCorp(a) 360,000 9,810,000
- -----------------------------------------------------------------
Oxford Health Plans, Inc.(a) 100,000 4,550,000
- -----------------------------------------------------------------
PacifiCare Health System, Inc.(a) 28,500 2,002,125
- -----------------------------------------------------------------
RoTech Medical Corp.(a) 400,000 6,400,000
- -----------------------------------------------------------------
Tenet Healthcare Corp.(a) 700,000 14,612,500
- -----------------------------------------------------------------
99,674,625
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS-1.29%
Baxter International, Inc. 400,000 $ 16,650,000
- -----------------------------------------------------------------
Boston Scientific Corp.(a) 300,000 16,312,500
- -----------------------------------------------------------------
Omnicare, Inc. 300,000 8,175,000
- -----------------------------------------------------------------
41,137,500
- -----------------------------------------------------------------
NATURAL GAS PIPELINE-1.49%
PanEnergy Corp. 300,000 11,550,000
- -----------------------------------------------------------------
Sonat, Inc. 200,000 9,850,000
- -----------------------------------------------------------------
Williams Companies, Inc. 500,000 26,125,000
- -----------------------------------------------------------------
47,525,000
- -----------------------------------------------------------------
OIL & GAS (SERVICES)-3.39%
Halliburton Co. 260,000 14,722,500
- -----------------------------------------------------------------
Mobil Corp. 160,000 18,680,000
- -----------------------------------------------------------------
National Fuel Gas Co. 42,500 1,583,125
- -----------------------------------------------------------------
Petroleum Geo-Services A.S.A.-ADR
(Norway)(a) 266,600 9,131,050
- -----------------------------------------------------------------
Reading & Bates Corp.(a) 420,000 12,075,000
- -----------------------------------------------------------------
Royal Dutch Petroleum Co. (Netherlands) 100,000 16,537,500
- -----------------------------------------------------------------
Texaco, Inc. 160,000 16,260,000
- -----------------------------------------------------------------
Transocean Offshore Inc. 160,000 10,120,000
- -----------------------------------------------------------------
YPF S.A.-ADR (Argentina) 400,000 9,100,000
- -----------------------------------------------------------------
108,209,175
- -----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.81%
Coastal Corp. 400,000 17,200,000
- -----------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 140,000 8,522,500
- -----------------------------------------------------------------
25,722,500
- -----------------------------------------------------------------
PUBLISHING-0.91%
Gannett Co., Inc. 168,000 12,747,000
- -----------------------------------------------------------------
Tribune Co. 200,000 16,350,000
- -----------------------------------------------------------------
29,097,000
- -----------------------------------------------------------------
RAILROADS-0.11%
Wisconsin Central Transportation
Corp. 100,000 3,600,000
- -----------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-2.38%
Crescent Real Estate Equities, Inc. 400,000 16,700,000
- -----------------------------------------------------------------
FelCor Suite Hotels, Inc. 320,000 10,480,000
- -----------------------------------------------------------------
National Health Investors, Inc. 300,000 10,462,500
- -----------------------------------------------------------------
Patroit American Hospitality, Inc. 440,000 15,455,000
- -----------------------------------------------------------------
Spieker Properties, Inc. 300,000 9,225,000
- -----------------------------------------------------------------
Starwood Lodging Trust 300,000 13,500,000
- -----------------------------------------------------------------
75,822,500
- -----------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.89%
Food Lion, Inc.-Class A 1,300,000 11,131,250
- -----------------------------------------------------------------
Safeway, Inc.(a) 400,000 17,150,000
- -----------------------------------------------------------------
28,281,250
- -----------------------------------------------------------------
RETAIL (STORES)-1.69%
Blue Square-Israel Ltd-ADR
(Israel)(a) 110,500 1,740,375
- -----------------------------------------------------------------
Dayton-Hudson Corp. 300,000 10,387,500
- -----------------------------------------------------------------
Fila Holdings S.p.A.-ADR (Italy) 141,700 10,202,400
- -----------------------------------------------------------------
J.C. Penney Co., Inc. 300,000 15,750,000
- -----------------------------------------------------------------
Wal-Mart Stores, Inc. 600,000 15,975,000
- -----------------------------------------------------------------
54,055,275
- -----------------------------------------------------------------
SEMICONDUCTORS-1.24%
Intel Corp. 360,000 39,555,000
- -----------------------------------------------------------------
</TABLE>
FS-19
<PAGE> 121
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SHOES & RELATED APPAREL-0.44%
NIKE, Inc. Class B 240,000 $ 14,130,000
- -----------------------------------------------------------------
TELECOMMUNICATIONS-6.19%
ADC Telecommunications(a) 140,000 9,572,500
- -----------------------------------------------------------------
American Portable Telecom, Inc.(a) 500,000 3,812,500
- -----------------------------------------------------------------
Andrew Corp.(a) 340,000 16,575,000
- -----------------------------------------------------------------
Frontier Corp. 540,000 15,660,000
- -----------------------------------------------------------------
Koor Industries Ltd.-ADR (Israel) 240,000 4,170,000
- -----------------------------------------------------------------
LCI International, Inc.(a) 315,789 10,065,775
- -----------------------------------------------------------------
Lucent Technologies, Inc. 400,000 18,800,000
- -----------------------------------------------------------------
MFS Communications Co., Inc.(a) 1,004,936 50,372,417
- -----------------------------------------------------------------
Nokia Corp.-Class A-ADR (Finland) 360,000 16,695,000
- -----------------------------------------------------------------
Pacific Telesis Group 300,000 10,200,000
- -----------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-ADR (Brazil) 200,000 14,900,000
- -----------------------------------------------------------------
Telefonaktiebolaget L.M.
Ericsson-ADR (Sweden) 600,000 16,575,000
- -----------------------------------------------------------------
Tellabs, Inc.(a) 120,000 10,215,000
- -----------------------------------------------------------------
197,613,192
- -----------------------------------------------------------------
TELEPHONE-2.79%
Ameritech Corp. 300,000 16,425,000
- -----------------------------------------------------------------
BellSouth Corp. 500,000 20,375,000
- -----------------------------------------------------------------
Cincinnati Bell, Inc. 800,000 39,500,000
- -----------------------------------------------------------------
SBC Communications, Inc. 260,000 12,642,500
- -----------------------------------------------------------------
88,942,500
- -----------------------------------------------------------------
TEXTILES-0.23%
VF Corp. 109,900 7,184,712
- -----------------------------------------------------------------
TOBACCO-3.11%
Philip Morris Companies, Inc. 700,000 64,837,500
- -----------------------------------------------------------------
RJR Nabisco Holdings Corp. 1,200,000 34,650,000
- -----------------------------------------------------------------
99,487,500
- -----------------------------------------------------------------
TRANSPORTATION-0.09%
Hvide Marine, Inc. Class A(a) 200,000 2,975,000
- -----------------------------------------------------------------
Total Common Stocks 2,412,932,529
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-12.95%
AUTOMOBILE/TRUCK PARTS & TIRES-0.41%
Magna International, Inc.,
Conv. Sub Deb., 5.00%, 10/15/02 $12,000,000 $ 13,110,000
- -----------------------------------------------------------------
BUSINESS SERVICES-0.30%
Career Horizons, Inc.,
Conv. Bonds, 7.00%, 11/01/02(b)
(acquired 10/16/95-11/27/95; cost
$4,015,000) 4,000,000 9,725,601
- -----------------------------------------------------------------
CHEMICALS-1.08%
Hexcel Corp.,
Conv. Sub. Notes, 7.00%, 08/01/03 6,000,000 8,010,000
- -----------------------------------------------------------------
Sandoz Capital BVI Ltd.
(Switzerland),
Sr. Conv. Deb., 2.00%, 10/06/02(b)
(acquired 01/09/96-06/05/96; cost
$24,018,250) 24,000,000 26,430,000
- -----------------------------------------------------------------
34,440,000
- -----------------------------------------------------------------
COMPUTER NETWORKING-0.77%
3Com Corp.,
Conv. Sub. Notes, 10.25%,
11/01/01(b)
(acquired 11/07/95-08/28/96; cost
$19,300,448) 12,000,000 24,720,000
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-0.25%
Comverse Technology Inc.,
Conv. Sub. Deb., 5.75%,
10/01/06(b)
(acquired 10/01/96-10/24/96; cost
$8,029,250) $ 8,000,000 $ 7,960,000
- -----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.95%
ADT Operations,
Conv. Sub. Notes, 4.32%,
07/06/10(c) 25,000,000 14,937,500
- -----------------------------------------------------------------
Checkpoint Systems Inc.,
Conv. Sub. Deb., 5.25%,
11/01/05(b)
(acquired 10/17/95-11/15/95; cost
$4,013,125) 4,000,000 5,450,750
- -----------------------------------------------------------------
SCI Systems, Inc.,
Conv. Sub. Notes, 5.00%,
05/01/06(b)
(acquired 10/24/96-10/28/96; cost
$9,952,680) 8,000,000 9,800,000
- -----------------------------------------------------------------
30,188,250
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.59%
First Financial Management Corp.,
Conv. Deb., 5.00%, 12/15/99 10,000,000 18,800,000
- -----------------------------------------------------------------
HOTELS/MOTELS-0.62%
HFS, Inc.,
Conv. Sr. Notes, 4.75%, 03/01/03 10,000,000 12,887,500
- -----------------------------------------------------------------
Prime Hospitality Corp.,
Conv. Sub. Notes, 7.00%, 04/15/02 5,000,000 7,012,500
- -----------------------------------------------------------------
19,900,000
- -----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.57%
Thermo Electron Corp.,
Conv. Sub. Deb., 4.25%,
01/01/03(b)
(acquired 11/29/95-04/01/96; cost
$17,830,575) 16,000,000 18,240,000
- -----------------------------------------------------------------
MEDICAL (DRUGS)-0.47%
ICN Pharmaceuticals Inc.,
Conv. Sub. Notes, 8.50%, 11/15/99 14,000,000 15,155,000
- -----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.87%
Genesis Health Ventures,
Sr. Conv. Sub. Deb., 6.00%,
11/30/03 5,000,000 7,684,995
- -----------------------------------------------------------------
HEALTHSOUTH Rehabilitation Corp.,
Conv. Sub. Deb., 5.00%, 04/01/01 6,000,000 12,120,000
- -----------------------------------------------------------------
Multicare Companies,
Conv. Sub. Deb., 7.00%,
03/15/03(b)
(acquired 11/30/95; cost
$6,210,000) 6,000,000 7,132,500
- -----------------------------------------------------------------
Phycor, Inc.,
Conv. Sub. Deb., 4.50%, 02/15/03 12,000,000 12,225,000
- -----------------------------------------------------------------
Quintiles Transnational,
Conv. Sub. Notes, 4.25%,
05/31/00(b)
(acquired 04/23/96; cost
$12,027,000) 12,000,000 12,480,000
- -----------------------------------------------------------------
Renal Treatment Centers,
Conv. Sub Notes, 5.625%,
07/15/06(b)
(acquired 06/06/96-06/07/96; cost
$7,988,500) 8,000,000 8,000,000
- -----------------------------------------------------------------
59,642,495
- -----------------------------------------------------------------
OFFICE AUTOMATION-0.55%
Danka Business Systems PLC,
Conv. Sub. Deb., 6.75%, 04/01/02
(United Kingdom) 12,000,000 17,580,000
- -----------------------------------------------------------------
OFFICE PRODUCTS-0.23%
U.S. Office Products Co.,
Conv. Sub. Notes, 5.50%, 02/01/01 6,500,000 7,426,531
- -----------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 122
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-0.56%
Apache Corp.,
Conv. Sub. Deb., 6.00%,
01/15/02(b)
(acquired 06/14/96-08/22/96; cost
$9,188,750) $ 8,000,000 $ 10,120,000
- -----------------------------------------------------------------
Pride Petroleum Services, Inc.,
Conv. Sub. Deb., 6.25%, 02/15/06 5,000,000 7,725,000
- -----------------------------------------------------------------
17,845,000
- -----------------------------------------------------------------
POLLUTION CONTROL-0.62%
Sanifill, Inc.,
Conv. Sub. Deb., 5.00%, 03/01/06 6,000,000 7,770,000
- -----------------------------------------------------------------
U.S. Filter Corp.,
Conv. Sub. Notes, 6.00%, 09/15/05 6,200,000 11,888,500
- -----------------------------------------------------------------
19,658,500
- -----------------------------------------------------------------
RETAIL (STORES)-2.03%
Federated Department Stores,
Conv. Notes, 5.00%, 10/01/03 10,000,000 11,287,500
- -----------------------------------------------------------------
Home Depot, Inc.,
Conv. Sub. Notes, 3.25%, 10/01/01 11,000,000 11,027,500
- -----------------------------------------------------------------
SAKS Holdings,
Conv. Sub. Notes, 5.50%, 09/15/06 15,000,000 15,900,000
- -----------------------------------------------------------------
Sports Authority, Inc. (The),
Conv. Sub. Notes, 5.25%,
09/15/01(b)
(acquired 09/17/96; cost
$14,000,000) 14,000,000 13,930,000
- -----------------------------------------------------------------
Staples, Inc.,
Conv. Sub. Deb., 4.50%,
10/01/00(b)
(acquired 09/16/96-10/28/96; cost
$13,282,260) 12,000,000 12,720,000
- -----------------------------------------------------------------
64,865,000
- -----------------------------------------------------------------
SEMICONDUCTORS-0.81%
Altera Corp.,
Conv. Sub. Notes, 5.75%,
06/15/02(b)
(acquired 09/16/96-09/26/96; cost
$14,249,080) 12,000,000 16,440,000
- -----------------------------------------------------------------
Analog Devices,
Conv. Sub. Notes, 3.50%, 12/01/00 8,000,000 9,300,000
- -----------------------------------------------------------------
25,740,000
- -----------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-0.27%
Seacor Holdings Inc.,
Conv. Sub. Notes, 5.375%,
11/15/06(b)
(acquired 10/30/96; cost
$8,250,000) 8,250,000 8,497,500
- -----------------------------------------------------------------
Total Convertible Corporate
Bonds 413,493,877
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-6.55%
COMPUTER SOFTWARE/SERVICES-1.08%
Ceridian Corp.-$2.75 Conv. Pfd. 220,000 23,980,000
- -----------------------------------------------------------------
Vanstar Corp.-$3.375 Conv. Pfd.(b)
(acquired 09/2796-10/30/96; cost
$10,034,500) 200,000 10,350,000
- -----------------------------------------------------------------
34,330,000
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.75%
Penncorp Financial Group-$3.375
Conv. Pfd. 100,000 8,100,000
- -----------------------------------------------------------------
SunAmerica Inc.-Series E, $3.10 Dep.
Conv. Pfd. 180,000 15,795,000
- -----------------------------------------------------------------
23,895,000
- -----------------------------------------------------------------
FUNERAL SERVICES-1.06%
SCI Financial LLC-Series A, $3.125
Conv. Pfd. 360,000 33,840,000
- -----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.79%
Conseco Inc.-$4.279 Conv. Pfd.
PRIDES 260,000 25,350,000
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-0.66%
Aetna Inc.-$4.758 Conv. Pfd. 160,000 $ 11,220,000
- -----------------------------------------------------------------
PMI Group, Inc.-$2.30 Exch. Conv.
Pfd. 200,000 9,925,000
- -----------------------------------------------------------------
21,145,000
- -----------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.38%
U.S. Surgical Corp.-Series A, $2.20
Conv. Pfd 300,000 12,000,000
- -----------------------------------------------------------------
PUBLISHING-0.27%
Hollinger International, Inc.-$0.951
Conv. Pfd PRIDES 700,000 8,575,000
- -----------------------------------------------------------------
RETAIL (STORES)-0.57%
TJX Companies, Inc.-Series E, $7.00
Conv. Pfd 80,000 18,200,000
- -----------------------------------------------------------------
TELECOMMUNICATIONS-0.82%
MFS Communications Co., Inc.-$2.68
Conv. Pfd 300,000 26,025,000
- -----------------------------------------------------------------
UTILITIES (MISCELLANEOUS)-0.17%
MCN Corp.-$2.013 Conv. Pfd. PRIDES 200,000 5,500,000
- -----------------------------------------------------------------
Total Convertible Preferred
Stocks 208,860,000
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U. S. TREASURY NOTES-4.52%
5.375%, 11/30/97 $ 12,000,000 $ 11,981,400
- -----------------------------------------------------------------
5.25%, 12/31/97 12,000,000 11,961,960
- -----------------------------------------------------------------
5.00%, 01/31/98 12,000,000 11,915,400
- -----------------------------------------------------------------
5.125%, 02/28/98 12,000,000 11,925,360
- -----------------------------------------------------------------
6.125%, 03/31/98 12,000,000 12,084,240
- -----------------------------------------------------------------
5.875%, 04/30/98 12,000,000 12,043,200
- -----------------------------------------------------------------
6.00%, 05/31/98 12,000,000 12,061,680
- -----------------------------------------------------------------
6.25%, 06/30/98 12,000,000(d) 12,110,160
- -----------------------------------------------------------------
6.25%, 07/31/98 12,000,000(d) 12,110,880
- -----------------------------------------------------------------
6.125%, 08/31/98 12,000,000 12,085,200
- -----------------------------------------------------------------
6.00%, 09/30/98 12,000,000(d) 12,060,600
- -----------------------------------------------------------------
5.875%, 10/31/98 12,000,000 12,030,120
- -----------------------------------------------------------------
Total U. S. Treasury Notes 144,370,200
- -----------------------------------------------------------------
TOTAL INVESTMENTS-99.60% 3,179,656,606
- -----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.40% 12,814,809
- -----------------------------------------------------------------
NET ASSETS-100.00% $ 3,192,471,415
=================================================================
</TABLE>
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debenture
Dep. - Depository
Exch. - Exchangeable
Jr. - Junior
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sr. - Senior
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31, 1996 was
$201,996,351 which represented 6.33% of net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
See Notes to Financial Statements.
FS-21
<PAGE> 123
Financials
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,723,507,418) $3,179,656,606
- ---------------------------------------------------------
Cash 4,227,663
- ---------------------------------------------------------
Receivable for:
Investments sold 46,357,131
- ---------------------------------------------------------
Capital stock sold 10,899,789
- ---------------------------------------------------------
Dividends and interest 9,846,941
- ---------------------------------------------------------
Variation margin 425,000
- ---------------------------------------------------------
Investment for deferred compensation
plan 30,282
- ---------------------------------------------------------
Other assets 60,778
- ---------------------------------------------------------
Total assets 3,251,504,190
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 51,431,948
- ---------------------------------------------------------
Capital stock reacquired 3,913,155
- ---------------------------------------------------------
Deferred compensation 30,282
- ---------------------------------------------------------
Accrued advisory fees 1,684,854
- ---------------------------------------------------------
Accrued administrative services fees 12,855
- ---------------------------------------------------------
Accrued distribution fees 1,104,528
- ---------------------------------------------------------
Accrued transfer agent fees 571,997
- ---------------------------------------------------------
Accrued operating expenses 283,156
- ---------------------------------------------------------
Total liabilities 59,032,775
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $3,192,471,415
=========================================================
NET ASSETS:
Class A $2,647,207,658
=========================================================
Class B $ 515,672,339
=========================================================
Institutional Class $ 29,591,418
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 236,469,378
=========================================================
Class B:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 46,136,132
=========================================================
Institutional Class:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 2,633,153
=========================================================
Class A:
Net asset value and redemption price
per share $ 11.19
=========================================================
Offering price per share:
(Net asset value of $11.19 divided
by 94.50%) $ 11.84
=========================================================
Class B:
Net asset value and offering price per
share $ 11.18
=========================================================
Institutional Class:
Net asset value, offering and
redemption price per share $ 11.24
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $226,295 foreign
withholding tax) $ 51,362,438
- --------------------------------------------------------
Interest 25,650,354
- --------------------------------------------------------
Total investment income 77,012,792
- --------------------------------------------------------
EXPENSES:
Advisory fees 16,686,866
- --------------------------------------------------------
Administrative services fees 114,489
- --------------------------------------------------------
Custodian fees 228,479
- --------------------------------------------------------
Directors' fees 23,489
- --------------------------------------------------------
Distribution fees-Class A 6,952,782
- --------------------------------------------------------
Distribution fees-Class B 2,831,042
- --------------------------------------------------------
Transfer agent fees-Class A 3,479,192
- --------------------------------------------------------
Transfer agent fees-Class B 755,257
- --------------------------------------------------------
Transfer agent fees-Institutional Class 2,105
- --------------------------------------------------------
Other 735,932
- --------------------------------------------------------
Total expenses 31,809,633
- --------------------------------------------------------
Less fees waived by advisor (156,975)
- --------------------------------------------------------
Expenses paid indirectly (40,776)
- --------------------------------------------------------
Net expenses 31,611,882
- --------------------------------------------------------
Net investment income 45,400,910
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 187,783,804
- --------------------------------------------------------
Foreign currencies 108,458
- --------------------------------------------------------
Futures contracts (153,728)
- --------------------------------------------------------
187,738,534
- --------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 171,825,605
- --------------------------------------------------------
Foreign currencies 1,822
- --------------------------------------------------------
Futures contracts (51,980)
- --------------------------------------------------------
171,775,447
- --------------------------------------------------------
Net gain on investment securities,
foreign currencies and futures
contracts 359,513,981
- --------------------------------------------------------
Net increase in net assets resulting from
operations $404,914,891
========================================================
</TABLE>
See Notes to Financial Statements.
FS-22
<PAGE> 124
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 45,400,910 $ 26,980,252
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities, foreign currencies and futures
contracts 187,738,534 179,125,169
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities, foreign currencies and futures
contracts 171,775,447 200,981,202
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 404,914,891 407,086,623
- -------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (34,698,850) (34,589,802)
- -------------------------------------------------------------------------------------------------------------------------------
Class B (2,262,959) (55,355)
- -------------------------------------------------------------------------------------------------------------------------------
Institutional Class (506,177) (536,096)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investments:
Class A (170,497,932) (57,274,888)
- -------------------------------------------------------------------------------------------------------------------------------
Class B (8,672,692) (12,593)
- -------------------------------------------------------------------------------------------------------------------------------
Institutional Class (2,168,635) (759,222)
- -------------------------------------------------------------------------------------------------------------------------------
Net equalization credits (charges):
Class A 511,762 (284,916)
- -------------------------------------------------------------------------------------------------------------------------------
Class B 219,669 24,584
- -------------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,194 (13,270)
- -------------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 518,654,491 86,486,354
- -------------------------------------------------------------------------------------------------------------------------------
Class B 417,063,105 66,768,426
- -------------------------------------------------------------------------------------------------------------------------------
Institutional Class 2,366,710 (206,795)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 1,124,924,577 466,633,050
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,067,546,838 1,600,913,788
- -------------------------------------------------------------------------------------------------------------------------------
End of period $3,192,471,415 $2,067,546,838
===============================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,544,742,646 $1,606,658,340
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 8,877,492 102,563
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities, foreign currencies and
futures contracts 182,752,246 176,462,351
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures contracts 456,099,031 284,323,584
- -------------------------------------------------------------------------------------------------------------------------------
$3,192,471,415 $2,067,546,838
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-23
<PAGE> 125
Financials
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six operating diversified
portfolios: AIM Charter Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund,
AIM Capital Development Fund, AIM Constellation Fund and AIM Weingarten Fund.
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and the Institutional Class. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to provide growth of
capital, with current income as a secondary objective.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible bonds are valued at
the mean between the closing bid and asked prices obtained from a
broker-dealer. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations that are issued or guaranteed by the U.S. Treasury
are valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as yield,
type of issue, coupon rate and maturity date. Securities for which market
prices are not provided by any of the above methods are valued at the mean
between last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision
of the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
also generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1996
$109,380 was reclassified from undistributed net realized gains to
undistributed net investment income as a result of differing book/tax
treatment of foreign currency transactions. Net assets of the Fund were
unaffected as a result of this reclassification.
C. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
D. Expenses-Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
E. Equalization-The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and costs of repurchases of
Fund shares, equivalent on a per share basis to the amount of undistributed
net investment income, is credited or charged to undistributed net income
when the transaction is recorded so that the undistributed net investment
income per share is unaffected by sales or redemptions of Fund shares.
F. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation.
FS-24
<PAGE> 126
Financials
Purchases and sales of portfolio securities and income items denominated in
foreign currencies are translated into U.S. dollar amounts on the respective
dates of such transactions.
G. Foreign Currency Contracts-A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed upon price at a future
date. The Fund may enter into a forward 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.
H. Stock Index Futures Contracts-The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and the change in the value of the contracts may not correlate with changes
in the value of the securities being hedged.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees paid
by the Fund to AIM to the extent necessary to reduce the fees paid by the Fund
at net asset levels higher than those currently incorporated in the present
advisory fee schedule. 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. The
approval of Board of Directors would be necessary before AIM can discontinue
this waiver. During the year ended October 31, 1996, AIM waived fees of
$156,975. 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.
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, 1996, AIM was
reimbursed $114,489 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A and Class B shares. During the year
ended October 31, 1996, AFS was paid $2,264,602 for such services. During the
year ended October 31, 1996, the Fund paid A I M Institutional Fund Services,
Inc. ("AIFS") $2,105 for shareholder and transfer agency services with respect
to the Institutional Class.
The Fund received reductions in transfer agency fees of $37,315 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $3,461 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $40,776 during the year ended October
31, 1996.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs and provides periodic payments
to selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund. The Fund, pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of this amount, the Fund may pay a service
fee of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer or pledge to
one or more designees, its rights to all or a designed portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan), and (b) any contingent deferred sales charges received by AIM
FS-25
<PAGE> 127
Financials
Distributors related to the Class B shares. During the year ended October 31,
1996, the Class A and Class B shares paid AIM Distributors $6,952,782 and
$2,831,042, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,705,618 from sales of shares of
the Class A shares of the Fund during the year ended October 31, 1996. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of Class A shares. During the year ended
October 31, 1996, AIM Distributors received commissions of $32,497 in contingent
deferred sales charges imposed on 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, 1996, the Fund paid legal fees of $8,908 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-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund 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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $28,500,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1996 was
$5,045,277,974 and $4,249,301,619, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1996, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $479,518,418
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (24,739,986)
- ------------------------------------------------------------
Net unrealized appreciation of investment
securities $454,778,432
============================================================
Cost of investments for tax purposes is
$2,724,878,174.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold
- ---------------------------------------------------------------------------------------------------------------------------------
Class A 71,824,128 $752,853,277 40,727,782 $396,439,839
- ---------------------------------------------------------------------------------------------------------------------------------
Class B* 41,436,800 435,348,846 6,409,868 67,237,422
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Class 448,911 4,759,971 335,121 3,269,772
- ---------------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
- ---------------------------------------------------------------------------------------------------------------------------------
Class A 19,521,139 192,994,968 10,283,705 77,653,310
- ---------------------------------------------------------------------------------------------------------------------------------
Class B* 1,039,513 10,333,913 5,996 64,162
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Class 252,209 2,504,537 134,103 1,130,381
- ---------------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (40,679,494) (427,193,754) (42,561,203) (387,606,795)
- ---------------------------------------------------------------------------------------------------------------------------------
Class B* (2,705,793) (28,619,654) (50,252) (533,158)
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Class (464,310) (4,897,798) (519,822) (4,606,948)
- ---------------------------------------------------------------------------------------------------------------------------------
90,673,103 $938,084,306 14,765,298 $153,047,985
=================================================================================================================================
</TABLE>
* Class B shares commenced sales on June 26, 1995.
NOTE 7-FUTURES CONTRACT
On October 31, 1996, $1,738,000 par value U.S. Treasury obligations were pledged
as collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1996:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
--------------
<S> <C>
S&P 500 Index/125 contracts/March 97/Buy $(51,980)
=================================================================================================================================
</TABLE>
FS-26
<PAGE> 128
Financials
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended October 31, 1996 and for a Class
B share outstanding during the year ended October 31, 1996 and the period June
26, 1995 (date sales commenced) through October 31, 1995.
<TABLE>
<CAPTION>
CLASS A:
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income 0.19 0.15 0.21 0.17 0.18 0.18
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Net gains (losses) on securities
(both realized and unrealized) 1.43 2.11 (0.45) 1.22 0.16 2.15
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Total from investment operations 1.62 2.26 (0.24) 1.39 0.34 2.33
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income (0.16) (0.20) (0.16) (0.29) (0.17) (0.15)
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Distributions from capital gains (0.90) (0.33) (0.16) -- (0.23) (0.31)
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Total distributions (1.06) (0.53) (0.32) (0.29) (0.40) (0.46)
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 11.19 $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42
====================================== ========== ========== ========== ========== ========== ========
Total return(a) 16.70% 27.03% (2.55)% 16.92% 4.17% 37.65%
====================================== ========== ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,647,208 $1,974,417 $1,579,074 $1,690,482 $1,256,151 $443,546
====================================== ========== ========== ========== ========== ========== ========
Ratio of expenses to average net
assets 1.12%(b)(c) 1.17% 1.17% 1.17% 1.17% 1.29%
====================================== ========== ========== ========== ========== ========== ========
Ratio of net investment income to
average net assets 1.81%(b) 1.55% 2.32% 1.89% 2.14% 2.14%
====================================== ========== ========== ========== ========== ========== ========
Portfolio turnover rate 164% 161% 126% 144% 95% 144%
====================================== ========== ========== ========== ========== ========== ========
Average broker commission rate(d) $ 0.0638 N/A N/A N/A N/A N/A
====================================== ========== ========== ========== ========== ========== ========
<CAPTION>
1990 1989 1988 1987
-------- ------- ------- -------
<S> <C> <<C> <C> <C>
Net asset value, beginning of period $ 6.97 $ 5.40 $ 6.61 $ 8.18
- -------------------------------------- -------- ------- ------- -------
Income from investment operations:
Net investment income 0.18 0.21 0.15 0.09
- -------------------------------------- -------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 0.08 1.55 0.16 0.35
- -------------------------------------- -------- ------- ------- -------
Total from investment operations 0.26 1.76 0.31 0.44
- -------------------------------------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.26) (0.19) (0.12) (0.14)
- -------------------------------------- -------- ------- ------- -------
Distributions from capital gains (0.42) -- (1.40) (1.87)
- -------------------------------------- -------- ------- ------- -------
Total distributions (0.68) (0.19) (1.52) (2.01)
- -------------------------------------- -------- ------- ------- -------
Net asset value, end of period $ 6.55 $ 6.97 $ 5.40 $ 6.61
====================================== ======== ======= ======= =======
Total return(a) 3.86% 33.68% 5.90% 6.72%
====================================== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $102,499 $70,997 $65,799 $82,756
====================================== ======== ======= ======= =======
Ratio of expenses to average net
assets 1.35% 1.35% 1.46% 1.15%
====================================== ======== ======= ======= =======
Ratio of net investment income to
average net assets 2.51% 3.73% 2.83% 1.57%
====================================== ======== ======= ======= =======
Portfolio turnover rate 215% 131% 247% 225%
====================================== ======== ======= ======= =======
Average broker commission rate(d) N/A N/A N/A N/A
====================================== ======== ======= ======= =======
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $2,317,594,098.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratios of expenses to average net assets would have remained the same.
(d) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
<TABLE>
<CAPTION>
CLASS B:
1996 1995
---------- -------
<S> <C> <C>
Net asset value, beginning of period $ 10.62 $ 9.81
- ---------------------------------------------------------------------------------------- -------- -------
Income from investment operations:
Net investment income 0.10 0.03
- ---------------------------------------------------------------------------------------- -------- -------
Net gains (losses) on securities (both realized and unrealized) 1.45 0.80
- ---------------------------------------------------------------------------------------- -------- -------
Total from investment operations 1.55 0.83
- ---------------------------------------------------------------------------------------- -------- -------
Less distributions:
Dividends from net investment income (0.09) (0.02)
- ---------------------------------------------------------------------------------------- -------- -------
Distributions from capital gains (0.90) --
- ---------------------------------------------------------------------------------------- -------- -------
Total distributions (0.99) (0.02)
- ---------------------------------------------------------------------------------------- -------- -------
Net asset value, end of period $ 11.18 $ 10.62
======================================================================================== ======== =======
Total return(a) 15.90% 8.48%
======================================================================================== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $515,672 $67,592
======================================================================================== ======== =======
Ratio of expenses to average net assets 1.94%(b)(c) 1.98%(d)
======================================================================================== ======== =======
Ratio of net investment income to average net assets 0.99%(b) 0.74%(d)
======================================================================================== ======== =======
Portfolio turnover rate 164% 161%
======================================================================================== ======== =======
Average broker commission rate(e) $ 0.0638 N/A
======================================================================================== ======== =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charge and are not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $283,104,175.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratios of expenses to average net assets would have remained the same.
(d) Annualized.
(e) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an Agreement and Plan of Merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM Funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-27
<PAGE> 129
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Weingarten Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1996, the related statement
of operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended, and financial highlights for
each of the years in the eight year period then ended, the
ten months ended October 31, 1988, and the year ended
December 31, 1987. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on
these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Weingarten Fund as of October 31, 1996, the results of its
operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years
in the eight year period then ended, the ten months ended
October 31, 1988, and the year ended December 31, 1987, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-28
<PAGE> 130
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-87.88%
ADVERTISING/BROADCASTING-0.50%
Interpublic Group of Companies,
Inc. 550,000 $ 26,675,000
- ----------------------------------------------------------------
AEROSPACE/DEFENSE-1.24%
Boeing Co. (The) 275,000 26,228,125
- ----------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 850,000 20,081,250
- ----------------------------------------------------------------
United Technologies Corp. 150,000 19,312,500
- ----------------------------------------------------------------
65,621,875
- ----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.28%
Chrysler Corp. 450,000 15,131,250
- ----------------------------------------------------------------
BANKING-0.79%
Chase Manhattan Corp. 200,000 17,150,000
- ----------------------------------------------------------------
Citicorp 250,000 24,750,000
- ----------------------------------------------------------------
41,900,000
- ----------------------------------------------------------------
BEVERAGES-0.42%
PepsiCo Inc. 750,000 22,218,750
- ----------------------------------------------------------------
BIOTECHNOLOGY-1.09%
AMGEN Inc.(a) 250,000 15,328,125
- ----------------------------------------------------------------
Guidant Corp. 920,600 42,462,675
- ----------------------------------------------------------------
57,790,800
- ----------------------------------------------------------------
BUILDING MATERIALS-0.49%
Georgia-Pacific Corp. 350,000 26,250,000
- ----------------------------------------------------------------
BUSINESS SERVICES-2.08%
AccuStaff, Inc.(a) 511,000 13,669,250
- ----------------------------------------------------------------
CUC International Inc.(a) 750,000 18,375,000
- ----------------------------------------------------------------
Diebold, Inc. 343,100 19,728,250
- ----------------------------------------------------------------
Equifax Inc. 700,000 20,825,000
- ----------------------------------------------------------------
Healthcare COMPARE Corp.(a) 525,000 23,100,000
- ----------------------------------------------------------------
Interim Services Inc.(a) 58,500 2,340,000
- ----------------------------------------------------------------
Olsten Corp. 619,800 12,396,000
- ----------------------------------------------------------------
110,433,500
- ----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.33%
Morton International, Inc. 450,000 17,718,750
- ----------------------------------------------------------------
COMPUTER MINI/PCS-2.89%
COMPAQ Computer Corp.(a) 550,000 38,293,750
- ----------------------------------------------------------------
Dell Computer Corp.(a) 395,100 32,151,263
- ----------------------------------------------------------------
Gateway 2000 Inc.(a) 850,000 40,003,125
- ----------------------------------------------------------------
Sun Microsystems Inc.(a) 700,000 42,700,000
- ----------------------------------------------------------------
153,148,138
- ----------------------------------------------------------------
COMPUTER NETWORKING-4.44%
Ascend Communications, Inc.(a) 350,000 22,881,250
- ----------------------------------------------------------------
Cabletron Systems, Inc.(a) 650,000 40,543,750
- ----------------------------------------------------------------
Cascade Communications Corp.(a) 550,000 39,943,750
- ----------------------------------------------------------------
Cisco Systems, Inc.(a) 925,000 57,234,375
- ----------------------------------------------------------------
FORE Systems, Inc.(a) 525,000 20,868,750
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
3Com Corp.(a) 800,000 $ 54,100,000
- ----------------------------------------------------------------
235,571,875
- ----------------------------------------------------------------
COMPUTER PERIPHERALS-0.88%
Storage Technology Corp.(a) 1,091,500 46,525,188
- ----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-8.86%
BMC Software, Inc.(a) 500,000 41,500,000
- ----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 829,000 30,258,500
- ----------------------------------------------------------------
Ceridian Corp.(a) 400,000 19,850,000
- ----------------------------------------------------------------
Computer Associates
International, Inc. 675,000 39,909,375
- ----------------------------------------------------------------
Computer Sciences Corp.(a) 214,400 15,919,200
- ----------------------------------------------------------------
Compuware Corp.(a) 700,000 36,925,000
- ----------------------------------------------------------------
Electronic Data Systems Corp. 1,000,000 45,000,000
- ----------------------------------------------------------------
Electronics For Imaging, Inc.(a) 31,800 2,289,600
- ----------------------------------------------------------------
First Data Corp. 250,000 19,937,500
- ----------------------------------------------------------------
Fiserv, Inc.(a) 850,000 32,618,750
- ----------------------------------------------------------------
HBO & Co. 600,000 36,075,000
- ----------------------------------------------------------------
Microsoft Corp.(a) 200,000 27,450,000
- ----------------------------------------------------------------
Oracle Corp.(a) 450,000 19,040,625
- ----------------------------------------------------------------
Parametric Technology Co.(a) 554,800 27,115,850
- ----------------------------------------------------------------
Sterling Commerce, Inc.(a) 750,000 21,093,750
- ----------------------------------------------------------------
Synopsys, Inc.(a) 342,700 15,421,500
- ----------------------------------------------------------------
Wallace Computer Services, Inc. 1,350,000 39,656,250
- ----------------------------------------------------------------
470,060,900
- ----------------------------------------------------------------
CONGLOMERATES-2.88%
AlliedSignal Inc. 300,000 19,650,000
- ----------------------------------------------------------------
Loews Corp. 750,000 61,968,750
- ----------------------------------------------------------------
Textron Inc. 160,000 14,200,000
- ----------------------------------------------------------------
Tyco International Ltd. 875,000 43,421,875
- ----------------------------------------------------------------
U.S. Industries Inc.(a) 500,000 13,500,000
- ----------------------------------------------------------------
152,740,625
- ----------------------------------------------------------------
CONTAINERS-0.31%
Sealed Air Corp.(a) 425,000 16,521,875
- ----------------------------------------------------------------
COSMETICS & TOILETRIES-1.00%
Avon Products, Inc. 375,000 20,343,750
- ----------------------------------------------------------------
Gillette Co. (The) 237,100 17,723,225
- ----------------------------------------------------------------
Procter & Gamble Co. 150,000 14,850,000
- ----------------------------------------------------------------
52,916,975
- ----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.21%
Amphenol Corp.(a) 95,000 1,888,125
- ----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 1,500,000 33,562,500
- ----------------------------------------------------------------
Thermo Instrument Systems,
Inc.(a) 450,000 13,612,500
- ----------------------------------------------------------------
Waters Corp.(a) 487,300 15,106,300
- ----------------------------------------------------------------
64,169,425
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-1.59%
Bear Stearns Companies Inc. 535,720 12,656,385
- ----------------------------------------------------------------
Charles Schwab Corp. 342,100 8,552,500
- ----------------------------------------------------------------
</TABLE>
FS-29
<PAGE> 131
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT)-(CONTINUED)
Franklin Resources, Inc. 271,000 $ 19,105,500
- ----------------------------------------------------------------
PaineWebber Group Inc. 850,000 19,975,000
- ----------------------------------------------------------------
Price (T. Rowe) Associates 248,800 8,490,300
- ----------------------------------------------------------------
Salomon Inc. 350,000 15,793,750
- ----------------------------------------------------------------
84,573,435
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-5.20%
Beneficial Corp. 250,000 14,625,000
- ----------------------------------------------------------------
Federal Home Loan Mortgage Corp. 508,200 51,328,200
- ----------------------------------------------------------------
Federal National Mortgage
Association 1,358,600 53,155,225
- ----------------------------------------------------------------
Finova Group, Inc. 250,000 15,437,500
- ----------------------------------------------------------------
Green Tree Financial Corp. 608,900 24,127,663
- ----------------------------------------------------------------
Household International, Inc. 175,000 15,487,500
- ----------------------------------------------------------------
Student Loan Marketing
Association 1,000,000 82,750,000
- ----------------------------------------------------------------
SunAmerica, Inc. 500,000 18,750,000
- ----------------------------------------------------------------
275,661,088
- ----------------------------------------------------------------
FOOD/PROCESSING-1.60%
ConAgra, Inc. 407,700 20,334,038
- ----------------------------------------------------------------
Dean Foods Co. 725,000 21,025,000
- ----------------------------------------------------------------
Lancaster Colony Corp. 394,233 14,783,738
- ----------------------------------------------------------------
Sysco Corp. 850,000 28,900,000
- ----------------------------------------------------------------
85,042,776
- ----------------------------------------------------------------
FUNERAL SERVICES-0.32%
Service Corp. International 600,000 17,100,000
- ----------------------------------------------------------------
GAMING-0.34%
International Game Technology 850,000 17,956,250
- ----------------------------------------------------------------
HOTELS/MOTELS-1.17%
Hilton Hotels Corp. 660,000 20,047,500
- ----------------------------------------------------------------
Host Marriott Corp.(a) 1,800,000 27,675,000
- ----------------------------------------------------------------
Marriott International, Inc. 250,000 14,218,750
- ----------------------------------------------------------------
61,941,250
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.66%
Conseco, Inc. 1,100,000 58,850,000
- ----------------------------------------------------------------
Equitable Companies, Inc. 700,000 16,450,000
- ----------------------------------------------------------------
Provident Companies, Inc. 350,000 12,993,750
- ----------------------------------------------------------------
88,293,750
- ----------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-4.90%
Allstate Corp. 451,300 25,329,213
- ----------------------------------------------------------------
American International Group,
Inc. 225,000 24,440,625
- ----------------------------------------------------------------
CIGNA Corp. 325,000 42,412,500
- ----------------------------------------------------------------
Everest Re Holdings, Inc. 912,000 23,256,000
- ----------------------------------------------------------------
ITT Hartford Group, Inc. 325,000 20,475,000
- ----------------------------------------------------------------
MGIC Investment Corp. 310,700 21,321,788
- ----------------------------------------------------------------
Old Republic International Corp. 383,700 9,496,575
- ----------------------------------------------------------------
PMI Group, Inc. (The) 706,100 40,335,963
- ----------------------------------------------------------------
TIG Holdings, Inc. 332,000 9,586,500
- ----------------------------------------------------------------
Travelers Group, Inc. 800,000 43,400,000
- ----------------------------------------------------------------
260,054,164
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION-1.16%
Carnival Corporation-Class A 850,000 $ 25,606,250
- ----------------------------------------------------------------
Coleman Co., Inc. (The)(a) 405,300 5,370,225
- ----------------------------------------------------------------
Eastman Kodak Co. 130,300 10,391,425
- ----------------------------------------------------------------
Harley-Davidson, Inc. 450,000 20,306,250
- ----------------------------------------------------------------
61,674,150
- ----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.64%
Thermo Electron Corp.(a) 930,000 33,945,000
- ----------------------------------------------------------------
MEDICAL (DRUGS)-5.62%
Abbott Laboratories 525,000 26,578,125
- ----------------------------------------------------------------
American Home Products Corp. 400,000 24,500,000
- ----------------------------------------------------------------
AmeriSource Health Corp.(a) 380,000 16,102,500
- ----------------------------------------------------------------
Bristol-Myers Squibb Co. 325,000 34,368,750
- ----------------------------------------------------------------
Cardinal Health, Inc. 175,000 13,737,500
- ----------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 300,000 8,737,500
- ----------------------------------------------------------------
ICN Pharmaceuticals, Inc. 1,150,000 21,850,000
- ----------------------------------------------------------------
Merck & Co., Inc. 600,000 44,475,000
- ----------------------------------------------------------------
Pharmacia & Upjohn, Inc. 450,000 16,200,000
- ----------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 554,900 37,247,663
- ----------------------------------------------------------------
Schering-Plough Corp. 608,100 38,918,400
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 461,200 15,392,550
- ----------------------------------------------------------------
298,107,988
- ----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.60%
Columbia/HCA Healthcare Corp. 1,050,000 37,537,500
- ----------------------------------------------------------------
Health Care and Retirement
Corp.(a) 222,350 5,475,369
- ----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 1,100,000 41,250,000
- ----------------------------------------------------------------
Living Centers of America,
Inc.(a) 256,000 5,984,000
- ----------------------------------------------------------------
MedPartners, Inc.(a) 2,110,000 44,573,750
- ----------------------------------------------------------------
Oxford Health Plans, Inc.(a) 300,000 13,650,000
- ----------------------------------------------------------------
Quorum Health Group, Inc.(a) 750,000 20,250,000
- ----------------------------------------------------------------
Tenet Healthcare Corp.(a) 1,072,900 22,396,788
- ----------------------------------------------------------------
191,117,407
- ----------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-3.53%
Baxter International Inc. 550,000 22,893,750
- ----------------------------------------------------------------
Becton, Dickinson & Co. 650,000 28,275,000
- ----------------------------------------------------------------
Boston Scientific Corp.(a) 250,077 13,597,937
- ----------------------------------------------------------------
Medtronic, Inc. 500,000 32,187,500
- ----------------------------------------------------------------
St. Jude Medical, Inc. 446,700 17,644,650
- ----------------------------------------------------------------
Stryker Corp 750,000 22,312,500
- ----------------------------------------------------------------
Sybron International Corp.(a) 1,050,000 30,581,250
- ----------------------------------------------------------------
U.S. Surgical Corp. 478,500 20,037,188
- ----------------------------------------------------------------
187,529,775
- ----------------------------------------------------------------
NATURAL GAS PIPELINE-0.66%
Columbia Gas System, Inc. 362,000 21,991,500
- ----------------------------------------------------------------
Williams Cos., Inc (The) 250,000 13,062,500
- ----------------------------------------------------------------
35,054,000
- ----------------------------------------------------------------
OFFICE AUTOMATION-0.04%
Xerox Corp. 49,100 2,277,013
- ----------------------------------------------------------------
OFFICE PRODUCTS-0.78%
Avery Dennison Corp. 225,000 14,821,875
- ----------------------------------------------------------------
</TABLE>
FS-30
<PAGE> 132
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OFFICE PRODUCTS-(CONTINUED)
Reynolds & Reynolds Co.-Class A 1,000,000 $ 26,375,000
- ----------------------------------------------------------------
41,196,875
- ----------------------------------------------------------------
OIL & GAS (SERVICES)-2.00%
Louisiana Land & Exploration Co. 374,900 21,322,438
- ----------------------------------------------------------------
NorAm Energy Corp. 2,000,000 30,750,000
- ----------------------------------------------------------------
Reading & Bates Corp.(a) 775,000 22,281,250
- ----------------------------------------------------------------
Transocean Offshore Inc. 505,800 31,991,850
- ----------------------------------------------------------------
106,345,538
- ----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-2.58%
Baker Hughes Inc. 600,000 21,375,000
- ----------------------------------------------------------------
Coastal Corp. 295,000 12,685,000
- ----------------------------------------------------------------
Cooper Cameron Corp.(a) 95,300 6,087,288
- ----------------------------------------------------------------
Dresser Industries, Inc. 450,000 14,793,750
- ----------------------------------------------------------------
Halliburton Co. 400,000 22,650,000
- ----------------------------------------------------------------
Rowan Companies, Inc.(a) 1,200,000 26,850,000
- ----------------------------------------------------------------
Schlumberger Ltd. 150,000 14,868,750
- ----------------------------------------------------------------
Tidewater Inc. 400,000 17,500,000
- ----------------------------------------------------------------
136,809,788
- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.62%
Kimberly-Clark Corp. 350,000 32,637,500
- ----------------------------------------------------------------
PUBLISHING-0.38%
New York Times Co. 400,000 14,450,000
- ----------------------------------------------------------------
Times Mirror Co. (The) 122,400 5,661,000
- ----------------------------------------------------------------
20,111,000
- ----------------------------------------------------------------
RESTAURANTS-0.38%
Applebee's International, Inc. 828,000 20,182,500
- ----------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.59%
American Stores Co. 925,000 38,271,875
- ----------------------------------------------------------------
Kroger Co.(The)(a) 244,400 10,906,350
- ----------------------------------------------------------------
Safeway Inc.(a) 817,800 35,063,175
- ----------------------------------------------------------------
84,241,400
- ----------------------------------------------------------------
RETAIL (STORES)-6.84%
AutoZone, Inc.(a) 450,000 11,531,250
- ----------------------------------------------------------------
Consolidated Stores Corp.(a) 742,600 28,682,925
- ----------------------------------------------------------------
Dayton-Hudson Corp. 1,033,100 35,771,088
- ----------------------------------------------------------------
Federated Department Stores,
Inc.(a) 500,000 16,500,000
- ----------------------------------------------------------------
Gap Inc. (The) 750,000 21,750,000
- ----------------------------------------------------------------
Home Depot, Inc. 550,000 30,112,500
- ----------------------------------------------------------------
Lowe's Companies, Inc. 1,117,200 45,106,950
- ----------------------------------------------------------------
Micro Warehouse, Inc.(a) 97,600 2,244,800
- ----------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 2,200,000 77,000,000
- ----------------------------------------------------------------
Price/Costco Inc.(a) 538,700 10,706,663
- ----------------------------------------------------------------
Staples, Inc.(a) 2,000,025 37,250,466
- ----------------------------------------------------------------
Toys "R" Us, Inc.(a) 1,300,000 44,037,500
- ----------------------------------------------------------------
Viking Office Products Inc.(a) 58,600 1,706,725
- ----------------------------------------------------------------
362,400,867
- ----------------------------------------------------------------
SEMICONDUCTORS-2.32%
Altera Corp.(a) 400,000 24,800,000
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-(CONTINUED)
Intel Corp. 750,000 $ 82,406,250
- ----------------------------------------------------------------
Texas Instruments, Inc. 325,000 15,640,625
- ----------------------------------------------------------------
122,846,875
- ----------------------------------------------------------------
SHOES & RELATED APPAREL-0.55%
NIKE, Inc.-Class B 500,000 29,437,500
- ----------------------------------------------------------------
TELECOMMUNICATIONS-4.66%
ADC Telecommunications, Inc.(a) 941,000 64,340,875
- ----------------------------------------------------------------
Andrew Corp.(a) 400,000 19,500,000
- ----------------------------------------------------------------
Frontier Corp. 469,300 13,609,700
- ----------------------------------------------------------------
Lucent Technologies, Inc. 1,000,000 47,000,000
- ----------------------------------------------------------------
MFS Communications Company,
Inc.(a) 781,600 39,177,700
- ----------------------------------------------------------------
PairGain Technologies, Inc.(a) 275,000 18,940,625
- ----------------------------------------------------------------
Tellabs, Inc.(a) 400,000 34,050,000
- ----------------------------------------------------------------
360 Communications Co.(a) 463,333 10,482,909
- ----------------------------------------------------------------
247,101,809
- ----------------------------------------------------------------
TELEPHONE-0.72%
Cincinnati Bell, Inc. 775,000 38,265,625
- ----------------------------------------------------------------
TEXTILES-0.54%
Fruit of the Loom, Inc.(a) 319,500 11,621,813
- ----------------------------------------------------------------
Liz Claiborne, Inc. 400,000 16,900,000
- ----------------------------------------------------------------
28,521,813
- ----------------------------------------------------------------
TOBACCO-2.20%
Philip Morris Companies, Inc. 575,000 53,259,375
- ----------------------------------------------------------------
RJR Nabisco Holdings Corp. 856,200 24,722,775
- ----------------------------------------------------------------
Universal Corp. 146,700 3,997,575
- ----------------------------------------------------------------
UST, Inc. 1,200,000 34,650,000
- ----------------------------------------------------------------
116,629,725
- ----------------------------------------------------------------
Total Domestic Common
Stocks 4,662,451,787
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS & NOTES-0.56%
RESTAURANTS-0.56%
Boston Chicken, Inc.,
Conv. Notes,
8.00%(b), 06/01/15 $ 78,540,000 25,427,325
- ----------------------------------------------------------------
Boston Chicken, Inc.,
Conv. Sub. Deb.,
4.50%, 02/01/04 3,245,000 4,259,063
- ----------------------------------------------------------------
Total Convertible
Corporate Bonds &
Notes 29,686,388
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-10.88%
BRAZIL-0.42%
Telecomunicacoes Brasileiras
S/A-ADR (Telecommunications) 300,000 22,350,000
- ----------------------------------------------------------------
CANADA-1.33%
Canadian Pacific, Ltd.
(Transportation-Miscellaneous) 650,000 16,412,500
- ----------------------------------------------------------------
Newbridge Networks Corp.(a)
(Computer Networking) 1,200,000 37,950,000
- ----------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 133
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Northern Telecom Ltd.
(Telecommunications) 250,000 $ 16,281,250
- ----------------------------------------------------------------
70,643,750
- ----------------------------------------------------------------
FRANCE-0.25%
Roussel-Uclaf (Medical-Drugs) 50,000 13,232,273
- ----------------------------------------------------------------
GERMANY-0.42%
Adidas A.G.(Shoes & Related
Apparel) 160,900 13,790,821
- ----------------------------------------------------------------
Veba A.G. (Electric Services) 158,000 8,426,875
- ----------------------------------------------------------------
22,217,696
- ----------------------------------------------------------------
HONG KONG-0.85%
HSBC Holdings PLC(a)
(Banking) 820,000 16,702,878
- ----------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Real Estate) 2,505,000 28,509,350
- ----------------------------------------------------------------
45,212,228
- ----------------------------------------------------------------
IRELAND-0.30%
Elan Corp. PLC-ADR(a)
(Medical-Drugs) 580,000 16,095,000
- ----------------------------------------------------------------
ISRAEL-0.71%
ECI Telecommunications Ltd.
Designs
(Computer Networking) 824,700 16,494,000
- ----------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR
(Medical-Drugs) 500,000 20,937,500
- ----------------------------------------------------------------
37,431,500
- ----------------------------------------------------------------
ITALY-1.17%
Fila Holding S.p.A.-ADR
(Retail-Stores) 504,100 36,295,200
- ----------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 6,000,000 12,371,786
- ----------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 6,000,000 13,415,952
- ----------------------------------------------------------------
62,082,938
- ----------------------------------------------------------------
JAPAN-1.41%
Canon, Inc.
(Office Automation) 1,045,000 20,008,783
- ----------------------------------------------------------------
Honda Motor Co.
(Automobile-Manufacturers) 608,000 14,525,141
- ----------------------------------------------------------------
Sony Corp.
(Electronic
Components/Miscellaneous) 321,900 19,310,324
- ----------------------------------------------------------------
TDK Corp.
(Electronic
Components/Miscellaneous) 356,000 20,886,917
- ----------------------------------------------------------------
74,731,165
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MALAYSIA-0.20%
Malayan Banking Berhad
(Banking) 1,074,000 $ 10,627,350
- ----------------------------------------------------------------
NETHERLANDS-0.33%
Gucci Group NV-New York Shares
(Textiles) 250,000 17,250,000
- ----------------------------------------------------------------
SWEDEN-1.18%
ASTRA AB-A Shares
(Medical-Drugs) 340,000 15,615,067
- ----------------------------------------------------------------
Telefonaktiebolaget L.M.
Ericsson-ADR
(Telecommunications) 1,700,000 46,962,500
- ----------------------------------------------------------------
62,577,567
- ----------------------------------------------------------------
SWITZERLAND-0.90%
Ciba-Geigy AG
(Chemicals) 20,000 24,636,075
- ----------------------------------------------------------------
Sandoz AG
(Chemicals) 20,000 23,117,088
- ----------------------------------------------------------------
47,753,163
- ----------------------------------------------------------------
UNITED KINGDOM-1.41%
Danka Business Systems PLC-ADR
(Office Automation) 376,600 14,922,775
- ----------------------------------------------------------------
Granada Group PLC
(Leisure & Recreation) 1,000,000 14,379,882
- ----------------------------------------------------------------
Smithkline Beecham PLC-ADR
(Medical-Drugs) 700,000 43,837,500
- ----------------------------------------------------------------
Stolt-Nielsen S.A.
(Transportation-Miscellaneous) 121,500 1,898,437
- ----------------------------------------------------------------
75,038,594
- ----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 577,243,224
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENTS-2.44%(C)
Daiwa Securities America Inc.,
5.53%, 11/01/96(d) $ 326,080 326,080
- ----------------------------------------------------------------
SBC Capital Markets, Inc.
5.55%, 11/01/96(e) 129,000,000 129,000,000
- ----------------------------------------------------------------
Total Repurchase Agreements 129,326,080
- ----------------------------------------------------------------
TOTAL INVESTMENTS-101.76% 5,398,707,479
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(1.76)% (93,272,392)
- ----------------------------------------------------------------
TOTAL NET ASSETS-100.00% $5,305,435,087
================================================================
</TABLE>
Abbreviations:
ADR-American Depository Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(c) 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.
(d) Joint repurchase agreement entered into on 10/31/96 with maturing value of
$750,115,208 Collateralized by $733,115,000 U.S. Treasury obligations, 0% to
10.375% due 11/15/96 to 08/15/23.
(e) Joint repurchase agreement entered into on 10/31/96 with maturing value of
$700,107,917. Collateralized by $691,506,000 U.S. Treasury obligations, 0%
to 9.125% due 11/30/96 to 10/31/01.
See Notes to Financial Statements.
FS-32
<PAGE> 134
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$4,364,479,746) $5,398,707,479
- ---------------------------------------------------------
Foreign currencies, at market value
(cost $253,890) 253,726
- ---------------------------------------------------------
Receivables for:
Investments sold 11,950,581
- ---------------------------------------------------------
Options written 1,337,955
- ---------------------------------------------------------
Capital stock sold 5,563,124
- ---------------------------------------------------------
Dividends and interest 3,124,499
- ---------------------------------------------------------
Investment for deferred compensation
plan 59,575
- ---------------------------------------------------------
Other assets 110,155
- ---------------------------------------------------------
Total assets 5,421,107,094
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 76,633,560
- ---------------------------------------------------------
Options written 25,795,994
- ---------------------------------------------------------
Capital stock reacquired 7,180,052
- ---------------------------------------------------------
Deferred compensation 59,575
- ---------------------------------------------------------
Accrued advisory fees 2,735,952
- ---------------------------------------------------------
Accrued administrative service fees 12,099
- ---------------------------------------------------------
Accrued distribution fees 1,499,021
- ---------------------------------------------------------
Accrued transfer agent fees 878,973
- ---------------------------------------------------------
Accrued operating expenses 876,781
- ---------------------------------------------------------
Total liabilities 115,672,007
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $5,305,435,087
=========================================================
NET ASSETS:
Class A $4,977,492,845
=========================================================
Class B $ 267,459,433
=========================================================
Institutional Class $ 60,482,809
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
CLASS A:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 246,580,037
=========================================================
CLASS B:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 13,389,126
=========================================================
INSTITUTIONAL CLASS:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 2,955,876
=========================================================
CLASS A:
Net asset value and redemption price
per share $ 20.19
- ---------------------------------------------------------
Offering price per share:
(Net asset value of
$20.19 divided by 94.50%) $ 21.37
=========================================================
CLASS B:
Net asset value and offering price per
share $ 19.98
=========================================================
INSTITUTIONAL CLASS:
Net asset value, offering and
redemption price per share $ 20.46
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,308,115 foreign
withholding tax) $ 55,329,053
- ---------------------------------------------------------
Interest 15,225,042
- ---------------------------------------------------------
Total investment income 70,554,095
- ---------------------------------------------------------
EXPENSES:
Advisory fees 31,419,183
- ---------------------------------------------------------
Administrative service fees 132,643
- ---------------------------------------------------------
Custodian fees 402,058
- ---------------------------------------------------------
Directors' fees 31,363
- ---------------------------------------------------------
Distribution fees-Class A 14,212,254
- ---------------------------------------------------------
Distribution fees-Class B 1,514,633
- ---------------------------------------------------------
Transfer agent fees-Class A 8,434,506
- ---------------------------------------------------------
Transfer agent fees-Class B 452,997
- ---------------------------------------------------------
Transfer agent fees-Institutional Class 4,292
- ---------------------------------------------------------
Other 1,337,876
- ---------------------------------------------------------
Total expenses 57,941,805
- ---------------------------------------------------------
Less: Fees waived by advisor (1,458,804)
- ---------------------------------------------------------
Expenses paid indirectly (76,493)
- ---------------------------------------------------------
Net expenses 56,406,508
- ---------------------------------------------------------
Net investment income 14,147,587
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 593,755,723
- ---------------------------------------------------------
Foreign currencies 946,540
- ---------------------------------------------------------
Futures contracts (7,874,291)
- ---------------------------------------------------------
Options contracts 3,720,144
- ---------------------------------------------------------
590,548,116
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 81,966,541
- ---------------------------------------------------------
Foreign currencies 366,935
- ---------------------------------------------------------
Options contracts (3,194,922)
- ---------------------------------------------------------
79,138,554
- ---------------------------------------------------------
Net gain on investment securities,
foreign currencies, futures and option
contracts 669,686,670
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 683,834,257
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-33
<PAGE> 135
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 14,147,587 $ (1,259,456)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities, foreign currencies, futures and
options contracts 590,548,116 620,641,509
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities, foreign currencies, and
options contracts 79,138,554 411,202,260
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 683,834,257 1,030,584,313
- ---------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A -- (14,842,521)
- ---------------------------------------------------------------------------------------------------------------------------
Institutional Class -- (290,923)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment securities:
Class A (606,609,217) (387,332,253)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (7,814,517) --
- ---------------------------------------------------------------------------------------------------------------------------
Institutional Class (7,332,667) (4,072,920)
- ---------------------------------------------------------------------------------------------------------------------------
Net equalization credits:
Class A 2,368,957 204,025
- ---------------------------------------------------------------------------------------------------------------------------
Class B 992,175 297,921
- ---------------------------------------------------------------------------------------------------------------------------
Institutional Class 65,590 71,195
- ---------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 362,344,237 (17,628,236)
- ---------------------------------------------------------------------------------------------------------------------------
Class B 210,825,508 41,458,876
- ---------------------------------------------------------------------------------------------------------------------------
Institutional Class 5,462,015 6,504,480
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 644,136,338 654,953,957
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,661,298,749 4,006,344,792
- ---------------------------------------------------------------------------------------------------------------------------
End of period $5,305,435,087 $4,661,298,749
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,649,184,459 $3,070,552,699
- ---------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 44,516,626 25,028,873
- ---------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities, foreign
currencies, futures and options contracts 580,711,311 613,833,040
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign currencies, and option
contracts 1,031,022,691 951,884,137
- ---------------------------------------------------------------------------------------------------------------------------
$5,305,435,087 $4,661,298,749
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-34
<PAGE> 136
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series of AIM Equity Funds, Inc. (the
"Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six operating diversified
portfolios: AIM Weingarten Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund,
AIM Capital Development Fund, AIM Charter Fund and AIM Constellation Fund. The
Fund currently offers three different classes of shares: the Class A shares,
Class B shares and the Institutional Class. Matters affecting each portfolio or
class will be voted on exclusively by such shareholders. The assets, liabilities
and operations of each portfolio are accounted for separately. The Fund's
investment objective is to seek growth of capital principally through investment
in common stocks of seasoned and better capitalized companies. Information
presented in these financial statements pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible bonds are valued
at the mean between the closing bid and asked prices obtained from a
broker-dealer. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date or absent a last sales price, at the mean of the closing bid
and asked prices. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Company's officers in a manner
specifically authorized by the Board of Directors of the Company. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a currency contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the
U.S. dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in the value of the
contract may not correlate with changes in the securities being hedged.
E. Covered Call Options--The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent
FS-35
<PAGE> 137
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The current market
value of a written option is the mean between the last bid and asked prices
on that day. If a written call option expires on the stipulated expiration
date, or if the Fund enters into a closing purchase transaction, the Fund
realizes a gain (or a loss if the closing purchase transaction exceeds the
premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised,
the Fund realizes a gain or a loss from the sale of the underlying security
and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
The Fund will not write a covered call option if, immediately thereafter,
the aggregate value of the securities underlying all such options,
determined as of the dates such options were written, would exceed 25% of
the net assets of the Fund.
F. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1996
$1,913,444 was reclassified from undistributed net realized gains to
undistributed net investment income as a result of differing book/tax
treatment of foreign currency transactions. Net assets of the Fund were
unaffected as a result of this reclassification.
G. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
H. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, eg. advisory fees, are allocated among them.
I. Equalization--The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and the costs of repurchases
of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of 1.0%
of the first $30 million of the Fund's average daily net assets, plus 0.75% of
the Fund's average daily net assets in excess of $30 million to and including
$350 million, plus 0.625% of the Fund's average daily net assets in excess of
$350 million. AIM is currently voluntarily waiving a portion of its advisory
fees payable by the Fund to AIM to the extent necessary to reduce the fees paid
by the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver of fees is entirely voluntary but approval is
required by the Board of Directors of the Company for any decision by AIM to
discontinue the waiver. During the year ended October 31, 1996, AIM waived fees
of $1,458,804. 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.
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, 1996, AIM was
reimbursed $132,643 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A shares and Class B shares. During the
year ended October 31, 1996, AFS was reimbursed $4,391,818 for such services.
During the year ended October 31, 1996, the Fund, pursuant to a transfer
agency and service agreement, paid A I M Institutional Fund Services, Inc.
("AIFS") $4,292 for shareholder and transfer agency services with respect to the
Institutional Class.
The Fund received reductions in transfer agency fees of $70,737 from dividends
received on balances in cash management bank
FS-36
<PAGE> 138
accounts. In addition, the Fund incurred expenses of $5,756 for pricing services
which are paid through directed brokerage commissions. The effect of the above
arrangements resulted in a reduction in the Fund's total expenses of $76,493
during the year ended October 31, 1996.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own Class A shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
B shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares of the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more designees, its rights to all or a designated portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges received by AIM
Distributors related to the Class B shares. During the year ended October 31,
1996, the Class A shares and the Class B shares paid AIM Distributors
$14,212,254 and $1,514,633, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,259,328 from sales of shares of
the Class A shares of the Fund during the year ended October 31, 1996. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of Class A shares. During the year ended
October 31, 1996, AIM Distributors received commissions of $34,185 in contingent
deferred sales charges imposed on 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, 1996, the Fund paid legal fees of $14,974
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-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended October 31, 1996 was $7,636,727,517 and
$7,477,919,832, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of October 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,085,136,998
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (61,959,672)
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,023,177,326
===========================================================
</TABLE>
Cost of investments for tax purposes is $4,375,530,153.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund 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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $68,400,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 6-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year -0- --
- --------------------------------------------------------------
Written 139,095 $ 55,345,942
- --------------------------------------------------------------
Closed (61,183) (25,179,074)
- --------------------------------------------------------------
Exercised (16,555) (4,365,829)
- --------------------------------------------------------------
Expired (12,549) (3,199,967)
- --------------------------------------------------------------
End of year 48,808 $ 22,601,072
- --------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 139
Open call option contracts written at October 31, 1996 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1996 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Baxter International Inc. Dec 40 77 $ 22,868 $ 19,250 $ 3,618
Beneficial Corp. Jan 55 1,250 635,605 632,813 2,792
Boston Scientific Corp. Jan 50 2,500 1,824,939 1,625,000 199,939
Cascade Communications Corp. Jan 80 2,750 1,535,823 1,546,875 (11,052)
Chase Manhattan Corp. Jan 75 2,000 1,641,945 2,375,000 (733,055)
Electronics For Imaging, Inc. Jan 80 318 242,126 174,900 67,226
Federal Home Loan Mortgage Corp. Jan 90 2,332 1,885,359 2,915,000 (1,029,641)
Federal National Mortgage Association Dec 30 6,086 3,170,699 5,705,625 (2,534,926)
First Data Corp. Dec 85 2,500 554,981 296,875 258,106
HBO & Co. Feb 60 3,000 1,337,955 2,400,000 (1,062,045)
HBO & Co. Feb 70 3,000 1,649,987 1,218,750 431,237
PaineWebber Group Inc. Jan 25 8,500 930,718 850,000 80,718
Parametric Technology Co. Dec 50 1,580 622,066 424,625 197,441
Procter & Gamble Co. Dec 90 1,500 874,771 1,500,000 (625,229)
Storage Technology Corp. Dec 40 4,915 2,451,088 2,058,156 392,932
Sun Microsystems Inc. Nov 60 4,000 2,383,920 1,162,500 1,221,420
Williams Cos., Inc. (The) Dec 50 2,500 836,222 890,625 (54,403)
- ---------------------------------------------------------------------------------------------------------------------------------
48,808 $22,601,072 $25,795,994 $ (3,194,922)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the capital stock outstanding during the years ended October 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 34,550,539 $648,183,624 32,034,901 $559,325,258
- ----------------------------------------------------------------------------------------------------------------------------
Class B* 12,381,545 231,706,372 2,180,033 43,415,613
- ----------------------------------------------------------------------------------------------------------------------------
Institutional Class 516,716 9,877,153 559,557 10,092,219
- ----------------------------------------------------------------------------------------------------------------------------
Issued as a reinvestment of dividends:
Class A 32,395,132 557,844,149 24,460,017 361,036,594
- ----------------------------------------------------------------------------------------------------------------------------
Class B* 425,933 7,326,082 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Institutional Class 338,803 5,871,449 199,304 2,950,819
- ----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (44,929,759) (843,683,536) (54,445,065) (937,990,088)
- ----------------------------------------------------------------------------------------------------------------------------
Class B* (1,500,861) (28,206,946) (97,524) (1,956,737)
- ----------------------------------------------------------------------------------------------------------------------------
Institutional Class (552,275) (10,286,587) (363,327) (6,538,558)
- ----------------------------------------------------------------------------------------------------------------------------
33,625,773 $578,631,760 4,527,896 $30,335,120
============================================================================================================================
</TABLE>
* Class B shares commenced sales on June 26, 1995.
FS-38
<PAGE> 140
Financials
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the eight-year period ended October 31, 1996, the ten
months ended October 31, 1988 and the year ended December 31, 1987 and for a
Class B share outstanding during the year ended October 31, 1996 and the period
June 26, 1995 (date sales commenced) through October 31, 1995.(a)
CLASS A:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.33 $ 17.82 $ 17.62 $ 16.68 $ 15.76 $ 11.15 $ 12.32
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income 0.06 -- 0.07 0.10 0.10 0.11 0.09
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Net gains (losses) on securities (both
realized and unrealized) 2.51 4.36 0.57 0.93 0.98 4.80 (0.56)
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Total from investment operations 2.57 4.36 0.64 1.03 1.08 4.91 (0.47)
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income -- (0.07) (0.11) (0.09) (0.07) (0.09) (0.06)
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Distributions from net realized capital
gains (2.71) (1.78) (0.33) -- (0.09) (0.21) (0.64)
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Total distributions (2.71) (1.85) (0.44) (0.09) (0.16) (0.30) (0.70)
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 20.19 $ 20.33 $ 17.82 $ 17.62 $ 16.68 $ 15.76 $ 11.15
======================================== ========== ========== ========== ========== ========== ========== ========
Total return(c) 14.81% 28.20% 3.76% 6.17% 6.85% 44.88% (4.03)%
======================================== ========== ========== ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,977,493 $4,564,730 $3,965,858 $4,999,983 $5,198,835 $2,534,331 $632,522
======================================== ========== ========== ========== ========== ========== ========== ========
Ratio of expenses to average net
assets(d) 1.12%(f)(g) 1.17% 1.21% 1.13% 1.13% 1.18% 1.25%
======================================== ========== ========== ========== ========== ========== ========== ========
Ratio of net investment income to
average net assets(e) 0.33%(f) (0.02)% 0.45% 0.62% 0.60% 0.72% 0.75%
======================================== ========== ========== ========== ========== ========== ========== ========
Portfolio turnover rate 159% 139% 136% 109% 37% 46% 79%
======================================== ========== ========== ========== ========== ========== ========== ========
Average broker commission rate(i) $ 0.0615 N/A N/A N/A N/A N/A N/A
======================================== ========== ========== ========== ========== ========== ========== ========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) -- -- -- -- -- -- --
======================================== ========== ========== ========== ========== ========== ========== ========
Average amount of debt outstanding
during the period (000s omitted)(j) -- $ 593 -- -- -- -- $ 485
======================================== ========== ========== ========== ========== ========== ========== ========
Average number of shares outstanding
during the period (000s omitted)(j) 248,189 229,272 249,351 314,490 246,273 102,353 44,770
======================================== ========== ========== ========== ========== ========== ========== ========
Average amount of debt per share during
the period -- $ 0.0026 -- -- -- -- $ 0.011
======================================== ========== ========== ========== ========== ========== ========== ========
<CAPTION>
DECEMBER 31,
------------
1989 1988(b) 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.23 $ 8.36 $ 8.82
- ---------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.10 0.07 0.07
- ---------------------------------------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 3.10 0.80 0.83
- ---------------------------------------- -------- -------- --------
Total from investment operations 3.20 0.87 0.90
- ---------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.11) -- (0.09)
- ---------------------------------------- -------- -------- --------
Distributions from net realized capital
gains -- -- (1.27)
- ---------------------------------------- -------- -------- --------
Total distributions (0.11) -- (1.36)
- ---------------------------------------- -------- -------- --------
Net asset value, end of period $ 12.32 $ 9.23 $ 8.36
- ---------------------------------------- -------- -------- --------
Total return(c) 35.13% 10.41% 9.75%
- ---------------------------------------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $393,320 $297,284 $286,453
======================================== ======== ======== ========
Ratio of expenses to average net
assets(d) 1.19% 1.08%(h) 0.95%
======================================== ======== ======== ========
Ratio of net investment income to
average net assets(e) 0.96% 0.90%(h) 0.66%
======================================== ======== ======== ========
Portfolio turnover rate 87% 93% 108%
======================================== ======== ======== ========
Average broker commission rate(i) N/A N/A N/A
======================================== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) $ 3,781 -- $ 355
======================================== ======== ======== ========
Average amount of debt outstanding
during the period (000s omitted)(j) $ 1,083 $ 229 $ 509
======================================== ======== ======== ========
Average number of shares outstanding
during the period (000s omitted)(j) 31,275 33,031 25,825
======================================== ======== ======== ========
Average amount of debt per share during
the period $ 0.035 $ 0.007 $ 0.020
======================================== ======== ======== ========
</TABLE>
(a) Per share information has been restated to reflect a 2 for 1 stock split,
effected in the form of a dividend, on September 29, 1987.
(b) The Fund changed investment advisors on September 30, 1988.
(c) Does not deduct sales charges and, for periods less than one year, total
returns are not annualized.
(d) Ratios of expenses prior to waiver of advisory fees are 1.15%, 1.19%, 1.24%,
1.17%, and 1.15% for the years 1996-1992, respectively.
(e) Ratios of net investment income (loss) prior to waiver of advisory fees are
0.30%, (0.04)%, 0.42%, 0.58%, and 0.58% for the years 1996-1992,
respectively.
(f) After waiver of advisory fees. Ratios are based on average net assets of
$4,737,418,087.
(g) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
(h) Annualized.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(j) Averages computed on a daily basis.
FS-39
<PAGE> 141
Financials
CLASS B:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 20.28 $ 18.56
- -------------------------------------------------------------------------------------------------- --------- ---------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.03)
- -------------------------------------------------------------------------------------------------- --------- ---------
Net gains (losses) on securities (both realized and unrealized) 2.46 1.75
- -------------------------------------------------------------------------------------------------- --------- ---------
Total from investment operations 2.41 1.72
- -------------------------------------------------------------------------------------------------- --------- ---------
Less distributions:
Distributions from net realized capital gains (2.71) --
- -------------------------------------------------------------------------------------------------- --------- ---------
Net asset value, end of period $ 19.98 $ 20.28
================================================================================================== ========= =========
Total return(b) 13.95% 9.27%
================================================================================================== ========= =========
Ratios/supplemental data:
Net assets, end of period (000's omitted) $ 267,459 $ 42,238
================================================================================================== ========= =========
Ratio of expenses to average net assets 1.95%(c)(d) 1.91%(e)
================================================================================================== ========= =========
Ratio of net investment income (loss) to average net assets (0.50)%(c) (0.76)%(e)
================================================================================================== ========= =========
Portfolio turnover rate 159% 139%
================================================================================================== ========= =========
Average broker commission rate(f) $ 0.0615 N/A
================================================================================================== ========= =========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) -- --
================================================================================================== ========= =========
Average amount of debt outstanding during the
period (000s omitted)(g) -- $ 3
================================================================================================== ========= =========
Average number of shares outstanding during the
period (000s omitted)(g) 7,956 1,036
================================================================================================== ========= =========
Average amount of debt per share during the period -- $ 0.0029
================================================================================================== ========= =========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After waiver of advisory fees. Ratios are based on average net assets of
$151,463,325. Ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees were 1.98% and (0.53)%.
(d) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
(e) Annualized. After waiver of advisory fees. Annualized ratios of expenses and
net investment income (loss) to average net assets prior to waiver of
advisory fees were 1.94% and (0.79)%, respectively.
(f) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(g) Averages computed on a daily basis.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-40
<PAGE> 142
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, 1996, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended, and the financial
highlights for each of the years in the eight-year period
then ended, the ten months ended October 31, 1988, and the
year ended December 31, 1987. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Constellation Fund as of October 31, 1996, and the results
of its operations for the year then ended, the changes in
its net assets for each of the years in the two-year
period then ended, and the financial highlights for each
of the years in the eight-year period then ended, the ten
months ended October 31, 1988, and the year ended December
31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-41
<PAGE> 143
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-84.91%
ADVERTISING/BROADCASTING-1.58%
American Radio Systems
Corp.(a)(b) 650,000 $ 19,825,000
- -----------------------------------------------------------------
CanWest Global Communications
Corp. 2,250,000 23,906,250
- -----------------------------------------------------------------
Chancellor Corp.-Class A(a)(b) 500,000 16,125,000
- -----------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 750,000 54,750,000
- -----------------------------------------------------------------
Infinity Broadcasting
Corp.-Class A(a) 787,500 22,837,500
- -----------------------------------------------------------------
Jacor Communications, Inc.(a) 1,000,000 28,000,000
- -----------------------------------------------------------------
Paxson Communications Corp.(a) 1,000,000 8,875,000
- -----------------------------------------------------------------
True North Communications, Inc. 325,700 7,735,375
- -----------------------------------------------------------------
182,054,125
- -----------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS &
TIRES-0.12%
Mark IV Industries, Inc. 656,250 14,191,406
- -----------------------------------------------------------------
BANKING-0.55%
Bank of Boston Corp. 1,000,000 64,000,000
- -----------------------------------------------------------------
BIOTECHNOLOGY-0.73%
AMGEN Inc.(a) 1,000,000 61,312,500
- -----------------------------------------------------------------
Guidant Corp. 500,000 23,062,500
- -----------------------------------------------------------------
84,375,000
- -----------------------------------------------------------------
BUSINESS SERVICES-0.90%
AccuStaff, Inc.(a) 500,000 13,375,000
- -----------------------------------------------------------------
APAC Teleservices, Inc.(a) 200,000 9,225,000
- -----------------------------------------------------------------
Career Horizons, Inc.(a) 350,000 14,218,750
- -----------------------------------------------------------------
Corrections Corporation of
America 100,100 2,602,600
- -----------------------------------------------------------------
CUC International, Inc.(a) 900,000 22,050,000
- -----------------------------------------------------------------
Equifax, Inc. 500,000 14,875,000
- -----------------------------------------------------------------
HealthCare COMPARE Corp.(a) 493,900 21,731,600
- -----------------------------------------------------------------
Paychex, Inc. 100,000 5,700,000
- -----------------------------------------------------------------
103,777,950
- -----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.52%
Airgas, Inc.(a) 1,857,400 42,023,675
- -----------------------------------------------------------------
IMC Global, Inc. 500,000 18,750,000
- -----------------------------------------------------------------
60,773,675
- -----------------------------------------------------------------
COMPUTER MINI/PCS-2.77%
Compaq Computer Corp.(a) 1,350,000 93,993,750
- -----------------------------------------------------------------
Dell Computer Corp.(a) 900,000 73,237,500
- -----------------------------------------------------------------
Rational Software Corp.(a) 1,050,000 40,293,750
- -----------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,850,000 112,850,000
- -----------------------------------------------------------------
320,375,000
- -----------------------------------------------------------------
COMPUTER NETWORKING-5.83%
ACT Networks, Inc.(a)(b) 500,000 17,125,000
- -----------------------------------------------------------------
Ascend Communications, Inc.(a) 1,486,800 97,199,550
- -----------------------------------------------------------------
Auspex Systems, Inc.(a) 311,700 3,194,925
- -----------------------------------------------------------------
Cabletron Systems, Inc.(a) 1,000,000 62,375,000
- -----------------------------------------------------------------
Cascade Communications Corp.(a) 1,500,000 108,937,500
- -----------------------------------------------------------------
Cisco Systems, Inc.(a) 2,500,000 154,687,500
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
FORE Systems, Inc.(a) 1,650,000 $ 65,587,500
- -----------------------------------------------------------------
Shiva Corp.(a) 212,400 8,708,400
- -----------------------------------------------------------------
Sync Research, Inc.(a)(b) 500,000 6,625,000
- -----------------------------------------------------------------
3Com Corp.(a) 2,000,000 135,250,000
- -----------------------------------------------------------------
Xircom, Inc.(a) 662,200 13,409,550
- -----------------------------------------------------------------
673,099,925
- -----------------------------------------------------------------
COMPUTER PERIPHERALS-1.39%
Adaptec, Inc.(a) 500,000 30,437,500
- -----------------------------------------------------------------
American Power Conversion
Corp.(a) 563,300 12,040,537
- -----------------------------------------------------------------
Microchip Technology, Inc.(a) 1,000,050 36,251,812
- -----------------------------------------------------------------
U.S. Robotics Corp.(a) 1,300,000 81,737,500
- -----------------------------------------------------------------
160,467,349
- -----------------------------------------------------------------
COMPUTER
SOFTWARE/SERVICES-12.85%
Affiliated Computer Services,
Inc.(a) 245,600 13,508,000
- -----------------------------------------------------------------
BISYS Group, Inc. (The)(a) 463,200 17,254,200
- -----------------------------------------------------------------
BMC Software, Inc.(a) 1,000,000 83,000,000
- -----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 500,000 18,250,000
- -----------------------------------------------------------------
Ceridian Corp.(a) 1,000,000 49,625,000
- -----------------------------------------------------------------
Computer Associates
International, Inc. 1,875,000 110,859,375
- -----------------------------------------------------------------
Computer Sciences Corp.(a) 700,000 51,975,000
- -----------------------------------------------------------------
Compuware Corp.(a) 1,000,000 52,750,000
- -----------------------------------------------------------------
CSG Systems International,
Inc.(a) 510,000 8,542,500
- -----------------------------------------------------------------
DST Systems, Inc.(a) 1,000,000 30,750,000
- -----------------------------------------------------------------
Electronic Arts, Inc.(a) 850,000 31,875,000
- -----------------------------------------------------------------
First Data Corp. 600,000 47,850,000
- -----------------------------------------------------------------
HBO & Co. 1,000,000 60,125,000
- -----------------------------------------------------------------
HPR, Inc.(a) 500,000 7,000,000
- -----------------------------------------------------------------
IDX Systems Corp.(a) 306,900 9,053,550
- -----------------------------------------------------------------
Integrated Systems, Inc.(a) 428,700 11,574,900
- -----------------------------------------------------------------
Intuit, Inc.(a) 750,000 20,250,000
- -----------------------------------------------------------------
McAfee Associates, Inc.(a) 1,524,200 69,351,100
- -----------------------------------------------------------------
Metromail Corp. 500,000 9,187,500
- -----------------------------------------------------------------
Microsoft Corp.(a) 2,000,000 274,500,000
- -----------------------------------------------------------------
National Data Corp. 600,000 24,675,000
- -----------------------------------------------------------------
Network General Corp.(a)(b) 2,185,000 52,713,125
- -----------------------------------------------------------------
Oracle Corp.(a) 2,499,950 105,779,134
- -----------------------------------------------------------------
Parametric Technology Corp.(a) 2,400,000 117,300,000
- -----------------------------------------------------------------
Physician Computer Network,
Inc.(a) 1,500,000 13,406,250
- -----------------------------------------------------------------
Pure Atria Corp.(a) 57,700 1,572,325
- -----------------------------------------------------------------
Sterling Commerce, Inc.(a) 1,696,300 47,708,438
- -----------------------------------------------------------------
Sterling Software, Inc.(a) 500,000 16,250,000
- -----------------------------------------------------------------
Structural Dynamics Research
Corp.(a) 1,100,000 19,525,000
- -----------------------------------------------------------------
SunGard Data Systems Inc.(a) 530,000 22,657,500
- -----------------------------------------------------------------
Synopsys, Inc.(a) 1,500,000 67,500,000
- -----------------------------------------------------------------
Tecnomatix Technologies Ltd.(a) 329,500 5,725,063
- -----------------------------------------------------------------
Transition Systems, Inc.(a) 33,300 316,350
- -----------------------------------------------------------------
</TABLE>
FS-42
<PAGE> 144
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Wind River Systems(a) 300,000 $ 12,750,000
- -----------------------------------------------------------------
1,485,159,310
- -----------------------------------------------------------------
CONGLOMERATES-0.63%
Corning, Inc. 1,000,000 38,750,000
- -----------------------------------------------------------------
Tyco International Ltd. 411,982 20,444,606
- -----------------------------------------------------------------
U.S. Industries, Inc.(a) 500,000 13,500,000
- -----------------------------------------------------------------
72,694,606
- -----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.04%
AMETEK, Inc. 200,000 3,975,000
- -----------------------------------------------------------------
Berg Electronics Corp.(a) 500,000 14,125,000
- -----------------------------------------------------------------
BMC Industries, Inc. 500,000 14,812,500
- -----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 450,000 10,068,750
- -----------------------------------------------------------------
Methode Electronics, Inc.-Class
A 450,000 8,775,000
- -----------------------------------------------------------------
Molex, Inc.-Class A 234,375 7,587,890
- -----------------------------------------------------------------
SCI Systems, Inc.(a) 500,000 24,875,000
- -----------------------------------------------------------------
Symbol Technologies, Inc.(a) 600,000 26,925,000
- -----------------------------------------------------------------
Thermo Instrument Systems,
Inc.(a) 300,000 9,075,000
- -----------------------------------------------------------------
120,219,140
- -----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.11%
Imperial Credit Industries,
Inc.(a) 700,000 12,687,500
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-4.20%
Aames Financial Corp. 309,100 13,793,587
- -----------------------------------------------------------------
Beneficial Corp. 400,000 23,400,000
- -----------------------------------------------------------------
Capital One Financial Corp. 1,500,000 46,687,500
- -----------------------------------------------------------------
Cityscape Financial Corp.(a) 474,300 12,213,225
- -----------------------------------------------------------------
Concord EFS, Inc.(a) 97,100 2,815,900
- -----------------------------------------------------------------
Credit Acceptance Corp.(a) 1,128,800 30,477,600
- -----------------------------------------------------------------
First USA, Inc. 400,000 23,000,000
- -----------------------------------------------------------------
Green Tree Financial Corp. 2,150,000 85,193,750
- -----------------------------------------------------------------
Household International, Inc. 650,000 57,525,000
- -----------------------------------------------------------------
MBNA Corp. 1,500,000 56,625,000
- -----------------------------------------------------------------
Money Store, Inc. (The) 1,250,000 32,187,500
- -----------------------------------------------------------------
Olympic Financial Ltd.(a) 1,431,200 22,720,300
- -----------------------------------------------------------------
PMT Services, Inc.(a) 553,500 11,070,000
- -----------------------------------------------------------------
Southern Pacific Funding
Corp.(a) 116,100 3,657,150
- -----------------------------------------------------------------
Student Loan Marketing
Association 450,000 37,237,500
- -----------------------------------------------------------------
SunAmerica, Inc. 700,000 26,250,000
- -----------------------------------------------------------------
484,854,012
- -----------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.17%
Washington Mutual, Inc. 458,400 19,367,400
- -----------------------------------------------------------------
FOOD/PROCESSING-0.25%
Richfood Holdings, Inc. 1,182,100 28,518,163
- -----------------------------------------------------------------
FUNERAL SERVICES-0.96%
Service Corp. International 3,000,000 85,500,000
- -----------------------------------------------------------------
Stewart Enterprises, Inc.-Class
A 750,000 25,687,500
- -----------------------------------------------------------------
111,187,500
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FURNITURE-0.26%
Leggett & Platt, Inc. 1,000,000 $ 29,875,000
- -----------------------------------------------------------------
GAMING-0.75%
GTECH Holdings Corp.(a) 750,000 22,125,000
- -----------------------------------------------------------------
International Game Technology 1,875,000 39,609,375
- -----------------------------------------------------------------
Trump Hotels & Casino Resorts,
Inc.(a)(b) 1,540,800 24,460,200
- -----------------------------------------------------------------
86,194,575
- -----------------------------------------------------------------
HOMEBUILDING-0.06%
Oakwood Homes Corp. 250,000 6,625,000
- -----------------------------------------------------------------
HOTELS/MOTELS-1.40%
Doubletree Corp.(a) 652,800 26,479,200
- -----------------------------------------------------------------
HFS, Inc.(a) 1,200,000 87,900,000
- -----------------------------------------------------------------
Promus Hotel Corp.(a) 650,000 20,637,500
- -----------------------------------------------------------------
Sun International Hotels Ltd.(a) 560,300 26,474,175
- -----------------------------------------------------------------
161,490,875
- -----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.64%
Compdent Corp.(a)(b) 700,000 24,062,500
- -----------------------------------------------------------------
Conseco, Inc. 500,000 26,750,000
- -----------------------------------------------------------------
RISCORP, Inc.-Class A(a) 172,300 861,500
- -----------------------------------------------------------------
United Companies Financial Corp. 750,000 22,406,250
- -----------------------------------------------------------------
74,080,250
- -----------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-1.02%
CapMAC Holdings Inc.(b) 850,000 28,368,750
- -----------------------------------------------------------------
MGIC Investment Corp. 1,250,000 85,781,250
- -----------------------------------------------------------------
Progressive Corp. 44,900 3,086,875
- -----------------------------------------------------------------
117,236,875
- -----------------------------------------------------------------
LEISURE & RECREATION-0.98%
Callaway Golf Co. 1,250,000 38,281,250
- -----------------------------------------------------------------
Harley-Davidson, Inc. 1,000,000 45,125,000
- -----------------------------------------------------------------
Mattel, Inc. 625,000 18,046,875
- -----------------------------------------------------------------
Speedway Motorsports, Inc.(a) 511,200 11,693,700
- -----------------------------------------------------------------
113,146,825
- -----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.35%
Pentair, Inc. 500,000 12,625,000
- -----------------------------------------------------------------
Thermo Electron Corp.(a) 750,000 27,375,000
- -----------------------------------------------------------------
40,000,000
- -----------------------------------------------------------------
MEDICAL (DRUGS)-1.51%
Cardinal Health, Inc. 1,400,000 109,900,000
- -----------------------------------------------------------------
Curative Technologies, Inc.(a) 265,000 6,028,750
- -----------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 250,000 8,625,000
- -----------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 750,000 21,843,750
- -----------------------------------------------------------------
Jones Medical Industries, Inc. 402,350 17,502,225
- -----------------------------------------------------------------
Parexel International Corp.(a) 217,100 10,637,900
- -----------------------------------------------------------------
174,537,625
- -----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-7.66%
American HomePatient Inc.(a)(b) 750,000 17,812,500
- -----------------------------------------------------------------
American Medical Response,
Inc.(a) 300,000 9,000,000
- -----------------------------------------------------------------
American Oncology Resources,
Inc.(a) 336,900 2,695,200
- -----------------------------------------------------------------
Apria Healthcare Group,
Inc.(a)(b) 1,750,000 33,468,750
- -----------------------------------------------------------------
ClinTrials Research Inc.(a) 243,300 9,032,513
- -----------------------------------------------------------------
</TABLE>
FS-43
<PAGE> 145
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Columbia/HCA Healthcare Corp. 2,625,000 $ 93,843,750
- -----------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 1,000,000 22,875,000
- -----------------------------------------------------------------
Health Care and Retirement
Corp.(a) 2,250,000 55,406,250
- -----------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 2,999,987 65,999,714
- -----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 3,071,000 115,162,500
- -----------------------------------------------------------------
Lincare Holdings, Inc.(a) 1,000,000 37,500,000
- -----------------------------------------------------------------
Manor Care, Inc. 1,000,000 39,250,000
- -----------------------------------------------------------------
MedPartners, Inc.(a) 800,000 16,900,000
- -----------------------------------------------------------------
OccuSystems, Inc.(a) 430,000 11,771,250
- -----------------------------------------------------------------
OrNda HealthCorp(a) 2,000,000 54,500,000
- -----------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 524,200 7,535,375
- -----------------------------------------------------------------
Oxford Health Plans, Inc.(a) 1,498,600 68,186,300
- -----------------------------------------------------------------
PhyCor, Inc.(a) 1,050,000 32,550,000
- -----------------------------------------------------------------
Physicians Resource Group,
Inc.(a) 500,000 13,500,000
- -----------------------------------------------------------------
Quorum Health Group, Inc.(a) 600,000 16,200,000
- -----------------------------------------------------------------
Tenet Healthcare Corp.(a) 2,250,000 46,968,750
- -----------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 550,000 21,450,000
- -----------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 1,350,000 33,750,000
- -----------------------------------------------------------------
Vencor, Inc.(a) 2,000,000 59,250,000
- -----------------------------------------------------------------
884,607,852
- -----------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-4.32%
Advanced Technology
Laboratories, Inc.(a) 650,000 19,825,000
- -----------------------------------------------------------------
Boston Scientific Corp.(a) 1,014,552 55,166,265
- -----------------------------------------------------------------
CardioThoracic Systems, Inc.(a) 250,000 4,750,000
- -----------------------------------------------------------------
Dentsply International, Inc. 550,000 23,168,750
- -----------------------------------------------------------------
Gulf South Medical Supply,
Inc.(a)(b) 1,160,400 25,528,800
- -----------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 1,000,000 39,250,000
- -----------------------------------------------------------------
Invacare Corp. 885,200 24,785,600
- -----------------------------------------------------------------
Medtronic, Inc. 500,000 32,187,500
- -----------------------------------------------------------------
Nellcor Puritan Bennett, Inc.(a) 500,000 9,750,000
- -----------------------------------------------------------------
Omnicare, Inc. 2,000,000 54,500,000
- -----------------------------------------------------------------
Physician Sales & Service,
Inc.(a) 750,000 15,937,500
- -----------------------------------------------------------------
Quintiles Transnational Corp.(a) 500,000 32,875,000
- -----------------------------------------------------------------
Spine-Tech, Inc.(a) 57,600 1,454,400
- -----------------------------------------------------------------
St. Jude Medical, Inc.(a) 780,200 30,817,900
- -----------------------------------------------------------------
Steris Corp.(a) 825,000 31,143,750
- -----------------------------------------------------------------
Sybron International Corp.(a) 2,000,000 58,250,000
- -----------------------------------------------------------------
Target Therapeutics, Inc.(a) 225,000 8,325,000
- -----------------------------------------------------------------
US Surgical Corp. 750,000 31,406,250
- -----------------------------------------------------------------
499,121,715
- -----------------------------------------------------------------
OFFICE PRODUCTS-0.52%
Avery Dennison Corp. 300,000 19,762,500
- -----------------------------------------------------------------
Reynolds & Reynolds Co.-Class A 1,517,100 40,013,513
- -----------------------------------------------------------------
59,776,013
- -----------------------------------------------------------------
OIL & GAS (DRILLING)-0.35%
Reading & Bates Corp.(a) 1,400,000 40,250,000
- -----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.52%
Burlington Resources, Inc. 750,000 37,781,250
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-(CONTINUED)
Transocean Offshore Inc. 350,000 $ 22,137,500
- -----------------------------------------------------------------
59,918,750
- -----------------------------------------------------------------
OIL & GAS (SERVICES)-0.52%
Camco International, Inc. 613,700 23,780,875
- -----------------------------------------------------------------
Global Marine, Inc.(a) 2,000,000 36,750,000
- -----------------------------------------------------------------
60,530,875
- -----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-2.18%
Baker Hughes, Inc. 1,000,000 35,625,000
- -----------------------------------------------------------------
Cooper Cameron Corp.(a) 27,500 1,756,563
- -----------------------------------------------------------------
Diamond Offshore Drilling,
Inc.(a) 1,000,000 60,875,000
- -----------------------------------------------------------------
ENSCO International, Inc.(a) 750,000 32,437,500
- -----------------------------------------------------------------
Marine Drilling Co., Inc.(a) 2,000,000 27,750,000
- -----------------------------------------------------------------
Pride Petroleum Services,
Inc.(a) 518,700 9,077,250
- -----------------------------------------------------------------
Rowan Co., Inc.(a) 1,300,000 29,087,500
- -----------------------------------------------------------------
Smith International, Inc.(a) 750,000 28,500,000
- -----------------------------------------------------------------
Varco International, Inc.(a) 1,326,100 26,190,475
- -----------------------------------------------------------------
251,299,288
- -----------------------------------------------------------------
POLLUTION CONTROL-0.51%
United Waste Systems, Inc.(a) 592,200 20,356,875
- -----------------------------------------------------------------
US Filter Corp.(a) 206,000 7,107,000
- -----------------------------------------------------------------
USA Waste Services, Inc.(a) 1,000,000 32,000,000
- -----------------------------------------------------------------
59,463,875
- -----------------------------------------------------------------
PUBLISHING-0.28%
Gartner Group, Inc.(a) 608,200 18,702,150
- -----------------------------------------------------------------
Times Mirror Co. (The) 300,000 13,875,000
- -----------------------------------------------------------------
32,577,150
- -----------------------------------------------------------------
RESTAURANTS-1.30%
Apple South, Inc. 500,000 5,875,000
- -----------------------------------------------------------------
Applebee's International, Inc. 843,600 20,562,750
- -----------------------------------------------------------------
Brinker International, Inc.(a) 1,400,000 23,800,000
- -----------------------------------------------------------------
Cracker Barrel Old Country
Store, Inc. 500,000 10,187,500
- -----------------------------------------------------------------
Lone Star Steakhouse & Saloon,
Inc.(a) 1,250,000 32,031,250
- -----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 750,000 17,390,625
- -----------------------------------------------------------------
Planet Hollywood International,
Inc.-Class A(a) 750,000 15,562,500
- -----------------------------------------------------------------
Starbucks Corp.(a) 750,000 24,375,000
- -----------------------------------------------------------------
149,784,625
- -----------------------------------------------------------------
RETAIL (FOOD & DRUG)-3.13%
American Stores Co. 1,000,000 41,375,000
- -----------------------------------------------------------------
Eckerd Corp.(a) 1,262,800 35,042,700
- -----------------------------------------------------------------
Kroger Co. (The)(a) 1,200,000 53,550,000
- -----------------------------------------------------------------
Revco D.S., Inc.(a) 1,000,000 30,125,000
- -----------------------------------------------------------------
Safeway, Inc.(a) 2,000,000 85,750,000
- -----------------------------------------------------------------
Thrifty PayLess Holdings,
Inc.(a) 1,513,800 32,357,475
- -----------------------------------------------------------------
Vons Companies, Inc. (The) 1,500,000 83,062,500
- -----------------------------------------------------------------
361,262,675
- -----------------------------------------------------------------
RETAIL (STORES)-10.61%
AutoZone, Inc.(a) 1,500,000 38,437,500
- -----------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 1,000,000 25,250,000
- -----------------------------------------------------------------
Boise Cascade Office Products
Corp.(a) 293,100 5,568,900
- -----------------------------------------------------------------
</TABLE>
FS-44
<PAGE> 146
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
CDW Computer Centers, Inc.(a) 650,000 $ 40,909,373
- -----------------------------------------------------------------
Claire's Stores, Inc. 400,000 6,800,000
- -----------------------------------------------------------------
CompUSA, Inc.(a) 1,000,000 46,250,000
- -----------------------------------------------------------------
Consolidated Stores Corp.(a) 1,600,000 61,800,000
- -----------------------------------------------------------------
Corporate Express, Inc.(a) 1,090,000 35,561,250
- -----------------------------------------------------------------
Dayton Hudson Corp. 1,500,000 51,937,500
- -----------------------------------------------------------------
Dillard Department Stores, Inc. 500,000 15,875,000
- -----------------------------------------------------------------
Dollar General Corp. 1,087,093 30,166,830
- -----------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 600,000 22,650,000
- -----------------------------------------------------------------
Finish Line, Inc. (The) Class
A(a) 422,700 17,964,750
- -----------------------------------------------------------------
Gap, Inc. (The) 1,000,000 29,000,000
- -----------------------------------------------------------------
Global DirectMail Corp.(a) 700,000 34,475,000
- -----------------------------------------------------------------
Gymboree Corp.(a)(b) 1,447,000 45,218,750
- -----------------------------------------------------------------
Home Depot, Inc. 100,000 5,475,000
- -----------------------------------------------------------------
Jones Apparel Group, Inc.(a) 600,000 18,750,000
- -----------------------------------------------------------------
Kohl's Corp.(a) 838,600 30,189,600
- -----------------------------------------------------------------
Lowe's Co., Inc. 1,000,000 40,375,000
- -----------------------------------------------------------------
Men's Wearhouse, Inc.
(The)(a)(b) 1,075,050 22,172,906
- -----------------------------------------------------------------
Meyer (Fred), Inc.(a) 700,000 24,587,500
- -----------------------------------------------------------------
Micro Warehouse, Inc.(a) 1,250,000 28,750,000
- -----------------------------------------------------------------
Neiman Marcus Group, Inc.
(The)(a) 300,000 9,787,500
- -----------------------------------------------------------------
Oakley, Inc.(a) 2,000,000 29,750,000
- -----------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 1,250,000 43,750,000
- -----------------------------------------------------------------
Petco Animal Supplies,
Inc.(a)(b) 675,000 15,862,500
- -----------------------------------------------------------------
PETsMART, Inc.(a) 2,000,000 54,000,000
- -----------------------------------------------------------------
Ross Stores, Inc. 437,200 18,143,800
- -----------------------------------------------------------------
Saks Holdings, Inc.(a) 272,900 9,551,500
- -----------------------------------------------------------------
Sports Authority, Inc. (The)(a) 1,500,000 36,375,000
- -----------------------------------------------------------------
Staples, Inc.(a) 4,000,000 74,500,000
- -----------------------------------------------------------------
Sunglass Hut International,
Inc.(a) 628,900 5,581,489
- -----------------------------------------------------------------
Tech Data Corp.(a) 1,500,000 38,625,000
- -----------------------------------------------------------------
Tiffany & Co. 758,900 28,079,300
- -----------------------------------------------------------------
TJX Companies, Inc. 750,000 30,000,000
- -----------------------------------------------------------------
Toys "R" Us, Inc.(a) 2,000,000 67,750,000
- -----------------------------------------------------------------
Viking Office Products, Inc.(a) 2,500,000 72,812,500
- -----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 500,000 13,750,000
- -----------------------------------------------------------------
1,226,483,448
- -----------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.08%
Input/Output, Inc.(a) 300,000 8,925,000
- -----------------------------------------------------------------
SEMICONDUCTORS-2.68%
Altera Corp.(a) 750,000 46,500,000
- -----------------------------------------------------------------
Intel Corp. 2,200,000 241,725,000
- -----------------------------------------------------------------
Solectron Corp.(a) 300,000 16,050,000
- -----------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 150,000 4,781,250
- -----------------------------------------------------------------
309,056,250
- -----------------------------------------------------------------
SHOES & RELATED APPAREL-1.08%
Nike, Inc.-Class B 1,000,000 58,875,000
- -----------------------------------------------------------------
Nine West Group, Inc.(a) 1,100,000 54,862,500
- -----------------------------------------------------------------
Wolverine World Wide, Inc. 450,000 11,137,500
- -----------------------------------------------------------------
124,875,000
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-5.33%
ACC Corp. 358,350 $ 15,229,875
- -----------------------------------------------------------------
ADC Telecommunications, Inc.(a) 1,500,000 102,562,500
- -----------------------------------------------------------------
Allen Group, Inc. 596,700 9,472,613
- -----------------------------------------------------------------
Andrew Corp.(a) 1,750,000 85,312,500
- -----------------------------------------------------------------
Aspect Telecommunications
Corp.(a) 550,000 32,725,000
- -----------------------------------------------------------------
Billing Information Concepts(a) 400,000 10,450,000
- -----------------------------------------------------------------
Frontier Corp. 1,000,000 29,000,000
- -----------------------------------------------------------------
MCI Communications Corp. 2,000,000 50,250,000
- -----------------------------------------------------------------
PairGain Technologies, Inc.(a) 1,366,100 94,090,138
- -----------------------------------------------------------------
PictureTel Corp.(a) 500,000 13,500,000
- -----------------------------------------------------------------
Premiere Technologies, Inc.(a) 50,300 817,375
- -----------------------------------------------------------------
Premisys Communications, Inc.(a) 500,000 25,000,000
- -----------------------------------------------------------------
QUALCOMM, Inc.(a) 600,000 23,850,000
- -----------------------------------------------------------------
Tellabs, Inc.(a) 800,000 68,100,000
- -----------------------------------------------------------------
U.S. Long Distance Corp.(a) 343,300 2,875,138
- -----------------------------------------------------------------
United States Satellite
Broadcasting
Company, Inc.(a) 412,100 6,645,112
- -----------------------------------------------------------------
Western Wireless Corp.-Class
A(a)(b) 550,000 9,075,000
- -----------------------------------------------------------------
WorldCom, Inc.(a) 1,500,000 36,562,500
- -----------------------------------------------------------------
615,517,751
- -----------------------------------------------------------------
TELEPHONE-0.23%
Century Telephone Enterprises,
Inc. 55,700 1,789,363
- -----------------------------------------------------------------
Cincinnati Bell, Inc. 500,000 24,687,500
- -----------------------------------------------------------------
26,476,863
- -----------------------------------------------------------------
TEXTILES-1.78%
Designer Holdings Ltd.(a) 250,000 4,781,250
- -----------------------------------------------------------------
Liz Claiborne, Inc. 1,250,000 52,812,500
- -----------------------------------------------------------------
Nautica Enterprises, Inc.(a) 1,200,000 36,900,000
- -----------------------------------------------------------------
Russell Corp. 1,000,000 28,375,000
- -----------------------------------------------------------------
Tommy Hilfiger Corp.(a) 1,000,000 52,000,000
- -----------------------------------------------------------------
Unifi, Inc. 978,600 30,458,926
- -----------------------------------------------------------------
205,327,676
- -----------------------------------------------------------------
TRANSPORTATION
(MISCELLANEOUS)-0.16%
AirNet Systems, Inc.(a) 560,000 7,280,000
- -----------------------------------------------------------------
Rural/Metro Corp.(a) 300,000 10,950,000
- -----------------------------------------------------------------
18,230,000
- -----------------------------------------------------------------
TRUCKING-0.10%
USFreightways Corp. 550,000 12,031,250
- -----------------------------------------------------------------
Total Domestic Common Stocks 9,806,505,142
- -----------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-3.85%
CANADA-0.73%
Agrium, Inc. (Chemicals) 891,100 11,918,463
- -----------------------------------------------------------------
Newbridge Networks Corp.
(Computer Networking)(a) 1,500,000 47,437,500
- -----------------------------------------------------------------
Potash Corp. of Saskatchewan
Inc. (Metals-Miscellaneous) 350,000 24,806,250
- -----------------------------------------------------------------
84,162,213
- -----------------------------------------------------------------
FRANCE-0.12%
Roussel-Uclaf (Medical-Drugs) 50,580 13,385,768
- -----------------------------------------------------------------
</TABLE>
FS-45
<PAGE> 147
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
IRELAND-0.50%
CBT Group PLC-ADR (Computer
Software/Services)(a) 49,400 $ 2,717,000
- -----------------------------------------------------------------
Elan Corp. PLC-ADR
(Medical-Drugs)(a) 2,000,000 55,500,000
- -----------------------------------------------------------------
58,217,000
- -----------------------------------------------------------------
ISRAEL-0.30%
ECI Telecommunications Ltd.
Designs (Computer
Networking)(a) 1,250,000 25,000,000
- -----------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 225,000 9,421,875
- -----------------------------------------------------------------
34,421,875
- -----------------------------------------------------------------
ITALY-0.30%
Fila Holding S.p.A.-ADR
(Retail/Stores) 425,000 30,600,000
- -----------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 1,074,000 2,214,550
- -----------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 1,074,000 2,401,456
- -----------------------------------------------------------------
35,216,006
- -----------------------------------------------------------------
NETHERLANDS-0.54%
Baan Co. N.V. (Computer
Software/Services)(a) 800,000 29,600,000
- -----------------------------------------------------------------
Gucci Group NV-ADR (Textiles) 385,000 26,565,000
- -----------------------------------------------------------------
Ver Ned Uitgever Bezit
(Publishing) 328,500 5,963,223
- -----------------------------------------------------------------
62,128,223
- -----------------------------------------------------------------
SWEDEN-0.54%
Telefonaktiebolaget LM
Ericsson-ADR
(Telecommunications) 2,250,000 62,156,250
- -----------------------------------------------------------------
SWITZERLAND-0.05%
Ciba-Geigy AG (Chemicals) 5,000 6,159,018
- -----------------------------------------------------------------
UNITED KINGDOM-0.77%
Burton Group PLC (Retail-Stores) 2,700,000 6,558,838
- -----------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 1,937,500 76,773,438
- -----------------------------------------------------------------
Granada Group PLC (Leisure &
Recreation) 390,000 5,608,154
- -----------------------------------------------------------------
88,940,430
- -----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 444,786,783
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE
BONDS-0.07%
FINANCE (CONSUMER CREDIT)-0.07%
Cityscape Financial Corp., Conv.
Sub. Deb.
6.00%, 05/01/06
(Acquired 08/06/96-08/29/96;
Cost $10,090,613)(c) $ 7,815,000 $ 8,252,260
- -----------------------------------------------------------------
Total Convertible Corporate Bonds 8,252,260
- -----------------------------------------------------------------
REPURCHASE AGREEMENTS-5.65%(d)
Daiwa Securities America Inc.,
5.53%, 11/01/96(e) 38,201,444 38,201,444
- -----------------------------------------------------------------
SBC Capital Markets Inc.,
5.55%, 11/01/96(f) 179,000,000 179,000,000
- -----------------------------------------------------------------
Smith Barney Shearson Inc.,
5.60%, 11/01/96(g) 173,000,000 173,000,000
- -----------------------------------------------------------------
UBS Securities Inc., 5.60%,
11/01/96(h) 262,043,993 262,003,237
- -----------------------------------------------------------------
Total Repurchase Agreements 652,204,681
- -----------------------------------------------------------------
U.S. TREASURY SECURITIES-5.42%
U.S. TREASURY BILLS-5.42%(i)
5.18%, 12/26/96(j) 208,115,000 206,624,896
- -----------------------------------------------------------------
5.05%, 01/02/97(j) 387,710,000 384,542,409
- -----------------------------------------------------------------
4.53%, 02/06/97 35,000,000 34,536,950
- -----------------------------------------------------------------
Total U.S. Treasury
Securities 625,704,255
- -----------------------------------------------------------------
TOTAL INVESTMENTS-99.90% 11,537,453,121
- -----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.10% 11,087,841
- -----------------------------------------------------------------
NET ASSETS-100.00% $ 11,548,540,962
=================================================================
</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 October
31, 1996 was $358,443,781 which represented 3.10% of the Fund's net assets.
(c) 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 October 31, 1996 was $8,252,260, which represents
0.07% of net assets.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collaterized by $733,115,000 U.S. Treasury obligations, 0% to
10.375% due 11/15/96 to 08/15/23.
(f) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collaterized by $691,506,000 U.S. Treasury obligations 0% to
9.125% due 11/30/96 to 10/31/01.
(g) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,031,111. Collaterized by $254,910,124 U.S. Treasury obligations, 0% to
9.50% due 11/15/96 to 09/01/34.
(h) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$300,046,667. Collaterized by $609,995,215 U.S. Government agency
obligations 0% to 11.00% due 05/01/09 to 03/01/33.
(i) 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.
(j) A portion of the principal balance was pledged as collateral to cover margin
requirements for open future contracts. See Note 6.
Abbreviations:
ADR-American Depository Receipt
Conv.-Convertible
Deb.-Debentures
Sub.-Subordinated
See Notes to Financial Statements.
FS-46
<PAGE> 148
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$8,806,097,768) $11,537,453,121
- ---------------------------------------------------------
Foreign currencies, at market value
(cost $26,216) 26,258
- ---------------------------------------------------------
Receivables for:
Investments sold 15,784,521
- ---------------------------------------------------------
Capital stock sold 46,649,903
- ---------------------------------------------------------
Dividends and interest 2,142,548
- ---------------------------------------------------------
Variation margin 6,284,875
- ---------------------------------------------------------
Investment for deferred compensation
plan 63,878
- ---------------------------------------------------------
Other assets 58,196
- ---------------------------------------------------------
Total assets 11,608,463,300
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 30,867,907
- ---------------------------------------------------------
Capital stock reacquired 16,227,770
- ---------------------------------------------------------
Deferred compensation 63,878
- ---------------------------------------------------------
Accrued advisory fees 6,018,167
- ---------------------------------------------------------
Accrued administrative services fees 19,531
- ---------------------------------------------------------
Accrued directors' fees 4,297
- ---------------------------------------------------------
Accrued distribution fees 2,890,747
- ---------------------------------------------------------
Accrued transfer agent fees 2,020,918
- ---------------------------------------------------------
Accrued operating expenses 1,809,123
- ---------------------------------------------------------
Total liabilities 59,922,338
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $11,548,540,962
=========================================================
NET ASSETS:
Class A $11,255,506,428
=========================================================
Institutional Class $ 293,034,534
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 441,753,223
=========================================================
Institutional Class:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 11,265,330
=========================================================
CLASS A:
Net asset value and redemption price
per share $ 25.48
=========================================================
Offering price per share:
(Net asset value of $25.48 divided by
94.50%) $ 26.96
=========================================================
INSTITUTIONAL CLASS:
Net asset value, offering and
redemption price per share $ 26.01
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $366,503 foreign
withholding tax) $ 21,861,327
- ---------------------------------------------------------
Interest 60,273,163
- ---------------------------------------------------------
Total investment income 82,134,490
- ---------------------------------------------------------
EXPENSES:
Advisory fees 59,483,795
- ---------------------------------------------------------
Administrative service fees 212,800
- ---------------------------------------------------------
Custodian fees 611,167
- ---------------------------------------------------------
Directors' fees 54,355
- ---------------------------------------------------------
Distribution fees-Class A 27,788,170
- ---------------------------------------------------------
Transfer agent fees-Class A 17,524,711
- ---------------------------------------------------------
Transfer agent fees-Institutional Class 16,972
- ---------------------------------------------------------
Other 3,499,379
- ---------------------------------------------------------
Total expenses 109,191,349
- ---------------------------------------------------------
Less: Fees waived by advisor (1,869,383)
- ---------------------------------------------------------
Expenses paid indirectly (144,866)
- ---------------------------------------------------------
Net expenses 107,177,100
- ---------------------------------------------------------
Net investment income (loss) (25,042,610)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 347,014,327
- ---------------------------------------------------------
Foreign currencies (475,360)
- ---------------------------------------------------------
Futures contracts 47,580,962
- ---------------------------------------------------------
394,119,929
- ---------------------------------------------------------
Unrealized appreciation of:
Investment securities 651,403,520
- ---------------------------------------------------------
Foreign currencies 146,156
- ---------------------------------------------------------
Futures contracts 21,195,970
- ---------------------------------------------------------
672,745,646
- ---------------------------------------------------------
Net gain on investment securities,
foreign currencies and futures
contracts 1,066,865,575
- ---------------------------------------------------------
Net increase in net assets resulting
from operations $1,041,822,965
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-47
<PAGE> 149
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (25,042,610) $ (16,016,980)
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and futures contracts 394,119,929 237,427,697
- --------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and futures contracts 672,745,646 1,307,034,097
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,041,822,965 1,528,444,814
- --------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment securities:
Class A (233,242,373) (107,823,749)
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (4,789,469) (1,218,145)
- --------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 3,470,281,071 1,878,176,040
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 135,200,711 75,813,810
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 4,409,272,905 3,373,392,770
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 7,139,268,057 3,765,875,287
- --------------------------------------------------------------------------------------------------------------------------
End of period $11,548,540,962 $7,139,268,057
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 8,408,805,783 $4,828,771,443
- --------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (124,538) (54,010)
- --------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities, foreign currencies
and futures contracts 388,200,602 231,637,155
- --------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign currencies and futures
contracts 2,751,659,115 2,078,913,469
- --------------------------------------------------------------------------------------------------------------------------
$11,548,540,962 $7,139,268,057
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
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 two different classes of shares: the Class A shares and the
Institutional Class. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to 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 is valued at
its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Debt obligations that are issued or
guaranteed by the U.S. Treasury are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market quotations are not readily available 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
FS-48
<PAGE> 150
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 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, 1996,
$475,360 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, $25,447,442 was
reclassified from undistributed net investment income (loss) to paid-in
capital as a result of a net operating tax loss. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
D. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
E. Foreign Currency Translation--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward 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 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 voluntary 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, 1996, AIM waived fees of $1,869,383. 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.
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, 1996, AIM was
reimbursed $212,800 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Class A shares. During the year ended October 31, 1996, AFS was
paid $8,671,663 for such services. During the year ended October 31, 1996, the
Fund paid A I M Institutional Fund Services, Inc. ("AIFS") with respect to the
Institutional Class $16,972 for shareholder and transfer agency services.
The Fund received reductions in transfer agency fees of $132,361 from
dividends received on balances in cash management bank accounts. In addition,
the Fund incurred
FS-49
<PAGE> 151
expenses of $12,505 from pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction of Fund's total expenses of $144,866 during the year ended October 31,
1996.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Company has
adopted a Plan pursuant to Rule 12b-l under the 1940 Act (the "Plan"), with
respect to the Class A shares, whereby the Fund pays AIM Distributors an annual
rate of 0.30% of the Class A shares average daily net assets as compensation for
services related to the sales and distribution of the Class A shares. The Plan
provides that payments to dealers and financial institutions that provide
continuing personal shareholder services to their customers who purchase and own
shares of the Class A shares, in amounts of up to 0.25% of the average net
assets of the Class A shares attributable to the customers of such dealers or
financial institutions, may be characterized as a service fee. The Plan also
provides that payments in excess of service fees are characterized as an asset-
based sales charge under the Plan. The Plan also imposes a cap on the total
amount of sales charges, including asset-based sales charges, that may be paid
by the Company with respect to the Fund's Class A shares. During the year ended
October 31, 1996, the Class A shares paid AIM Distributors $27,788,170 as
compensation under the Plan.
AIM Distributors received commissions of $19,558,836 from Class A capital
stock transactions during the year ended October 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Capital, AIM Distributors, AFS,
AIFS and FMC.
During the year ended October 31, 1996 the Fund paid legal fees of $21,521 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-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 4-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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $83,000,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1996 was
$7,936,731,509 and $5,239,321,023, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1996, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $3,001,882,643
- -------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (273,922,974)
- -------------------------------------------------------
Net unrealized appreciation of
investment securities $2,727,959,669
=======================================================
</TABLE>
Cost of investments for tax purposes is $8,809,493,452.
NOTE 6-FUTURES CONTRACT
On October 31, 1996, $25,487,000 par value U.S. Treasury obligations were
pledged as collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1996:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
<S> <C>
S&P 500 Index/1,835 contracts/Dec.
96/Buy $ 20,302,845
=======================================================
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 282,903,859 $ 6,791,107,589 214,014,863 $ 4,411,919,689
- ---------------------------------------------------------------------------------
Institutional
Class 7,711,696 189,568,037 5,036,915 105,368,663
- ---------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 10,007,849 218,670,843 6,006,043 99,940,399
- ---------------------------------------------------------------------------------
Institutional
Class 200,095 4,444,113 60,580 1,019,563
- ---------------------------------------------------------------------------------
Reacquired:
Class A (146,642,433) (3,539,497,361) (128,002,913) (2,633,684,048)
- ---------------------------------------------------------------------------------
Institutional
Class (2,422,264) (58,811,439) (1,476,157) (30,574,416)
- ---------------------------------------------------------------------------------
151,758,802 $ 3,605,481,782 95,639,331 $ 1,953,989,850
=================================================================================
</TABLE>
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-50
<PAGE> 152
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 eight-year period ended October 31,
1996, the ten months ended October 31, 1988, and the year ended December 31,
1987.(a)
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
----------- ---------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72 $ 6.59 $ 9.40
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Income from investment
operations:
Net investment income (loss) (0.06) (0.05) (0.02) (0.04) (0.04) (0.03) (0.03)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Net gains (losses) on
securities (both realized
and unrealized) 2.60 5.95 1.29 3.83 1.76 5.16 (1.23)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Total from investment
operations 2.54 5.90 1.27 3.79 1.72 5.13 (1.26)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net
investment income -- -- -- -- -- -- (0.01)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Distributions from capital
gains (0.75) (0.52) -- -- (0.19) -- (1.54)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Total distributions (0.75) (0.52) -- -- (0.19) -- (1.55)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Net asset value, end of period $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72 $ 6.59
================================ =========== ========== ========== ========== ======== ======== =======
Total return(c) 11.26% 33.43% 7.45% 28.60% 14.82% 77.85% (16.17)%
================================ =========== ========== ========== ========== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $11,255,506 $7,000,350 $3,726,029 $2,756,497 $966,472 $342,835 $83,304
================================ =========== ========== ========== ========== ======== ======== =======
Ratio of expenses to average net
assets(d) 1.14%(e)(f) 1.16% 1.20% 1.22% 1.21% 1.35% 1.37%
================================ =========== ========== ========== ========== ======== ======== =======
Ratio of net investment income
(loss) to average net
assets(g) (0.27)%(e) (0.32)% (0.15)% (0.31)% (0.42)% (0.41)% (0.44)%
================================ =========== ========== ========== ========== ======== ======== =======
Portfolio turnover rate 58% 45% 79% 70% 62% 109% 192%
================================ =========== ========== ========== ========== ======== ======== =======
Average broker commission
rate(i) $ 0.0596 N/A N/A N/A N/A N/A N/A
================================ =========== ========== ========== ========== ======== ======== =======
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) -- -- -- -- -- -- --
================================ =========== ========== ========== ========== ======== ======== =======
Average amount of debt
outstanding during the period
(000s omitted)(j) -- -- -- -- -- -- $ 2,344
================================ =========== ========== ========== ========== ======== ======== =======
Average amount of shares
outstanding during the period
(000s omitted)(j) 381,030 244,731 182,897 124,101 55,902 21,205 11,397
================================ =========== ========== ========== ========== ======== ======== =======
Average amount of debt per share
during the period -- -- -- -- -- -- $ 0.21
================================ =========== ========== ========== ========== ======== ======== =======
<CAPTION>
DECEMBER 31,
1989 1988(b) 1987
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 7.34 $ 6.35 $ 10.58
- -------------------------------- ------- ------- --------
Income from investment
operations:
Net investment income (loss) 0.01 (0.03) (0.05)
- -------------------------------- ------- ------- --------
Net gains (losses) on
securities (both realized
and unrealized) 2.46 1.02 0.36
- -------------------------------- ------- ------- --------
Total from investment
operations 2.47 0.99 0.31
- -------------------------------- ------- ------- --------
Less distributions:
Dividends from net
investment income -- -- --
- -------------------------------- ------- ------- --------
Distributions from capital
gains (0.41) -- (4.54)
- -------------------------------- ------- ------- --------
Total distributions (0.41) -- (4.54)
- -------------------------------- ------- ------- --------
Net asset value, end of period $ 9.40 $ 7.34 $ 6.35
================================ ======= ======= ========
Total return(c) 35.50% 15.59% 2.85%
================================ ======= ======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $74,731 $78,272 $ 71,418
================================ ======= ======= ========
Ratio of expenses to average net
assets(d) 1.36% 1.30%(h) 1.11%
================================ ======= ======= ========
Ratio of net investment income
(loss) to average net
assets(g) 0.07% (0.57) (0.41)%
================================ ======= ======= ========
Portfolio turnover rate 149% 131% 135%
================================ ======= ======= ========
Average broker commission
rate(i) N/A N/A N/A
================================ ======= ======= ========
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) $ 9,610 $ 5,266 $ 109
================================ ======= ======= ========
Average amount of debt
outstanding during the period
(000s omitted)(j) $ 2,609 $ 2,148 $ 2,366
================================ ======= ======= ========
Average amount of shares
outstanding during the period
(000s omitted)(j) 10,050 10,845 9,668
================================ ======= ======= ========
Average amount of debt per share
during the period $ 0.26 $ 0.20 $ 0.24
================================ ======= ======= ========
(a) Per share information has been restated to reflect a 2 for 1 stock split, effected in the form of a dividend, on June 19,
1987.
(b) The Fund changed investment advisors on September 30, 1988.
(c) Does not deduct sales charges and for periods less than one year, total returns are not annualized.
(d) Ratios of expenses prior to waiver of advisory fees are 1.16%, 1.18% and 1.21% for the years 1996-1994, respectively.
(e) Ratios are based on average net assets of $9,262,723,318.
(f) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses, the ratio of expenses to average net assets would
have remained the same.
(g) Ratios of net investment income (loss) prior to waiver of advisory fees are (0.29)%, (0.34)% and (0.16)% for the years
1996-1994, respectively.
(h) Annualized.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October 31, 1996.
(j) Averages computed on a daily basis.
</TABLE>
FS-51
<PAGE> 153
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Aggressive Growth Fund (a portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1996, the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended and the financial highlights
for each of the years in the three-year period then ended and the ten month
period ended October 31, 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Aggressive Growth Fund as of October 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended and the ten month period ended October 31,
1993, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-52
<PAGE> 154
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE BONDS-0.53%
BUILDING MATERIALS-0.09%
Eagle Hardware & Garden, Inc.,
Conv. Sub. Deb.,
6.25%, 03/15/01 $ 1,665,000 $ 2,697,300
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.44%
Cityscape Financial Corp.,
Conv. Sub. Deb.,
6.00%, 05/01/06(a)
(Acquired 08/06/96; Cost
$1,326,624) 960,000 1,013,713
- -----------------------------------------------------------------
RAC Financial Group, Inc.,
Conv. Sub. Notes,
7.25%, 08/15/03(a)
(Acquired 09/06/96-09/30/96;
Cost $7,894,726) 6,160,000 10,964,800
- -----------------------------------------------------------------
11,978,513
- -----------------------------------------------------------------
Total Convertible Bonds 14,675,813
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS-92.35%
ADVERTISING/BROADCASTING-2.58%
American Radio Systems Corp.(b) 150,000 4,575,000
- -----------------------------------------------------------------
Chancellor Corp.-Class A(b) 250,000 8,062,500
- -----------------------------------------------------------------
Clear Channel Communications,
Inc.(b) 200,000 14,600,000
- -----------------------------------------------------------------
Evergreen Media Corp.-Class A(b) 250,000 6,750,000
- -----------------------------------------------------------------
Heftel Broadcasting Corp.(b) 275,000 9,968,750
- -----------------------------------------------------------------
Heritage Media Corp.(b) 300,000 4,575,000
- -----------------------------------------------------------------
Jacor Communications, Inc.(b) 400,000 11,200,000
- -----------------------------------------------------------------
Meredith Corp. 100,000 5,025,000
- -----------------------------------------------------------------
Paxson Communications Corp.(b) 335,000 2,973,125
- -----------------------------------------------------------------
SFX Broadcasting, Inc.-Class A(b) 75,000 3,225,000
- -----------------------------------------------------------------
70,954,375
- -----------------------------------------------------------------
AEROSPACE/DEFENSE-0.28%
BE Aerospace, Inc.(b) 355,000 7,721,250
- -----------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS &
TIRES-0.21%
Borg-Warner Automotive, Inc. 150,000 5,756,250
- -----------------------------------------------------------------
BANKING-0.22%
Cole Taylor Financial Group, Inc. 200,000 6,012,500
- -----------------------------------------------------------------
BUILDING MATERIALS-0.10%
Danaher Corp. 70,000 2,861,250
- -----------------------------------------------------------------
BUSINESS SERVICES-2.88%
APAC Teleservices, Inc.(b) 100,000 4,612,500
- -----------------------------------------------------------------
Cambridge Technology Partners,
Inc.(b) 225,000 7,425,000
- -----------------------------------------------------------------
Career Horizons, Inc.(b) 200,000 8,125,000
- -----------------------------------------------------------------
Claremont Technology Group,
Inc.(b) 101,300 3,089,650
- -----------------------------------------------------------------
Data Processing Resources
Corp.(b) 86,500 1,740,812
- -----------------------------------------------------------------
IntelliQuest Information Group,
Inc.(b)(c) 375,000 8,250,000
- -----------------------------------------------------------------
Leasing Solutions, Inc.(b) 146,600 4,617,900
- -----------------------------------------------------------------
Pharmaceutical Product
Development, Inc.(b) 377,700 7,223,512
- -----------------------------------------------------------------
RemedyTemp, Inc.-Class A(b) 165,000 3,300,000
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BUSINESS SERVICES-(CONTINUED)
Robert Half International,
Inc.(b) 300,000 $ 12,037,500
- -----------------------------------------------------------------
Romac International, Inc.(b) 200,000 5,750,000
- -----------------------------------------------------------------
RTW, Inc.(b) 275,000 4,262,500
- -----------------------------------------------------------------
Sterling Healthcare Group(b) 100,000 1,762,500
- -----------------------------------------------------------------
Superior Consultant Holdings
Corp.(b) 60,000 1,470,000
- -----------------------------------------------------------------
Vincam Group, Inc. (The)(b) 100,000 3,175,000
- -----------------------------------------------------------------
Whittman-Hart, Inc.(b) 50,000 2,375,000
- -----------------------------------------------------------------
79,216,874
- -----------------------------------------------------------------
CHEMICALS-0.18%
Agrium, Inc. (Canada) 363,800 4,865,825
- -----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.58%
Airgas, Inc.(b) 711,000 16,086,375
- -----------------------------------------------------------------
COMPUTER MINI/PCS-0.49%
Rational Software Corp.(b) 350,000 13,431,250
- -----------------------------------------------------------------
COMPUTER NETWORKING-4.45%
ACT Networks, Inc.(b) 376,200 12,884,850
- -----------------------------------------------------------------
Ascend Communications, Inc.(b) 337,200 22,044,450
- -----------------------------------------------------------------
Auspex Systems, Inc.(b) 300,000 3,075,000
- -----------------------------------------------------------------
Cascade Communications Corp.(b) 480,000 34,860,000
- -----------------------------------------------------------------
Coherent Communications Systems
Corp.(b) 267,200 5,177,000
- -----------------------------------------------------------------
Digital Systems International,
Inc.(b) 40,500 551,812
- -----------------------------------------------------------------
DSP Communications, Inc.(b) 125,000 4,750,000
- -----------------------------------------------------------------
FORE Systems, Inc.(b) 408,800 16,249,800
- -----------------------------------------------------------------
Ortel Corp.(b) 100,000 2,075,000
- -----------------------------------------------------------------
Shiva Corp.(b) 100,000 4,100,000
- -----------------------------------------------------------------
Sync Research, Inc.(b) 200,000 2,650,000
- -----------------------------------------------------------------
VideoServer, Inc.(b) 200,000 9,475,000
- -----------------------------------------------------------------
Xircom, Inc.(b) 217,000 4,394,250
- -----------------------------------------------------------------
122,287,162
- -----------------------------------------------------------------
COMPUTER PERIPHERALS-0.97%
American Power Conversion
Corp.(b) 140,800 3,009,600
- -----------------------------------------------------------------
MicroTouch Systems, Inc.(b) 200,000 3,625,000
- -----------------------------------------------------------------
U.S. Robotics Corp.(b) 319,600 20,094,850
- -----------------------------------------------------------------
26,729,450
- -----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-14.97%
Affiliated Computer Services,
Inc.(b) 300,000 16,500,000
- -----------------------------------------------------------------
Amisys Managed Care Systems(b) 215,000 3,278,750
- -----------------------------------------------------------------
Analysts International Corp. 200,000 5,000,000
- -----------------------------------------------------------------
ANSYS, Inc.(b) 318,500 3,901,625
- -----------------------------------------------------------------
Applied Microsystems Corp.(b)(c) 200,000 2,175,000
- -----------------------------------------------------------------
Applix, Inc.(b) 198,500 4,813,625
- -----------------------------------------------------------------
Avant! Corp.(b) 150,684 4,558,191
- -----------------------------------------------------------------
BDM International Inc.(b) 14,700 738,675
- -----------------------------------------------------------------
Bell & Howell Co.(b) 250,000 6,687,500
- -----------------------------------------------------------------
BISYS Group, Inc. (The)(b) 150,000 5,587,500
- -----------------------------------------------------------------
</TABLE>
FS-53
<PAGE> 155
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
CBT Group PLC-ADR(b) (Ireland) 153,900 $ 8,464,500
- -----------------------------------------------------------------
Cellular Technical Services
Co.(b) 350,000 5,643,750
- -----------------------------------------------------------------
CFI Proservices, Inc.(b)(c) 165,000 3,217,500
- -----------------------------------------------------------------
Citrix Systems, Inc.(b) 200,000 11,050,000
- -----------------------------------------------------------------
Clarify, Inc.(b) 10,400 501,800
- -----------------------------------------------------------------
Computer Data Systems, Inc. 6,700 180,900
- -----------------------------------------------------------------
Computer Task Group, Inc. 100,000 3,775,000
- -----------------------------------------------------------------
Cooper & Chyan Technology,
Inc.(b) 450,000 13,781,250
- -----------------------------------------------------------------
CSG Systems International,
Inc.(b) 185,200 3,102,100
- -----------------------------------------------------------------
CyberMedia, Inc.(b) 17,600 391,600
- -----------------------------------------------------------------
Dendrite International, Inc.(b) 250,000 6,656,250
- -----------------------------------------------------------------
Documentum, Inc.(b) 100,000 3,725,000
- -----------------------------------------------------------------
Engineering Animation, Inc.(b)(c) 310,100 7,597,450
- -----------------------------------------------------------------
Forte Software, Inc.(b) 100,000 3,775,000
- -----------------------------------------------------------------
GT Interactive Software Corp.(b) 143,900 2,752,087
- -----------------------------------------------------------------
HBO & Co. 200,000 12,025,000
- -----------------------------------------------------------------
HPR, Inc.(b) 500,000 7,000,000
- -----------------------------------------------------------------
IDX Systems Corp.(b) 65,600 1,935,200
- -----------------------------------------------------------------
Indus Group, Inc.(b) 250,000 5,062,500
- -----------------------------------------------------------------
Integrated Systems, Inc.(b) 390,000 10,530,000
- -----------------------------------------------------------------
Jack Henry & Associates 195,000 7,873,125
- -----------------------------------------------------------------
JDA Software Group, Inc.(b) 100,000 3,437,500
- -----------------------------------------------------------------
McAfee Associates, Inc.(b) 250,000 11,375,000
- -----------------------------------------------------------------
Medic Computer Systems, Inc.(b) 350,000 9,887,500
- -----------------------------------------------------------------
National Data Corp. 200,000 8,225,000
- -----------------------------------------------------------------
Network General Corp.(b) 600,000 14,475,000
- -----------------------------------------------------------------
OpenVision Technologies, Inc.(b) 300,000 3,225,000
- -----------------------------------------------------------------
Optika Imaging Systems, Inc.(b) 70,000 472,500
- -----------------------------------------------------------------
OrCAD, Inc.(b)(c) 320,000 3,280,000
- -----------------------------------------------------------------
Par Technology Corp.(b) 350,000 4,812,500
- -----------------------------------------------------------------
Peerless Systems Corp.(b) 200,000 2,125,000
- -----------------------------------------------------------------
PeopleSoft, Inc.(b) 100,000 8,975,000
- -----------------------------------------------------------------
Physician Computer Network,
Inc.(b) 600,000 5,362,500
- -----------------------------------------------------------------
Pure Atria Corp.(b) 595,307 16,222,116
- -----------------------------------------------------------------
Radius, Inc.(b) 151 208
- -----------------------------------------------------------------
Renaissance Solutions, Inc.(b) 250,000 10,062,500
- -----------------------------------------------------------------
S3 Inc.(b) 500,000 9,437,500
- -----------------------------------------------------------------
Sapient Corp.(b) 20,100 929,625
- -----------------------------------------------------------------
Saville Systems Ireland PLC-ADR
(Ireland)(b) 300,000 12,937,500
- -----------------------------------------------------------------
Scopus Technology, Inc.(b) 56,200 2,163,700
- -----------------------------------------------------------------
Segue Software, Inc.(b)(c) 100,000 1,337,500
- -----------------------------------------------------------------
SQA, Inc.(b) 180,400 4,938,450
- -----------------------------------------------------------------
Sterling Commerce, Inc.(b) 159,260 4,479,187
- -----------------------------------------------------------------
Sterling Software, Inc.(b) 100,000 3,250,000
- -----------------------------------------------------------------
SunGard Data Systems Inc.(b) 300,000 12,825,000
- -----------------------------------------------------------------
Sykes Enterprises, Inc.(b) 60,900 2,831,850
- -----------------------------------------------------------------
Synopsys, Inc.(b) 6,700 301,500
- -----------------------------------------------------------------
Systemsoft Corp.(b) 200,000 5,650,000
- -----------------------------------------------------------------
Technology Solutions Co.(b) 337,500 13,120,312
- -----------------------------------------------------------------
Transition Systems, Inc.(b) 19,600 186,200
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Unify Corp.(b)(c) 500,000 $ 4,687,500
- -----------------------------------------------------------------
Vanstar Corp.(b) 300,000 7,125,000
- -----------------------------------------------------------------
Veritas Software Corp.(b) 360,000 18,180,000
- -----------------------------------------------------------------
Viasoft, Inc.(b) 175,000 8,618,750
- -----------------------------------------------------------------
Visio Corp.(b) 150,000 6,918,750
- -----------------------------------------------------------------
Wind River Systems(b) 250,000 10,625,000
- -----------------------------------------------------------------
Xylan Corp.(b) 175,000 7,000,000
- -----------------------------------------------------------------
411,761,526
- -----------------------------------------------------------------
CONSUMER NON-DURABLES-0.59%
Central Garden and Pet Co.(b) 275,000 6,496,875
- -----------------------------------------------------------------
Herbalife International, Inc. 152,000 3,021,000
- -----------------------------------------------------------------
USA Detergents, Inc.(b) 200,000 6,600,000
- -----------------------------------------------------------------
16,117,875
- -----------------------------------------------------------------
CONTAINERS-0.03%
Apogee Enterprises, Inc. 25,000 962,500
- -----------------------------------------------------------------
COSMETICS & TOILETRIES-0.69%
Helen of Troy Ltd.(b) 346,200 6,318,150
- -----------------------------------------------------------------
Nature's Sunshine Products, Inc. 250,000 5,531,250
- -----------------------------------------------------------------
NBTY, Inc.(b) 450,000 7,031,250
- -----------------------------------------------------------------
18,880,650
- -----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.90%
AMETEK, Inc. 200,000 3,975,000
- -----------------------------------------------------------------
BMC Industries, Inc. 500,000 14,812,500
- -----------------------------------------------------------------
Checkpoint Systems, Inc.(b) 100,000 2,237,500
- -----------------------------------------------------------------
Harman International Industries,
Inc. 126,000 6,473,250
- -----------------------------------------------------------------
Methode Electronics, Inc.-Class A 187,500 3,656,250
- -----------------------------------------------------------------
Perceptron, Inc.(b) 300,000 7,425,000
- -----------------------------------------------------------------
Sawtek Inc.(b) 81,900 2,477,475
- -----------------------------------------------------------------
SCI Systems, Inc.(b) 125,000 6,218,750
- -----------------------------------------------------------------
Sipex Corp.(b)(c) 480,000 12,660,000
- -----------------------------------------------------------------
Symbol Technologies, Inc.(b) 200,000 8,975,000
- -----------------------------------------------------------------
Technitrol, Inc. 6,700 221,937
- -----------------------------------------------------------------
ThermoQuest Corp.(b) 200,000 2,625,000
- -----------------------------------------------------------------
Ultrak, Inc.(b) 300,000 7,912,500
- -----------------------------------------------------------------
79,670,162
- -----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.20%
Imperial Credit Industries,
Inc.(b) 300,000 5,437,500
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.90%
Aames Financial Corp. 185,000 8,255,625
- -----------------------------------------------------------------
AmeriCredit Corp.(b) 100,000 1,900,000
- -----------------------------------------------------------------
Amresco, Inc.(b) 330,000 6,971,250
- -----------------------------------------------------------------
Cityscape Financial Corp.(b) 90,700 2,335,525
- -----------------------------------------------------------------
CMAC Investment Corp. 150,000 10,368,750
- -----------------------------------------------------------------
Concord EFS, Inc.(b) 500,000 14,500,000
- -----------------------------------------------------------------
Consumer Portfolio Services,
Inc.(b) 105,000 1,286,250
- -----------------------------------------------------------------
Credit Acceptance Corp.(b) 282,400 7,624,800
- -----------------------------------------------------------------
First Alliance Corp.(b) 110,000 2,997,500
- -----------------------------------------------------------------
IMC Mortgage Co.(b) 100,000 3,750,000
- -----------------------------------------------------------------
</TABLE>
FS-54
<PAGE> 156
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER
CREDIT)-(CONTINUED)
Metris Companies Inc.(b) 50,000 $ 1,187,500
- -----------------------------------------------------------------
Money Store, Inc. (The) 716,600 18,452,450
- -----------------------------------------------------------------
Olympic Financial Ltd.(b) 486,200 7,718,425
- -----------------------------------------------------------------
PMT Services, Inc.(b) 235,600 4,712,000
- -----------------------------------------------------------------
RAC Financial Group, Inc.(b) 161,000 9,660,000
- -----------------------------------------------------------------
Southern Pacific Funding Corp.(b) 147,800 4,655,700
- -----------------------------------------------------------------
WFS Financial, Inc.(b) 44,550 935,550
- -----------------------------------------------------------------
107,311,325
- -----------------------------------------------------------------
FINANCE (LEASING COMPANIES)-0.09%
Oxford Resources Corp.-Class A(b) 100,000 2,550,000
- -----------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.50%
Bay View Capital Corp. 200,000 7,900,000
- -----------------------------------------------------------------
TCF Financial Corp. 150,000 5,812,500
- -----------------------------------------------------------------
13,712,500
- -----------------------------------------------------------------
FOOD/PROCESSING-0.63%
Delta & Pine Land Co. 150,000 5,400,000
- -----------------------------------------------------------------
Richfood Holdings, Inc. 489,700 11,814,012
- -----------------------------------------------------------------
17,214,012
- -----------------------------------------------------------------
FUNERAL SERVICES-0.78%
Equity Corporation
International(b) 369,900 8,507,700
- -----------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 375,000 12,843,750
- -----------------------------------------------------------------
21,351,450
- -----------------------------------------------------------------
FURNITURE-0.30%
Ethan Allen Interiors, Inc. 234,400 8,379,800
- -----------------------------------------------------------------
GAMING-0.21%
Primadonna Resorts, Inc.(b) 350,000 5,643,750
- -----------------------------------------------------------------
HOMEBUILDING-0.32%
American Homestar Corp.(b) 150,000 3,187,500
- -----------------------------------------------------------------
Coachmen Industries, Inc. 200,000 5,600,000
- -----------------------------------------------------------------
8,787,500
- -----------------------------------------------------------------
HOTELS/MOTELS-0.37%
Prime Hospitality Corp.(b) 450,000 6,862,500
- -----------------------------------------------------------------
Suburban Lodges of America,
Inc.(b) 80,000 1,670,000
- -----------------------------------------------------------------
Wyndham Hotel Corp.(b) 83,300 1,582,700
- -----------------------------------------------------------------
10,115,200
- -----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.79%
Compdent Corp.(b) 200,000 6,875,000
- -----------------------------------------------------------------
CRA Managed Care, Inc.(b) 100,000 5,075,000
- -----------------------------------------------------------------
First Commonwealth, Inc.(b) 162,500 3,412,500
- -----------------------------------------------------------------
United Companies Financial Corp. 210,000 6,273,750
- -----------------------------------------------------------------
21,636,250
- -----------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-0.70%
CapMAC Holdings, Inc. 250,000 8,343,750
- -----------------------------------------------------------------
HCC Insurance Holdings, Inc. 250,000 6,375,000
- -----------------------------------------------------------------
Vesta Insurance Group, Inc. 178,500 4,574,063
- -----------------------------------------------------------------
19,292,813
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION-1.17%
Cannondale Corp.(b)(c) 400,000 $ 7,700,000
- -----------------------------------------------------------------
Lewis Galoob Toys, Inc.(b) 200,000 5,375,000
- -----------------------------------------------------------------
Penske Motorsports, Inc.(b) 100,000 3,425,000
- -----------------------------------------------------------------
Platinum Entertainment, Inc.(b) 200,000 2,050,000
- -----------------------------------------------------------------
West Marine, Inc.(b) 250,000 8,812,500
- -----------------------------------------------------------------
WMS Industries, Inc.(b) 200,000 4,900,000
- -----------------------------------------------------------------
32,262,500
- -----------------------------------------------------------------
MACHINE TOOLS-0.17%
Precision Castparts Corp. 100,000 4,675,000
- -----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.08%
Greenwich Air Services,
Inc.-Class B(b) 125,000 2,109,375
- -----------------------------------------------------------------
MEDICAL (DRUGS)-2.15%
Arbor Drugs, Inc. 200,000 4,525,000
- -----------------------------------------------------------------
Biovail Corp. International(b)
(Canada) 250,000 7,312,500
- -----------------------------------------------------------------
Cardinal Health, Inc. 225,000 17,662,500
- -----------------------------------------------------------------
Curative Technologies, Inc.(b) 200,000 4,550,000
- -----------------------------------------------------------------
Dura Pharmaceuticals, Inc.(b) 200,000 6,900,000
- -----------------------------------------------------------------
Express Scripts, Inc.-Class A(b) 200,000 5,825,000
- -----------------------------------------------------------------
Medicis Pharmaceutical Corp.(b) 150,000 7,537,500
- -----------------------------------------------------------------
Parexel International Corp.(b) 100,000 4,900,000
- -----------------------------------------------------------------
59,212,500
- -----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-10.87%
ABR Information Services, Inc.(b) 150,000 10,387,500
- -----------------------------------------------------------------
American HomePatient, Inc.(b) 337,350 8,012,062
- -----------------------------------------------------------------
American Medical Response,
Inc.(b) 250,000 7,500,000
- -----------------------------------------------------------------
American Oncology Resources,
Inc.(b) 71,900 575,200
- -----------------------------------------------------------------
Apria Healthcare Group, Inc.(b) 250,000 4,781,250
- -----------------------------------------------------------------
Arbor Health Care Co.(b)(c) 450,000 9,843,750
- -----------------------------------------------------------------
Atria Communities, Inc.(b) 250,000 3,156,250
- -----------------------------------------------------------------
ClinTrials Research Inc.(b) 62,500 2,320,313
- -----------------------------------------------------------------
EmCare Holdings, Inc.(b) 300,000 7,500,000
- -----------------------------------------------------------------
Enterprise Systems, Inc.(b) 125,000 2,015,625
- -----------------------------------------------------------------
Envoy Corp.(b) 350,000 12,862,500
- -----------------------------------------------------------------
FPA Medical Management, Inc.(b) 200,000 3,725,000
- -----------------------------------------------------------------
Genesis Health Ventures, Inc.(b) 250,000 5,718,750
- -----------------------------------------------------------------
Health Care and Retirement
Corp.(b) 525,000 12,928,125
- -----------------------------------------------------------------
Health Management Associates,
Inc.-Class A(b) 737,662 16,228,564
- -----------------------------------------------------------------
HEALTHSOUTH Corp. (b) 675,530 25,332,375
- -----------------------------------------------------------------
Hologic, Inc.(b) 183,000 4,163,250
- -----------------------------------------------------------------
Lincare Holdings, Inc.(b) 200,000 7,500,000
- -----------------------------------------------------------------
MedPartners, Inc.(b) 150,000 3,168,750
- -----------------------------------------------------------------
Multicare Co., Inc.(b) 375,000 6,750,000
- -----------------------------------------------------------------
Myriad Genetics, Inc.(b) 100,000 2,475,000
- -----------------------------------------------------------------
NCS HealthCare, Inc.-Class
A(b)(c) 200,000 6,075,000
- -----------------------------------------------------------------
OccuSystems, Inc.(b) 287,200 7,862,100
- -----------------------------------------------------------------
OrNda HealthCorp.(b) 400,000 10,900,000
- -----------------------------------------------------------------
Orthodontic Centers of America,
Inc.(b) 625,000 8,984,375
- -----------------------------------------------------------------
Oxford Health Plans, Inc.(b) 300,000 13,650,000
- -----------------------------------------------------------------
</TABLE>
FS-55
<PAGE> 157
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Pediatrix Medical Group, Inc.(b) 220,000 $ 8,662,500
- -----------------------------------------------------------------
PhyCor, Inc.(b) 187,500 5,812,500
- -----------------------------------------------------------------
Physicians Resource Group,
Inc.(b) 303,200 8,186,400
- -----------------------------------------------------------------
Quorum Health Group, Inc.(b) 300,000 8,100,000
- -----------------------------------------------------------------
Renal Care Group, Inc.(b) 200,000 7,400,000
- -----------------------------------------------------------------
Renal Treatment Centers, Inc.(b) 200,000 5,350,000
- -----------------------------------------------------------------
RoTech Medical Corp.(b) 650,000 10,400,000
- -----------------------------------------------------------------
Sunrise Assisted Living, Inc.(b) 94,800 2,180,400
- -----------------------------------------------------------------
Total Renal Care Holdings,
Inc.(b) 150,000 5,850,000
- -----------------------------------------------------------------
Universal Health Services,
Inc.-Class B(b) 400,000 10,000,000
- -----------------------------------------------------------------
UroCor, Inc.(b) 142,800 1,677,900
- -----------------------------------------------------------------
Vencor, Inc.(b) 400,000 11,850,000
- -----------------------------------------------------------------
Veterinary Centers of America,
Inc.(b) 500,000 9,187,500
- -----------------------------------------------------------------
299,072,939
- -----------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-4.35%
Advanced Technology Laboratories,
Inc.(b) 150,000 4,575,000
- -----------------------------------------------------------------
Boston Scientific Corp.(b) 47,115 2,561,878
- -----------------------------------------------------------------
Capstone Pharmacy Services,
Inc.(b) 350,000 4,090,625
- -----------------------------------------------------------------
CardioThoracic Systems, Inc.(b) 125,000 2,375,000
- -----------------------------------------------------------------
Dentsply International, Inc. 300,000 12,637,500
- -----------------------------------------------------------------
ESC Medical Systems Ltd.(b)
(Israel) 47,850 1,321,856
- -----------------------------------------------------------------
General Surgical Innovations,
Inc.(b) 301,900 2,188,775
- -----------------------------------------------------------------
Gulf South Medical Supply,
Inc.(b) 317,200 6,978,400
- -----------------------------------------------------------------
Henry Schein, Inc.(b) 200,000 7,950,000
- -----------------------------------------------------------------
IRIDEX Corp.(b)(c) 150,000 1,200,000
- -----------------------------------------------------------------
Lunar Corp.(b) 100,000 3,112,500
- -----------------------------------------------------------------
Mentor Corp. 200,000 4,425,000
- -----------------------------------------------------------------
MiniMed, Inc.(b) 150,000 3,937,500
- -----------------------------------------------------------------
National Dentex Corp.(b)(c) 185,000 3,491,875
- -----------------------------------------------------------------
Omnicare, Inc. 400,000 10,900,000
- -----------------------------------------------------------------
Patterson Dental Co.(b) 400,000 11,200,000
- -----------------------------------------------------------------
Physician Sales & Service,
Inc.(b) 200,000 4,250,000
- -----------------------------------------------------------------
ResMed, Inc.(b) 275,000 4,606,250
- -----------------------------------------------------------------
Suburban Ostomy Supply Co.,
Inc.(b)(c) 556,900 6,787,219
- -----------------------------------------------------------------
Sybron International Corp.(b) 600,000 17,475,000
- -----------------------------------------------------------------
Target Therapeutics, Inc.(b) 100,000 3,700,000
- -----------------------------------------------------------------
119,764,378
- -----------------------------------------------------------------
METALS-0.39%
Oregon Metallurgical Corp.(b) 150,000 4,725,000
- -----------------------------------------------------------------
Rental Service Corp.(b) 103,600 2,382,800
- -----------------------------------------------------------------
Shaw Group, Inc.(b) 150,000 3,693,750
- -----------------------------------------------------------------
10,801,550
- -----------------------------------------------------------------
OFFICE AUTOMATION-0.34%
Danka Business Systems PLC-ADR
(United Kingdom) 237,900 9,426,788
- -----------------------------------------------------------------
OFFICE PRODUCTS-0.55%
Daisytek International
Corp.(b)(c) 394,700 15,097,275
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-0.75%
Benton Oil & Gas Co.(b) 325,000 $ 7,962,500
- -----------------------------------------------------------------
Devon Energy Corp. 300,000 10,462,500
- -----------------------------------------------------------------
Forasol-Foramer N.V.(b) (France) 125,000 2,156,250
- -----------------------------------------------------------------
20,581,250
- -----------------------------------------------------------------
OIL & GAS (SERVICES)-1.15%
Camco International, Inc. 225,000 8,718,750
- -----------------------------------------------------------------
Energy Ventures, Inc.(b) 261,000 11,484,000
- -----------------------------------------------------------------
SEACOR Holdings Inc.(b) 100,000 5,400,000
- -----------------------------------------------------------------
Veritas DGC, Inc.(b) 300,000 6,150,000
- -----------------------------------------------------------------
31,752,750
- -----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.41%
Marine Drilling Co., Inc.(b) 458,300 6,358,913
- -----------------------------------------------------------------
Varco International, Inc.(b) 250,000 4,937,500
- -----------------------------------------------------------------
11,296,413
- -----------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.14%
Schweitzer-Mauduit International,
Inc. 125,000 3,843,750
- -----------------------------------------------------------------
POLLUTION CONTROL-2.19%
ATC Environmental, Inc.(b) 300,000 3,262,500
- -----------------------------------------------------------------
GTS Duratek, Inc.(b) 150,000 1,743,750
- -----------------------------------------------------------------
United Waste Systems, Inc.(b) 398,700 13,705,313
- -----------------------------------------------------------------
US Filter Corp.(b) 450,000 15,525,000
- -----------------------------------------------------------------
USA Waste Services, Inc.(b) 810,000 25,920,000
- -----------------------------------------------------------------
60,156,563
- -----------------------------------------------------------------
PUBLISHING-0.53%
Gartner Group, Inc.(b) 253,600 7,798,200
- -----------------------------------------------------------------
World Color Press, Inc.(b) 300,000 6,712,500
- -----------------------------------------------------------------
14,510,700
- -----------------------------------------------------------------
RESTAURANTS-1.97%
Apple South, Inc. 499,962 5,874,554
- -----------------------------------------------------------------
Foodmaker, Inc.(b) 600,000 5,850,000
- -----------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(b) 275,000 5,637,500
- -----------------------------------------------------------------
Lone Star Steakhouse & Saloon,
Inc.(b) 175,000 4,484,375
- -----------------------------------------------------------------
Papa John's International,
Inc.(b) 150,000 7,462,500
- -----------------------------------------------------------------
Planet Hollywood International,
Inc.-Class A(b) 200,000 4,150,000
- -----------------------------------------------------------------
Showbiz Pizza Time, Inc.(b) 274,600 5,080,100
- -----------------------------------------------------------------
Sonic Corp.(b) 400,000 9,100,000
- -----------------------------------------------------------------
Starbucks Corp.(b) 200,000 6,500,000
- -----------------------------------------------------------------
54,139,029
- -----------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.26%
Quality Food Centers, Inc.(b) 200,000 7,300,000
- -----------------------------------------------------------------
RETAIL (STORES)-11.45%
Barnett, Inc.(b) 82,200 1,941,975
- -----------------------------------------------------------------
Bed Bath & Beyond, Inc.(b) 200,000 5,050,000
- -----------------------------------------------------------------
Blyth Industries, Inc.(b) 329,700 12,817,088
- -----------------------------------------------------------------
Buckle, Inc. (The)(b) 170,000 4,335,000
- -----------------------------------------------------------------
CDW Computer Centers, Inc.(b) 150,000 9,440,625
- -----------------------------------------------------------------
Claire's Stores, Inc. 250,000 4,250,000
- -----------------------------------------------------------------
</TABLE>
FS-56
<PAGE> 158
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Compucom Systems, Inc.(b) 800,000 $ 7,800,000
- -----------------------------------------------------------------
CompUSA, Inc.(b) 250,000 11,562,500
- -----------------------------------------------------------------
Corporate Express, Inc.(b) 200,000 6,525,000
- -----------------------------------------------------------------
Dollar Tree Stores, Inc.(b) 175,000 6,606,250
- -----------------------------------------------------------------
Duty Free International, Inc. 400,000 6,400,000
- -----------------------------------------------------------------
Eagle Hardware & Garden, Inc.(b) 300,000 8,587,500
- -----------------------------------------------------------------
Fila Holding S.p.A.-ADR (Italy) 115,000 8,280,000
- -----------------------------------------------------------------
Finish Line, Inc. (The)-Class
A(b) 161,400 6,859,500
- -----------------------------------------------------------------
Gadzooks, Inc.(b) 200,050 5,801,450
- -----------------------------------------------------------------
Gargoyles, Inc.(b) 100,000 1,325,000
- -----------------------------------------------------------------
Global DirectMail Corp.(b) 250,000 12,312,500
- -----------------------------------------------------------------
Gymboree Corp.(b) 391,000 12,218,750
- -----------------------------------------------------------------
Inacom Corp.(b) 200,000 6,325,000
- -----------------------------------------------------------------
Just for Feet, Inc.(b) 300,000 7,762,500
- -----------------------------------------------------------------
Loehmann's Holdings, Inc.(b)(c) 500,000 13,437,500
- -----------------------------------------------------------------
Marks Bros. Jewelers, Inc.(b)(c) 275,000 6,393,750
- -----------------------------------------------------------------
Men's Wearhouse, Inc. (The)(b) 321,000 6,620,625
- -----------------------------------------------------------------
Meyer (Fred), Inc.(b) 200,000 7,025,000
- -----------------------------------------------------------------
Micro Warehouse, Inc.(b) 500,000 11,500,000
- -----------------------------------------------------------------
MSC Industrial Direct Co.,
Inc.-Class A(b) 200,000 7,400,000
- -----------------------------------------------------------------
Neiman Marcus Group, Inc.
(The)(b) 150,000 4,893,750
- -----------------------------------------------------------------
99 Cents Only Stores(b) 100,000 1,475,000
- -----------------------------------------------------------------
O'Reilly Automotive, Inc.(b) 200,000 7,075,000
- -----------------------------------------------------------------
Oakley, Inc.(b) 700,000 10,412,500
- -----------------------------------------------------------------
Performance Food Group Co.(b)(c) 458,750 7,053,281
- -----------------------------------------------------------------
Petco Animal Supplies, Inc.(b) 427,500 10,046,250
- -----------------------------------------------------------------
Pier 1 Imports, Inc. 525,000 7,350,000
- -----------------------------------------------------------------
Rexall Sundown, Inc.(b) 150,000 4,068,750
- -----------------------------------------------------------------
Sports Authority, Inc. (The)(b) 492,500 11,943,125
- -----------------------------------------------------------------
Stein Mart, Inc.(b) 200,000 3,575,000
- -----------------------------------------------------------------
Sunglass Hut International,
Inc.(b) 132,200 1,173,275
- -----------------------------------------------------------------
Tech Data Corp.(b) 800,000 20,600,000
- -----------------------------------------------------------------
Wet Seal, Inc.-Class A(b) 265,000 8,347,500
- -----------------------------------------------------------------
Williams-Sonoma, Inc.(b) 250,000 6,875,000
- -----------------------------------------------------------------
Wilmar Industries, Inc.(b) 150,000 3,225,000
- -----------------------------------------------------------------
Zale Corp.(b) 425,000 8,234,375
- -----------------------------------------------------------------
314,925,319
- -----------------------------------------------------------------
SCHOOLS-0.08%
Children's Comprehensive
Services, Inc.(b) 150,000 2,212,500
- -----------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.71%
Dynatech Corp.(b) 71,800 3,549,613
- -----------------------------------------------------------------
Input/Output, Inc.(b) 400,000 11,900,000
- -----------------------------------------------------------------
Thermo Optek Corp.(b) 350,000 4,200,000
- -----------------------------------------------------------------
19,649,613
- -----------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.08%
Cornell Corrections, Inc.(b) 200,000 2,100,000
- -----------------------------------------------------------------
SEMICONDUCTORS-1.83%
Actel Corp.(b) 166,700 2,979,763
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-(CONTINUED)
Chips & Technologies, Inc.(b) 400,000 $ 7,950,000
- -----------------------------------------------------------------
Computer Products, Inc.(b) 550,000 10,862,500
- -----------------------------------------------------------------
HADCO Corp.(b) 230,000 6,986,250
- -----------------------------------------------------------------
Sanmina Corp.(b) 250,000 11,437,500
- -----------------------------------------------------------------
Vitesse Semiconductor Corp.(b) 75,000 2,390,625
- -----------------------------------------------------------------
VLSI Technology, Inc.(b) 450,000 7,762,500
- -----------------------------------------------------------------
50,369,138
- -----------------------------------------------------------------
SHOES & RELATED APPAREL-0.70%
Vans, Inc.(b) 600,000 9,975,000
- -----------------------------------------------------------------
Wolverine World Wide, Inc. 375,000 9,281,250
- -----------------------------------------------------------------
19,256,250
- -----------------------------------------------------------------
TELECOMMUNICATIONS-6.18%
ADC Telecommunications, Inc.(b) 300,000 20,512,500
- -----------------------------------------------------------------
Allen Group, Inc. 132,000 2,095,500
- -----------------------------------------------------------------
Andrew Corp.(b) 450,000 21,937,500
- -----------------------------------------------------------------
Anicom, Inc.(b) 400,000 3,600,000
- -----------------------------------------------------------------
Aspect Telecommunications
Corp.(b) 125,000 7,437,500
- -----------------------------------------------------------------
Billing Information Concepts(b) 350,000 9,143,750
- -----------------------------------------------------------------
Brightpoint, Inc.(b)(c) 499,950 12,498,750
- -----------------------------------------------------------------
LCI International, Inc.(b) 300,000 9,562,500
- -----------------------------------------------------------------
P-COM, Inc.(b) 100,000 2,200,000
- -----------------------------------------------------------------
PairGain Technologies, Inc.(b) 386,500 26,620,187
- -----------------------------------------------------------------
Precision Response Corp.(b) 50,000 1,787,500
- -----------------------------------------------------------------
Premiere Technologies, Inc.(b) 50,200 815,750
- -----------------------------------------------------------------
Premisys Communications, Inc.(b) 200,000 10,000,000
- -----------------------------------------------------------------
Proxim, Inc.(b) 100,000 2,275,000
- -----------------------------------------------------------------
Tellabs, Inc.(b) 100,000 8,512,500
- -----------------------------------------------------------------
Teltrend, Inc.(b) 300,000 9,900,000
- -----------------------------------------------------------------
TESSCO Technologies, Inc.(b)(c) 300,000 11,850,000
- -----------------------------------------------------------------
Tollgrade Communications, Inc.(b) 99,000 2,574,000
- -----------------------------------------------------------------
U.S. Long Distance Corp.(b) 307,500 2,575,313
- -----------------------------------------------------------------
United States Satellite
Broadcasting Co., Inc.(b) 123,600 1,993,050
- -----------------------------------------------------------------
Xpedite Systems, Inc.(b) 100,000 2,050,000
- -----------------------------------------------------------------
169,941,300
- -----------------------------------------------------------------
TEXTILES-2.43%
Designer Holdings Ltd.(b) 350,000 6,693,750
- -----------------------------------------------------------------
Mohawk Industries, Inc.(b) 350,000 8,487,500
- -----------------------------------------------------------------
Nautica Enterprises, Inc.(b) 450,000 13,837,500
- -----------------------------------------------------------------
Springs Industries, Inc.-Class A 150,000 6,768,750
- -----------------------------------------------------------------
St. John Knits, Inc. 250,000 11,437,500
- -----------------------------------------------------------------
Tommy Hilfiger Corp.(b) 250,000 13,000,000
- -----------------------------------------------------------------
WestPoint Stevens, Inc.(b) 250,000 6,656,250
- -----------------------------------------------------------------
66,881,250
- -----------------------------------------------------------------
TRANSPORTATION-0.51%
Hub Group, Inc.(b)(c) 400,000 8,900,000
- -----------------------------------------------------------------
Rural/Metro Corp.(b) 100,000 3,650,000
- -----------------------------------------------------------------
</TABLE>
FS-57
<PAGE> 159
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRANSPORTATION-(CONTINUED)
Trico Marine Services, Inc.(b) 40,800 $ 1,438,200
- -----------------------------------------------------------------
13,988,200
- -----------------------------------------------------------------
Total Common Stocks 2,540,073,704
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-1.98%
U.S. TREASURY BILLS(d)
5.046%, 01/02/97(e) $ 55,000,000 54,550,650
- -----------------------------------------------------------------
Total U.S. Treasury
Securities 54,550,650
- -----------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-5.39%(f)
Daiwa Securities America, Inc.,
5.53% 11/01/96(g) $ 222,124 $ 222,124
- -----------------------------------------------------------------
Dresdner Securities (USA), Inc.,
5.54% 11/01/96(h) 47,000,000 47,000,000
- -----------------------------------------------------------------
SBC Capital Markets, Inc., 5.55%
11/01/96(i) 101,000,000 101,000,000
- -----------------------------------------------------------------
Total Repurchase Agreements 148,222,124
- -----------------------------------------------------------------
TOTAL INVESTMENTS-100.25% 2,757,522,291
- -----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(0.25%) (6,958,348)
- -----------------------------------------------------------------
NET ASSETS-100.00% $ 2,750,563,943
=================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31,1996 was
$11,978,513 which represented 0.44% of the Fund's net assets.
(b) Non-income producing security.
(c) 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 October
31, 1996 was $153,533,350 which represented 5.58% of the Fund's net assets.
(d) U.S. Treasury bills are traded on 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.
(e) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 6.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 08/15/23.
(h) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,030,778. Collateralized by $198,651,000 U.S. Treasury obligations,
4.75% to 9.25% due 11/30/97 to 06/30/99.
(i) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collateralized by $691,506,000 U.S. Treasury obligations, 0%
to 9.125% due 11/30/96 to 10/31/01.
See Notes to Financial Statements.
FS-58
<PAGE> 160
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,102,644,643) $2,757,522,291
- ---------------------------------------------------------
Cash 391,114
- ---------------------------------------------------------
Receivables for:
Investments sold 13,844,684
- ---------------------------------------------------------
Capital stock sold 13,253,569
- ---------------------------------------------------------
Dividends and interest 222,317
- ---------------------------------------------------------
Variation margin 568,550
- ---------------------------------------------------------
Investment for deferred compensation
plan 23,229
- ---------------------------------------------------------
Other assets 130,315
- ---------------------------------------------------------
Total assets 2,785,956,069
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 25,232,620
- ---------------------------------------------------------
Capital stock reacquired 7,170,183
- ---------------------------------------------------------
Deferred compensation 23,229
- ---------------------------------------------------------
Accrued advisory fees 1,548,580
- ---------------------------------------------------------
Accrued administrative service fees 8,365
- ---------------------------------------------------------
Accrued distribution fees 608,714
- ---------------------------------------------------------
Accrued directors fees 1,339
- ---------------------------------------------------------
Accrued transfer agent fees 509,702
- ---------------------------------------------------------
Accrued operating expenses 289,394
- ---------------------------------------------------------
Total liabilities 35,392,126
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $2,750,563,943
- ---------------------------------------------------------
Capital stock, $.001 par value per
share:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 61,224,358
- ---------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 44.93
- ---------------------------------------------------------
OFFERING PRICE PER SHARE:
(Net asset value of $44.93 divided by
94.50%) $ 47.54
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 6,964,425
- --------------------------------------------------------
Dividends (net of $26,363 foreign
withholding tax) 1,998,154
- --------------------------------------------------------
Total investment income 8,962,579
- --------------------------------------------------------
EXPENSES:
Advisory fees 16,492,564
- --------------------------------------------------------
Custodian fees 244,961
- --------------------------------------------------------
Directors' fees 21,529
- --------------------------------------------------------
Distribution fees 6,492,025
- --------------------------------------------------------
Administrative services fees 97,857
- --------------------------------------------------------
Transfer agent fees 4,108,892
- --------------------------------------------------------
Other 1,248,996
- --------------------------------------------------------
Total expenses 28,706,824
- --------------------------------------------------------
Less: Expenses paid indirectly (40,269)
- --------------------------------------------------------
Net expenses 28,666,555
- --------------------------------------------------------
Net investment income (loss) (19,703,976)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FUTURES
CONTRACTS AND FOREIGN CURRENCIES:
Net realized gain on sales of:
Investment securities 124,457,350
- --------------------------------------------------------
Futures contracts 17,081,337
- --------------------------------------------------------
141,538,687
- --------------------------------------------------------
Unrealized appreciation (depreciation)
of:
Investment securities 214,736,369
- --------------------------------------------------------
Futures contracts (3,538,650)
- --------------------------------------------------------
Foreign currencies (42)
- --------------------------------------------------------
211,197,677
- --------------------------------------------------------
Net gain on investment securities,
futures contracts and foreign
currencies 352,736,364
- --------------------------------------------------------
Net increase in net assets resulting from
operations $333,032,388
- --------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-59
<PAGE> 161
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (19,703,976) $ (2,318,274)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities, futures contracts and foreign
currencies 141,538,687 52,290,438
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities, futures contracts and foreign
currencies 211,197,677 314,756,271
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 333,032,388 364,728,435
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment securities (54,512,548) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from capital stock transactions 226,490,173 1,193,587,768
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 505,010,013 1,558,316,203
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,245,553,930 687,237,727
- ---------------------------------------------------------------------------------------------------------------------------
End of period $2,750,563,943 $2,245,553,930
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,957,915,109 $1,748,790,238
- ---------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (44,163) (16,714)
- ---------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities, futures contracts
and foreign currencies 133,729,499 49,014,585
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, futures contracts and foreign
currencies 658,963,498 447,765,821
- ---------------------------------------------------------------------------------------------------------------------------
$2,750,563,943 $2,245,553,930
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Growth Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six diversified
portfolios: AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund, AIM Constellation Fund and AIM Weingarten
Fund. Matters affecting each portfolio or class will be voted on exclusively by
the shareholders of such portfolio or class. The Fund has temporarily
discontinued public sales of its shares to new investors. The Fund is a
diversified portfolio which seeks to achieve long-term growth of capital by
investing primarily in common stocks, convertible bonds, convertible preferred
stocks and warrants of companies which in the opinion of the Fund's investment
advisor are expected to achieve earnings growth over time at a rate in excess of
15% per year. The assets, liabilities and operations of each portfolio are
accounted for separately.
Information presented in these financial statements pertains only to the Fund.
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. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last price on the exchange
where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible bonds are valued at
the mean between the closing bid and asked prices obtained from a
broker-dealer. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations that are issued or guaranteed by the U.S. Treasury
are valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as yield,
type of issue, coupon rate and maturity date. Securities for which market
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
FS-60
<PAGE> 162
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are recorded on a trade date basis. Realized gains or losses on
sales are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1996,
$2,311,225 was reclassified from paid-in capital to undistributed net
realized gains as a result of differing book/tax treatments. In addition,
$19,676,527 was reclassified from undistributed net investment income (loss)
to paid-in capital as a result of a net operating tax loss. Net assets of the
Fund were unaffected by the reclassifications discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
E. Foreign Currency Transactions--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward 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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the fund's average daily net assets in excess of $150 million.
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, 1996, AIM was
reimbursed $97,857 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the year ended October 31, 1996,
AFS was paid $2,047,282 for such services.
The Fund received reductions in transfer agency fees of $37,293 from dividends
received on balances in cash management accounts. In addition, the Fund incurred
expenses of $2,976 from pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $40,269 during the year ended October
31, 1996.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. The Company has adopted a plan pursuant to rule 12b-1 under the 1940 Act
(the "Plan"), whereby the Fund pays to AIM Distributors an annual rate of 0.25%
of the Fund's average daily net assets as compensation for services related to
the sales and distribution of the Fund's shares. The Plan provides that payments
to dealers and financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions, may be characterized as
a service fee. Any amounts not paid as a service fee under the Plan would
constitute an assets-based sales charge. The Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Company with respect to the Fund's shares. During the year ended
October 31, 1996, the Fund paid AIM Distributors $6,492,025 as compensation
under the Plan.
AIM Distributors received commissions of $2,111,788 from sales of shares of
the Fund's capital stock during the year ended October 31, 1996. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of capital stock. During the year ended
October 31, 1996, AIM Distributors received $31,306 in contingent
FS-61
<PAGE> 163
deferred sales charges imposed on redemptions of the Fund's capital stock.
Certain officers and directors of the Company are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended October 31, 1996, the Fund paid legal fees of $12,003
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $14,900,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended October 31, 1996 were $2,207,324,806
and $1,964,387,494, respectively.
The amount of unrealized appreciation (depreciation) of investment securities as
of October 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $740,464,004
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (86,292,810)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $654,171,194
==========================================================
Cost of investment for tax purposes is
$2,103,351,097.
</TABLE>
NOTE 5-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-FUTURES CONTRACTS
On October 31, 1996, $2,306,000 par value U.S. Treasury obligations were pledged
as collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1996:
(Contracts -- $500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
-------------
<S> <C>
S&P 500 Index/166 Contracts/Dec 96/Buy $4,085,850
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold 30,538,437 $ 1,334,476,880 53,971,580 $1,912,251,434
- --------------------------------------------------------------------
Issued as
reinvestment
of
dividends 1,291,013 49,897,557 -- --
- --------------------------------------------------------------------
Reacquired (26,568,998) (1,157,884,264) (22,228,120) (718,663,666)
- --------------------------------------------------------------------
5,260,452 $ 226,490,173 31,743,460 $1,193,587,768
====================================================================
</TABLE>
FS-62
<PAGE> 164
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the three-year period ended October 31,
1996, the ten month period ended October 31, 1993 and each of the years in the
six-year period ended December 31, 1992.
<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
--------------------------------------------------- ------------------------------
1996 1995 1994 1993 1992(a) 1991 1990
---------- ---------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 40.13 $ 28.37 $ 23.85 $ 18.52 $ 16.06 $ 11.85 $ 13.30
- ------------------------------------ ---------- ---------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.32) (0.04) (0.05) (0.02) (0.03) (0.04) 0.08
---------- ---------- -------- -------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 6.09 11.80 4.57 5.35 3.41 7.29 (0.95)
---------- ---------- -------- -------- ------- ------- -------
Total from investment
operations 5.77 11.76 4.52 5.33 3.38 7.25 (0.87)
---------- ---------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net investment
income -- -- -- -- -- -- (0.09)
---------- ---------- -------- -------- ------- ------- -------
Distributions from capital gains (0.97) -- -- -- (0.92) (3.04) (0.49)
---------- ---------- -------- -------- ------- ------- -------
Total distributions (0.97) -- -- -- (0.92) (3.04) (0.58)
---------- ---------- -------- -------- ------- ------- -------
Net asset value, end of period $ 44.93 $ 40.13 $ 28.37 $ 23.85 $ 18.52 $ 16.06 $ 11.85
========== ========== ======== ======== ======= ======= =======
Total return(b) 14.77% 41.45% 18.96% 28.78% 21.34% 63.90% (6.50)%
========== ========== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $2,750,564 $2,245,554 $687,238 $217,256 $38,238 $16,218 $ 9,234
========== ========== ======== ======== ======= ======= =======
Ratio of expenses to average
net assets(c) 1.11 (e)(f) 1.08% 1.07% 1.00%(g) 1.25% 1.25% 1.25%
========== ========== ======== ======== ======= ======= =======
Ratio of net investment income (loss)
to average net assets(d) (0.76)%(e) (0.19)% (0.26)% (0.24)%(g) (0.59)% (0.31)% 0.62%
========== ========== ======== ======== ======= ======= =======
Portfolio turnover rate 79% 52% 75% 61% 164% 165% 137%
========== ========== ======== ======== ======= ======= =======
Average broker commission rate(h) $ 0.0545 N/A N/A N/A N/A N/A N/A
========== ========== ======== ======== ======= ======= =======
<CAPTION>
1989 1988 1987
------- ------- -------
<S> <C<C> <C> <C>
Net asset value, beginning of period $ 11.07 $ 9.86 $ 12.10
- ------------------------------------ ------- ------- -------
Income from investment operations:
Net investment income (loss) 0.03 0.05 --
------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 2.28 1.21 (1.38)
------- ------- -------
Total from investment
operations 2.31 1.26 (1.38)
------- ------- -------
Less distributions:
Dividends from net investment
income (0.03) (0.05) --
------- ------- -------
Distributions from capital gains (0.05) -- (0.86)
------- ------- -------
Total distributions (0.08) (0.05) (0.86)
------- ------- -------
Net asset value, end of period $ 13.30 $ 11.07 $ 9.86
======= ======= =======
Total return(b) 20.89% 12.77% (11.52)%
======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $11,712 $12,793 $13,991
======= ======= =======
Ratio of expenses to average
net assets(c) 1.25% 1.22% 1.20%
======= ======= =======
Ratio of net investment income (loss)
to average net assets(d) 0.24% 0.38% 0.01%
======= ======= =======
Portfolio turnover rate 69% 56% 118%
======= ======= =======
Average broker commission rate(h) N/A N/A N/A
======= ======= =======
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
and expense reimbursements were 1.15%, 1.09%, 1.17% (annualized), 1.65%,
1.83%, 1.99%, 1.80%, 1.56% and 1.29% for 1995-87, respectively.
(d) Ratios of net investment income (loss) to average net assets prior to
reduction of advisory fees and expense reimbursements were (0.26)%, (0.28)%,
(0.41)% (annualized), (0.99)%, (0.89)%, (0.11)%, (0.31)%, 0.04% and (0.08)%
for 1995-87, respectively.
(e) Ratios are based on average net assets of $2,596,810,191.
(f) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been 1.10%.
(g) Annualized.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO PLC announced the execution of an agreement and plan of merger pursuant
to which AIM Management will be merged with and into a direct wholly-owned
subsidiary of INVESCO PLC. AIM Management is the parent company of the Fund's
advisor. The merger is conditional on, among other things, approval by the
shareholders of INVESCO PLC and AIM Management and the shareholders of the AIM
funds and the mutual funds managed by INVESCO PLC, and is expected to take place
during the first quarter of 1997.
NOTE 10-LEGAL PROCEEDINGS
A claim, Saltzberg v. AIM Equity Funds, Inc., et al., was filed in Southern
District Court in Texas in October 1996 against AIM and certain other
subsidiaries of AIM Management. The claim was instituted under section 36(b) of
the Investment Company Act of 1940 and seeks to recover damages allegedly
suffered by the Fund in connection with fees paid for marketing and shareholder
services after the Fund was closed to new investors. AIM Management is
investigating whether there is any basis at all for this claim and intends to
defend it vigorously.
FS-63
<PAGE> 165
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM Capital Development Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Capital Development Fund (a series portfolio of AIM Equity Funds, Inc.),
including the schedule of investments, as of October 31, 1996, the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the period June 17, 1996 (date operations commenced)
through October 31, 1996. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
AIM Capital Development Fund as of October 31, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for the
period June 17, 1996 (date operations commenced) through October 31, 1996, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-64
<PAGE> 166
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-87.58%
ADVERTISING/BROADCASTING-3.57%
Alliance Communications Corp.-Class
B(a) 60,000 $ 525,000
- ----------------------------------------------------------------
Cox Radio, Inc.-Class A(a) 71,200 1,290,500
- ----------------------------------------------------------------
Eagle River Interactive, Inc.(a) 27,000 253,125
- ----------------------------------------------------------------
Evergreen Media Corp.-Class A(a) 1,800 48,600
- ----------------------------------------------------------------
Film Roman, Inc.(a) 70,800 544,275
- ----------------------------------------------------------------
Heritage Media Corp.(a) 8,400 128,100
- ----------------------------------------------------------------
Lamar Advertising Co.(a) 33,900 932,250
- ----------------------------------------------------------------
Metro Networks, Inc.(a) 61,600 1,247,400
- ----------------------------------------------------------------
SFX Broadcasting, Inc.-Class A(a) 1,200 51,600
- ----------------------------------------------------------------
Snyder Communications, Inc.(a) 73,400 1,431,300
- ----------------------------------------------------------------
Universal Outdoor Holdings, Inc.(a) 50,000 1,468,750
- ----------------------------------------------------------------
Univision Communications, Inc.(a) 54,500 1,839,375
- ----------------------------------------------------------------
9,760,275
- ----------------------------------------------------------------
AEROSPACE/DEFENSE-0.63%
Gulfstream Aerospace Corp.(a) 69,200 1,634,850
- ----------------------------------------------------------------
Tracor, Inc.(a) 3,900 88,725
- ----------------------------------------------------------------
1,723,575
- ----------------------------------------------------------------
AIRLINES-0.57%
Aviation Sales Co.(a) 20,000 390,000
- ----------------------------------------------------------------
Eagle USA Airfreight, Inc.(a) 2,400 65,400
- ----------------------------------------------------------------
Sabre Group Holdings Inc.(a) 36,500 1,113,250
- ----------------------------------------------------------------
1,568,650
- ----------------------------------------------------------------
APPLIANCES-0.20%
Service Experts, Inc.(a) 21,800 555,900
- ----------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.38%
Cross-Continent Auto Retailers,
Inc.(a) 28,500 730,313
- ----------------------------------------------------------------
Rush Enterprises, Inc.(a) 25,000 309,375
- ----------------------------------------------------------------
1,039,688
- ----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.97%
United Auto Group, Inc.(a) 77,400 2,660,625
- ----------------------------------------------------------------
BANKING-1.02%
AmSouth Bancorporation 6,000 278,250
- ----------------------------------------------------------------
Banknorth Group, Inc. 16,000 552,000
- ----------------------------------------------------------------
Cullen/Frost Bankers, Inc. 8,000 240,500
- ----------------------------------------------------------------
Hibernia Corp. 20,000 222,500
- ----------------------------------------------------------------
Marshall & Ilsley Corp. 46,500 1,493,813
- ----------------------------------------------------------------
2,787,063
- ----------------------------------------------------------------
BEVERAGES-0.35%
Diedrich Coffee, Inc.(a) 94,700 970,675
- ----------------------------------------------------------------
BUILDING MATERIALS-0.50%
Juno Lighting, Inc. 65,000 1,011,562
- ----------------------------------------------------------------
LSI Industries, Inc. 35,000 350,000
- ----------------------------------------------------------------
1,361,562
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BUILDING MATERIALS (TOOLS)-0.16%
Regal-Beloit Corp. 24,200 $ 429,550
- ----------------------------------------------------------------
BUSINESS SERVICES-4.33%
Abacus Direct Corp.(a) 57,800 1,517,250
- ----------------------------------------------------------------
Alliance Capital Management L.P. 3,000 83,625
- ----------------------------------------------------------------
American List Corp. 25,000 687,500
- ----------------------------------------------------------------
Claremont Technology Group, Inc.(a) 13,000 396,500
- ----------------------------------------------------------------
Copart, Inc.(a) 3,900 71,663
- ----------------------------------------------------------------
CUC International, Inc.(a) 46,500 1,139,250
- ----------------------------------------------------------------
Donnelley Enterprise Solutions
Inc.(a) 50,400 1,260,000
- ----------------------------------------------------------------
HealthPlan Services Corp.(a) 32,500 589,063
- ----------------------------------------------------------------
International Telecommunication
Data Systems, Inc.(a) 40,000 650,000
- ----------------------------------------------------------------
Lason Holdings, Inc.(a) 41,400 734,850
- ----------------------------------------------------------------
Mecon, Inc.(a) 19,500 375,375
- ----------------------------------------------------------------
MedQuist, Inc.(a) 3,300 58,575
- ----------------------------------------------------------------
MemberWorks, Inc.(a) 48,100 697,450
- ----------------------------------------------------------------
Metzler Group, Inc.(a) 70,600 1,645,862
- ----------------------------------------------------------------
National Processing, Inc.(a) 25,000 475,000
- ----------------------------------------------------------------
On Assignment, Inc.(a) 5,000 153,750
- ----------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 17,000 416,500
- ----------------------------------------------------------------
XLConnect Solutions, Inc.(a) 31,000 906,750
- ----------------------------------------------------------------
11,858,963
- ----------------------------------------------------------------
CHEMICALS-0.22%
Arcadian Corp. 25,000 615,625
- ----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.12%
IMC Global, Inc. 8,600 322,500
- ----------------------------------------------------------------
COMPUTER MAINFRAMES-0.37%
Amdahl Corp.(a) 100,000 1,025,000
- ----------------------------------------------------------------
COMPUTER MINI/PCS-0.05%
Dell Computer Corp.(a) 900 73,237
- ----------------------------------------------------------------
Gateway 2000, Inc.(a) 1,200 56,475
- ----------------------------------------------------------------
129,712
- ----------------------------------------------------------------
COMPUTER NETWORKING-3.31%
ACT Networks, Inc.(a) 16,000 548,000
- ----------------------------------------------------------------
Ascend Communications, Inc.(a) 32,000 2,092,000
- ----------------------------------------------------------------
Auspex Systems, Inc.(a) 8,600 88,150
- ----------------------------------------------------------------
Bay Networks, Inc.(a) 8,000 162,000
- ----------------------------------------------------------------
Belden, Inc. 45,000 1,293,750
- ----------------------------------------------------------------
Black Box Corp.(a) 13,600 459,000
- ----------------------------------------------------------------
Cabletron Systems, Inc.(a) 15,500 966,812
- ----------------------------------------------------------------
Cheyenne Software, Inc.(a) 15,000 455,625
- ----------------------------------------------------------------
Coherent Communications Systems
Corp.(a) 5,000 96,875
- ----------------------------------------------------------------
DSP Communications, Inc.(a) 1,200 45,600
- ----------------------------------------------------------------
FORE Systems, Inc.(a) 28,000 1,113,000
- ----------------------------------------------------------------
Harmonic Lightwaves, Inc.(a) 10,200 172,125
- ----------------------------------------------------------------
InterVoice, Inc.(a) 20,000 260,000
- ----------------------------------------------------------------
</TABLE>
FS-65
<PAGE> 167
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
Optical Data Systems, Inc.(a) 20,000 $ 292,500
- ----------------------------------------------------------------
3Com Corp.(a) 15,000 1,014,375
- ----------------------------------------------------------------
9,059,812
- ----------------------------------------------------------------
COMPUTER PERIPHERALS-1.67%
FileNet Corp.(a) 20,000 567,500
- ----------------------------------------------------------------
Microchip Technology, Inc.(a) 2,100 76,125
- ----------------------------------------------------------------
Printronix, Inc.(a) 87,500 1,082,812
- ----------------------------------------------------------------
Raster Graphics, Inc.(a) 50,000 418,750
- ----------------------------------------------------------------
Read-Rite Corp.(a) 20,000 355,000
- ----------------------------------------------------------------
U.S. Robotics Corp.(a) 33,000 2,074,875
- ----------------------------------------------------------------
4,575,062
- ----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-14.02%
Adobe Systems, Inc. 2,700 93,488
- ----------------------------------------------------------------
ANSYS, Inc.(a) 80,000 980,000
- ----------------------------------------------------------------
Aurum Software, Inc.(a) 24,300 771,525
- ----------------------------------------------------------------
Bell & Howell Co.(a) 21,200 567,100
- ----------------------------------------------------------------
BMC Software, Inc.(a) 13,500 1,120,500
- ----------------------------------------------------------------
Broderbund Software, Inc.(a) 20,000 562,500
- ----------------------------------------------------------------
Business Objects S.A.-ADR(a)
(France) 50,000 743,750
- ----------------------------------------------------------------
C/NET, Inc.(a) 24,500 392,000
- ----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 5,200 189,800
- ----------------------------------------------------------------
CCC Information Services Group(a) 149,000 2,793,750
- ----------------------------------------------------------------
Check Point Software Technologies
Ltd.(a) 25,000 687,500
- ----------------------------------------------------------------
Citrix Systems, Inc.(a) 7,000 386,750
- ----------------------------------------------------------------
Computer Learning Centers, Inc.(a) 2,100 56,175
- ----------------------------------------------------------------
Computervision Corp.(a) 6,300 56,700
- ----------------------------------------------------------------
Compuware Corp.(a) 15,000 791,250
- ----------------------------------------------------------------
Cooper & Chyan Technology, Inc.(a) 1,200 36,750
- ----------------------------------------------------------------
CSG Systems International, Inc.(a) 2,400 40,200
- ----------------------------------------------------------------
CyberMedia, Inc.(a) 23,400 520,650
- ----------------------------------------------------------------
Dassault Systemes S.A.-ADR(a)
(France) 20,000 867,500
- ----------------------------------------------------------------
DataWorks Corp.(a) 2,700 72,900
- ----------------------------------------------------------------
Dendrite International, Inc.(a) 21,000 559,125
- ----------------------------------------------------------------
Document Sciences Corp.(a) 55,000 701,250
- ----------------------------------------------------------------
DST Systems, Inc.(a) 34,000 1,045,500
- ----------------------------------------------------------------
Electronic Arts, Inc.(a) 1,500 56,250
- ----------------------------------------------------------------
FactSet Research Systems, Inc.(a) 9,600 230,400
- ----------------------------------------------------------------
Farallon Communications(a) 15,000 191,250
- ----------------------------------------------------------------
GT Interactive Software Corp.(a) 5,000 95,625
- ----------------------------------------------------------------
Hyperion Software Corp.(a) 90,000 1,833,750
- ----------------------------------------------------------------
Infinity Financial Technology,
Inc.(a) 35,000 573,125
- ----------------------------------------------------------------
Information Resources, Inc.(a) 10,400 131,300
- ----------------------------------------------------------------
Informix Corp.(a) 80,000 1,775,000
- ----------------------------------------------------------------
Intuit, Inc.(a) 15,000 405,000
- ----------------------------------------------------------------
JDA Software Group, Inc.(a) 15,000 515,625
- ----------------------------------------------------------------
Learning Company, Inc. (The)(a) 20,000 406,250
- ----------------------------------------------------------------
Macromedia, Inc.(a) 25,000 415,625
- ----------------------------------------------------------------
May & Speh, Inc.(a) 3,000 49,875
- ----------------------------------------------------------------
Memco Software Ltd.(a) (Israel) 67,700 1,235,525
- ----------------------------------------------------------------
Mercury Interactive Corp.(a) 35,000 446,250
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Metromail Corp.(a) 85,000 $ 1,561,875
- ----------------------------------------------------------------
Midway Games Inc.(a) 40,000 800,000
- ----------------------------------------------------------------
National Instruments Corp.(a) 15,000 427,500
- ----------------------------------------------------------------
Network General Corp.(a) 28,000 675,500
- ----------------------------------------------------------------
Object Design, Inc.(a) 20,000 228,750
- ----------------------------------------------------------------
OneWave, Inc.(a) 25,000 350,000
- ----------------------------------------------------------------
OpenVision Technologies, Inc.(a) 14,500 155,875
- ----------------------------------------------------------------
Parametric Technology Corp.(a) 2,000 97,750
- ----------------------------------------------------------------
PHAMIS, Inc.(a) 20,000 300,000
- ----------------------------------------------------------------
Physician Computer Network, Inc.(a) 25,100 224,331
- ----------------------------------------------------------------
Platinum Technology, Inc.(a) 25,000 359,375
- ----------------------------------------------------------------
Quality Systems, Inc.(a) 25,000 192,188
- ----------------------------------------------------------------
S3 Inc.(a) 5,000 94,375
- ----------------------------------------------------------------
Saville Systems Ireland PLC-ADR(a)
(Ireland) 29,000 1,250,625
- ----------------------------------------------------------------
SEI Corp. 61,000 1,235,250
- ----------------------------------------------------------------
SELECT Software Tools-ADR(a)
(United Kingdom) 29,100 640,200
- ----------------------------------------------------------------
Shared Medical Systems Corp. 8,000 386,000
- ----------------------------------------------------------------
Siebel Systems, Inc.(a) 21,000 1,144,500
- ----------------------------------------------------------------
Spectrum Holobyte, Inc.(a) 7,500 42,188
- ----------------------------------------------------------------
Structural Dynamics Research
Corp.(a) 3,000 53,250
- ----------------------------------------------------------------
SunGard Data Systems Inc.(a) 58,500 2,500,875
- ----------------------------------------------------------------
Symantec Corp.(a) 5,100 55,462
- ----------------------------------------------------------------
Technology Modeling Associates,
Inc.(a) 53,500 571,780
- ----------------------------------------------------------------
TRO Learning, Inc.(a) 2,400 42,600
- ----------------------------------------------------------------
Trusted Information Systems,
Inc.(a) 75,000 1,012,500
- ----------------------------------------------------------------
USCS International, Inc.(a) 15,000 270,000
- ----------------------------------------------------------------
VeriFone, Inc.(a) 1,500 50,437
- ----------------------------------------------------------------
Versant Object Technology Corp.(a) 20,000 390,000
- ----------------------------------------------------------------
Viewlogic Systems, Inc.(a) 7,000 66,062
- ----------------------------------------------------------------
Wallace Computer Services, Inc. 10,000 293,750
- ----------------------------------------------------------------
Xylan Corp.(a) 12,000 480,000
- ----------------------------------------------------------------
38,350,511
- ----------------------------------------------------------------
CONGLOMERATES-0.18%
Amway Asia Pacific Ltd. (Hong Kong) 13,900 498,662
- ----------------------------------------------------------------
CONSUMER NON-DURABLES-0.48%
Central Garden and Pet Co.(a) 1,800 42,525
- ----------------------------------------------------------------
First Years (The), Inc. 20,000 310,000
- ----------------------------------------------------------------
TAG Heuer International SA-ADR(a)
(Luxembourg) 33,700 539,200
- ----------------------------------------------------------------
USA Detergents, Inc.(a) 13,000 429,000
- ----------------------------------------------------------------
1,320,725
- ----------------------------------------------------------------
COSMETICS & TOILETRIES-1.38%
Carson, Inc.(a) 68,600 1,114,750
- ----------------------------------------------------------------
Estee Lauder Companies-Class A 14,500 623,500
- ----------------------------------------------------------------
French Fragrances, Inc.(a) 50,000 443,750
- ----------------------------------------------------------------
General Nutrition Companies,
Inc.(a) 75,000 1,368,750
- ----------------------------------------------------------------
Tambrands, Inc. 5,000 213,125
- ----------------------------------------------------------------
3,763,875
- ----------------------------------------------------------------
</TABLE>
FS-66
<PAGE> 168
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/
MISCELLANEOUS-0.30%
Oak Industries, Inc.(a) 1,500 $ 38,062
- ----------------------------------------------------------------
SRS Labs, Inc.(a) 50,000 787,500
- ----------------------------------------------------------------
825,562
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.44%
Hambrecht & Quist Group(a) 28,000 556,500
- ----------------------------------------------------------------
Investors Financial Services Corp. 10,000 258,750
- ----------------------------------------------------------------
Lehman Brothers Holdings, Inc. 10,000 251,250
- ----------------------------------------------------------------
Schwab (Charles) Corp. 6,000 150,000
- ----------------------------------------------------------------
1,216,500
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.12%
CMAC Investment Corp. 6,500 449,313
- ----------------------------------------------------------------
Federal National Mortgage
Association(b) 52,000 2,034,500
- ----------------------------------------------------------------
Green Tree Financial Corp. 3,600 142,650
- ----------------------------------------------------------------
Medaphis Corp.(a) 5,000 44,375
- ----------------------------------------------------------------
Metris Companies Inc.(a) 11,600 275,500
- ----------------------------------------------------------------
SunAmerica, Inc. 1,800 67,500
- ----------------------------------------------------------------
T. Rowe Price Associates 1,800 61,425
- ----------------------------------------------------------------
3,075,263
- ----------------------------------------------------------------
FOOD/PROCESSING-0.97%
Delta & Pine Land Co. 43,000 1,548,000
- ----------------------------------------------------------------
Lancaster Colony Corp. 20,000 750,000
- ----------------------------------------------------------------
Universal Foods Corp. 10,000 353,750
- ----------------------------------------------------------------
2,651,750
- ----------------------------------------------------------------
FUNERAL SERVICES-0.37%
Carriage Services, Inc.(a) 45,100 1,020,388
- ----------------------------------------------------------------
FURNITURE-0.39%
Kimball International, Inc. 30,000 1,080,000
- ----------------------------------------------------------------
GAMING-0.65%
GTECH Holdings Corp.(a) 35,000 1,032,500
- ----------------------------------------------------------------
International Game Technology 10,000 211,250
- ----------------------------------------------------------------
Station Casinos, Inc.(a) 20,000 222,500
- ----------------------------------------------------------------
Trump Hotels & Casino Resorts,
Inc.(a) 20,000 317,500
- ----------------------------------------------------------------
1,783,750
- ----------------------------------------------------------------
GAS DISTRIBUTION-0.02%
Southwestern Energy Co. 3,300 49,088
- ----------------------------------------------------------------
HOMEBUILDING-0.14%
Clayton Homes, Inc. 15,000 253,125
- ----------------------------------------------------------------
Shelter Components Corp. 10,000 131,250
- ----------------------------------------------------------------
384,375
- ----------------------------------------------------------------
HOTELS/MOTELS-0.29%
U.S. Franchise Systems, Inc.(a) 31,500 456,750
- ----------------------------------------------------------------
Wyndham Hotel Corp.(a) 18,000 342,000
- ----------------------------------------------------------------
798,750
- ----------------------------------------------------------------
INSURANCE (BROKER)-0.09%
Poe & Brown, Inc. 10,000 258,125
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.48%
American Travelers Corp.(a) 2,100 72,188
- ----------------------------------------------------------------
John Alden Financial Corp. 30,000 558,750
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE & HEALTH)-(CONTINUED)
UNUM Corp. 5,200 $ 326,950
- ----------------------------------------------------------------
Western National Corp. 19,900 358,200
- ----------------------------------------------------------------
1,316,088
- ----------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-2.77%
ACE, Ltd. 4,000 219,000
- ----------------------------------------------------------------
AMBAC, Inc. 2,900 181,250
- ----------------------------------------------------------------
American Re Corp. 900 57,937
- ----------------------------------------------------------------
Amerin Corp.(a) 55,000 1,086,250
- ----------------------------------------------------------------
CapMAC Holdings, Inc. 20,000 667,500
- ----------------------------------------------------------------
Exel Ltd. 1,200 45,600
- ----------------------------------------------------------------
HCC Insurance Holdings, Inc. 7,500 191,250
- ----------------------------------------------------------------
Horace Mann Educators Corp. 8,000 274,000
- ----------------------------------------------------------------
MBIA, Inc. 2,100 186,112
- ----------------------------------------------------------------
MGIC Investment Corp. 11,400 782,325
- ----------------------------------------------------------------
Mercury General Corp. 900 43,875
- ----------------------------------------------------------------
Mid Ocean Ltd. 1,800 84,600
- ----------------------------------------------------------------
Progressive Corp. 30,000 2,062,500
- ----------------------------------------------------------------
RenaissanceRe Holdings Ltd. 1,500 43,688
- ----------------------------------------------------------------
TIG Holdings, Inc. 20,000 577,500
- ----------------------------------------------------------------
Transatlantic Holdings, Inc. 3,000 216,000
- ----------------------------------------------------------------
UnionAmerica Holdings PLC-ADR
(United Kingdom) 19,500 363,188
- ----------------------------------------------------------------
Vesta Insurance Group, Inc. 5,000 128,125
- ----------------------------------------------------------------
W. R. Berkley Corp. 7,000 364,000
- ----------------------------------------------------------------
7,574,700
- ----------------------------------------------------------------
LEISURE & RECREATION-2.68%
Gaylord Entertainment Co.-Class A 60,000 1,185,000
- ----------------------------------------------------------------
Golden Bear Golf, Inc.(a) 20,700 372,600
- ----------------------------------------------------------------
Harley-Davidson, Inc. 40,000 1,805,000
- ----------------------------------------------------------------
K2, Inc. 18,000 414,000
- ----------------------------------------------------------------
King World Productions, Inc.(a) 1,800 64,800
- ----------------------------------------------------------------
North Face (The), Inc.(a) 49,000 992,250
- ----------------------------------------------------------------
Platinum Entertainment, Inc.(a) 15,000 153,750
- ----------------------------------------------------------------
Steinway Musical Instruments(a) 20,000 355,000
- ----------------------------------------------------------------
Toy Biz, Inc.(a) 95,000 1,686,250
- ----------------------------------------------------------------
Travis Boats & Motors, Inc.(a) 30,000 322,500
- ----------------------------------------------------------------
7,351,150
- ----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.55%
American Residential Services,
Inc.(a) 80,800 1,535,200
- ----------------------------------------------------------------
Greenwich Air Services, Inc.-Class
B(a) 30,000 506,250
- ----------------------------------------------------------------
Pall Corp. 70,000 1,793,750
- ----------------------------------------------------------------
Pfeiffer Vacuum Technology
AG-ADR(a) (Germany) 25,000 400,000
- ----------------------------------------------------------------
4,235,200
- ----------------------------------------------------------------
MEDICAL (DRUGS)-1.84%
Allergan, Inc. 1,200 36,600
- ----------------------------------------------------------------
AmeriSource Health Corp.(a) 25,000 1,059,375
- ----------------------------------------------------------------
Applied Analytical Industries,
Inc.(a) 39,300 854,775
- ----------------------------------------------------------------
BioChem Pharma, Inc.(a) (Canada) 7,800 332,475
- ----------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 20,000 690,000
- ----------------------------------------------------------------
</TABLE>
FS-67
<PAGE> 169
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (DRUGS)-(CONTINUED)
Elan Corp. PLC-ADR(a) (Ireland) 8,000 $ 222,000
- ----------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 5,500 160,188
- ----------------------------------------------------------------
Gilead Sciences, Inc.(a) 8,000 187,000
- ----------------------------------------------------------------
Liposome Company, Inc.(a) 15,000 256,875
- ----------------------------------------------------------------
North American Vaccine, Inc.(a) 37,500 834,375
- ----------------------------------------------------------------
R.P. Scherer Corp.(a) 5,000 231,875
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 5,000 166,875
- ----------------------------------------------------------------
5,032,413
- ----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-2.97%
Advance Paradigm, Inc.(a) 100,000 812,500
- ----------------------------------------------------------------
Alternative Living Services,
Inc.(a) 65,000 934,375
- ----------------------------------------------------------------
FPA Medical Management, Inc.(a) 22,000 409,750
- ----------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 2,100 46,200
- ----------------------------------------------------------------
HealthCor Holdings, Inc.(a) 55,000 522,500
- ----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 1,200 45,000
- ----------------------------------------------------------------
Horizon Mental Health Management,
Inc.(a) 7,000 187,250
- ----------------------------------------------------------------
Intensiva Healthcare Corp.(a) 70,000 490,000
- ----------------------------------------------------------------
Manor Care, Inc. 6,000 235,500
- ----------------------------------------------------------------
Mariner Health Group, Inc.(a) 7,400 62,900
- ----------------------------------------------------------------
Medical Resources, Inc.(a) 50,000 431,250
- ----------------------------------------------------------------
MedPartners, Inc.(a) 5,715 120,729
- ----------------------------------------------------------------
NovaCare, Inc.(a) 9,300 76,725
- ----------------------------------------------------------------
Oxford Health Plans, Inc.(a) 13,500 614,250
- ----------------------------------------------------------------
PacifiCare Health Systems,
Inc.-Class B(a) 8,000 562,000
- ----------------------------------------------------------------
Paracelsus Healthcare Corp.(a) 100,000 437,500
- ----------------------------------------------------------------
Physician Corp. of America(a) 10,000 110,625
- ----------------------------------------------------------------
Sierra Health Services, Inc.(a) 5,100 145,988
- ----------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 35,000 805,000
- ----------------------------------------------------------------
TresCom International, Inc.(a) 5,000 63,750
- ----------------------------------------------------------------
Vencor, Inc.(a) 3,000 88,875
- ----------------------------------------------------------------
Veterinary Centers of America,
Inc.(a) 50,000 918,750
- ----------------------------------------------------------------
8,121,417
- ----------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-5.66%
Biomet, Inc. 90,000 1,451,250
- ----------------------------------------------------------------
Dentsply International, Inc. 35,000 1,474,375
- ----------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 11,000 242,000
- ----------------------------------------------------------------
Haemonetics(a) 30,000 536,250
- ----------------------------------------------------------------
Heartstream, Inc.(a) 60,000 690,000
- ----------------------------------------------------------------
ICU Medical, Inc.(a) 25,000 221,875
- ----------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 14,000 549,500
- ----------------------------------------------------------------
Maxxim Medical, Inc.(a) 10,000 138,750
- ----------------------------------------------------------------
MiniMed, Inc.(a) 27,500 721,875
- ----------------------------------------------------------------
Nitinol Medical Technologies,
Inc.(a) 62,000 651,000
- ----------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 30,000 825,000
- ----------------------------------------------------------------
St. Jude Medical, Inc.(a) 30,000 1,185,000
- ----------------------------------------------------------------
Suburban Ostomy Supply Co., Inc.(a) 100,000 1,218,750
- ----------------------------------------------------------------
Sybron International Corp.(a) 80,000 2,330,000
- ----------------------------------------------------------------
TECNOL Medical Products, Inc.(a) 60,000 765,000
- ----------------------------------------------------------------
Trex Medical Corp.(a) 25,000 440,625
- ----------------------------------------------------------------
US Surgical Corp. 3,000 125,625
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS-(CONTINUED)
Ventritex, Inc.(a) 5,000 $ 114,063
- ----------------------------------------------------------------
Xomed Surgical Products, Inc.(a) 70,000 1,811,250
- ----------------------------------------------------------------
15,492,188
- ----------------------------------------------------------------
METALS (MISCELLANEOUS)-0.53%
Potash Corp. of Saskatchewan Inc.
(Canada) 12,500 885,938
- ----------------------------------------------------------------
Rental Service Corp.(a) 24,200 556,600
- ----------------------------------------------------------------
1,442,538
- ----------------------------------------------------------------
NATURAL GAS PIPELINES-0.33%
NGC Corp. 50,000 900,000
- ----------------------------------------------------------------
OFFICE AUTOMATION-0.14%
Danka Business Systems PLC-ADR
(United Kingdom) 10,000 396,250
- ----------------------------------------------------------------
OFFICE PRODUCTS-0.92%
Daisytek International Corp.(a) 30,000 1,147,500
- ----------------------------------------------------------------
Deluxe Corp. 40,000 1,305,000
- ----------------------------------------------------------------
OfficeMax, Inc.(a) 4,500 60,750
- ----------------------------------------------------------------
2,513,250
- ----------------------------------------------------------------
OIL & GAS (DRILLING)-0.62%
Atwood Oceanics, Inc.(a) 17,000 943,500
- ----------------------------------------------------------------
Reading & Bates Corp.(a) 26,000 747,500
- ----------------------------------------------------------------
1,691,000
- ----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.95%
Anadarko Petroleum Corp. 4,000 254,500
- ----------------------------------------------------------------
Apache Corp. 6,500 230,750
- ----------------------------------------------------------------
Burlington Resources, Inc. 25,000 1,259,375
- ----------------------------------------------------------------
Cabot Oil and Gas Corp.-Class A 66,000 1,023,000
- ----------------------------------------------------------------
Cross Timbers Oil Co. 2,100 49,613
- ----------------------------------------------------------------
Devon Energy Corp. 10,000 348,750
- ----------------------------------------------------------------
Houston Exploration Co. (The)(a) 75,000 1,284,375
- ----------------------------------------------------------------
Newfield Exploration Co.(a) 2,500 118,125
- ----------------------------------------------------------------
Noble Affiliates, Inc. 6,000 261,000
- ----------------------------------------------------------------
Nuevo Energy Co.(a) 8,900 443,888
- ----------------------------------------------------------------
Petroleum Securities Australia
Ltd.-ADR(a) (Australia) 18,000 366,750
- ----------------------------------------------------------------
Pogo Producing Co. 21,500 954,062
- ----------------------------------------------------------------
Ranger Oil Ltd. (Canada) 6,000 45,000
- ----------------------------------------------------------------
Rutherford-Moran Oil Corp.(a) 25,000 743,750
- ----------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 8,400 119,700
- ----------------------------------------------------------------
Snyder Oil Corp. 4,800 73,200
- ----------------------------------------------------------------
Transocean Offshore Inc. 8,000 506,000
- ----------------------------------------------------------------
8,081,838
- ----------------------------------------------------------------
OIL & GAS (SERVICES)-1.28%
Camco International, Inc. 8,000 310,000
- ----------------------------------------------------------------
Energy Ventures, Inc.(a) 18,000 792,000
- ----------------------------------------------------------------
GeoScience Corp.(a) 25,000 268,750
- ----------------------------------------------------------------
Oceaneering International, Inc.(a) 20,000 360,000
- ----------------------------------------------------------------
Petroleum Geo-Services ASA-ADR(a)
(Norway) 18,300 626,775
- ----------------------------------------------------------------
SEACOR Holdings Inc.(a) 12,000 648,000
- ----------------------------------------------------------------
3-D Geophysical, Inc.(a) 25,000 206,250
- ----------------------------------------------------------------
</TABLE>
FS-68
<PAGE> 170
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (SERVICES)-(CONTINUED)
Veritas DGC, Inc.(a) 13,900 $ 284,950
- ----------------------------------------------------------------
3,496,725
- ----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-3.06%
Baker Hughes, Inc. 16,500 587,812
- ----------------------------------------------------------------
BJ Services Co.(a) 3,000 134,625
- ----------------------------------------------------------------
Cooper Cameron Corp.(a) 10,500 670,688
- ----------------------------------------------------------------
ENSCO International, Inc.(a) 33,000 1,427,250
- ----------------------------------------------------------------
Falcon Drilling Company, Inc.(a) 15,000 530,625
- ----------------------------------------------------------------
GulfMark International, Inc.(a) 11,000 610,500
- ----------------------------------------------------------------
National-Oilwell, Inc.(a) 25,000 581,250
- ----------------------------------------------------------------
Noble Drilling Corp.(a) 25,400 473,075
- ----------------------------------------------------------------
Petroleum Helicopters, Inc. 10,000 175,000
- ----------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 39,000 682,500
- ----------------------------------------------------------------
Smith International, Inc.(a) 20,000 760,000
- ----------------------------------------------------------------
Tidewater, Inc. 6,000 262,500
- ----------------------------------------------------------------
Tuboscope Vetco International
Corp.(a) 60,000 915,000
- ----------------------------------------------------------------
Weatherford Enterra, Inc.(a) 19,000 551,000
- ----------------------------------------------------------------
8,361,825
- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS-1.27%
American Pad & Paper Co.(a) 105,000 1,968,750
- ----------------------------------------------------------------
Thermo Fibergen Inc.(a) 45,000 568,125
- ----------------------------------------------------------------
Wausau Paper Mills Co. 48,125 926,406
- ----------------------------------------------------------------
3,463,281
- ----------------------------------------------------------------
POLLUTION CONTROL-0.02%
Tetra Technologies, Inc.(a) 2,400 50,100
- ----------------------------------------------------------------
PUBLISHING-0.16%
Desktop Data, Inc.(a) 2,000 47,500
- ----------------------------------------------------------------
Harte-Hanks Communications, Inc. 1,800 46,575
- ----------------------------------------------------------------
Readers Digest Association,
Inc.-Class A 1,200 42,750
- ----------------------------------------------------------------
Scholastic Corp.(a) 2,600 190,450
- ----------------------------------------------------------------
World Color Press, Inc.(a) 4,800 107,400
- ----------------------------------------------------------------
434,675
- ----------------------------------------------------------------
RAILROADS-0.26%
Kansas City Southern Industries,
Inc. 15,000 705,000
- ----------------------------------------------------------------
REAL ESTATE-0.19%
Insignia Financial Group,
Inc.-Class A(a) 24,000 519,000
- ----------------------------------------------------------------
RESTAURANTS-2.09%
Apple South, Inc. 35,000 411,250
- ----------------------------------------------------------------
Boston Chicken, Inc.(a) 18,000 654,750
- ----------------------------------------------------------------
Brinker International, Inc.(a) 25,000 425,000
- ----------------------------------------------------------------
Cracker Barrel Old Country Store,
Inc. 8,000 163,000
- ----------------------------------------------------------------
IHOP Corp.(a) 5,000 110,000
- ----------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(a) 1,800 36,900
- ----------------------------------------------------------------
Logan's Roadhouse, Inc.(a) 20,000 365,000
- ----------------------------------------------------------------
Longhorn Steaks, Inc.(a) 10,000 160,000
- ----------------------------------------------------------------
New York Bagel Enterprises(a) 110,000 921,250
- ----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 10,000 231,875
- ----------------------------------------------------------------
Ryan's Family Steak Houses, Inc.(a) 150,000 1,106,250
- ----------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 34,800 643,800
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RESTAURANTS-(CONTINUED)
Taco Cabana-Class A(a) 50,000 $ 293,750
- ----------------------------------------------------------------
Wendy's International, Inc. 9,800 202,125
- ----------------------------------------------------------------
5,724,950
- ----------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.95%
Casey's General Stores, Inc. 72,000 1,296,000
- ----------------------------------------------------------------
Dominick's Supermarkets, Inc.(a) 45,000 894,375
- ----------------------------------------------------------------
Eckerd Corp. (The)(a) 25,000 693,750
- ----------------------------------------------------------------
Einstein/Noah Bagel Corp.(a) 20,100 675,862
- ----------------------------------------------------------------
Revco D.S., Inc.(a) 25,000 753,125
- ----------------------------------------------------------------
Starbucks Corp.(a) 1,800 58,500
- ----------------------------------------------------------------
Wild Oats Markets Inc.(a) 45,000 956,250
- ----------------------------------------------------------------
5,327,862
- ----------------------------------------------------------------
RETAIL (STORES)-7.72%
Abercrombie & Fitch Co.-Class A(a) 35,000 770,000
- ----------------------------------------------------------------
American Eagle Outfitters, Inc.(a) 15,000 262,500
- ----------------------------------------------------------------
Bed, Bath & Beyond, Inc.(a) 3,000 75,750
- ----------------------------------------------------------------
Best Buy Co., Inc.(a) 35,000 573,125
- ----------------------------------------------------------------
Borders Group, Inc.(a) 1,200 37,800
- ----------------------------------------------------------------
Brookstone, Inc.(a) 10,000 111,250
- ----------------------------------------------------------------
CompUSA, Inc.(a) 13,200 610,500
- ----------------------------------------------------------------
Consolidated Stores Corp.(a) 900 34,762
- ----------------------------------------------------------------
Corporate Express, Inc.(a) 13,000 424,125
- ----------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 13,000 490,750
- ----------------------------------------------------------------
Duty Free International, Inc. 8,900 142,400
- ----------------------------------------------------------------
Family Dollar Stores, Inc. 115,000 1,955,000
- ----------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 37,000 1,572,500
- ----------------------------------------------------------------
Gadzooks, Inc.(a) 24,000 696,000
- ----------------------------------------------------------------
Garden Ridge Corp.(a) 70,000 673,750
- ----------------------------------------------------------------
Gargoyles, Inc.(a) 25,000 331,250
- ----------------------------------------------------------------
Gymboree Corp.(a) 3,000 93,750
- ----------------------------------------------------------------
Hot Topic, Inc.(a) 46,500 1,116,000
- ----------------------------------------------------------------
Kohl's Corp.(a) 3,000 108,000
- ----------------------------------------------------------------
Little Switzerland, Inc.(a) 70,000 341,250
- ----------------------------------------------------------------
Loehmann's Holdings, Inc.(a) 3,900 104,813
- ----------------------------------------------------------------
Mac Frugals Bargains Close-Outs,
Inc.(a) 60,000 1,462,500
- ----------------------------------------------------------------
Marks Bros. Jewelers, Inc.(a) 1,800 41,850
- ----------------------------------------------------------------
Melville Corp.(a) 10,000 372,500
- ----------------------------------------------------------------
Mossimo, Inc.(a) 5,000 108,125
- ----------------------------------------------------------------
Neiman Marcus Group, Inc. (The)(a) 16,000 522,000
- ----------------------------------------------------------------
Oakley, Inc.(a) 30,000 446,250
- ----------------------------------------------------------------
Office Depot, Inc.(a) 12,000 235,500
- ----------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 1,200 42,000
- ----------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 7,000 164,500
- ----------------------------------------------------------------
Pier 1 Imports, Inc. 54,000 756,000
- ----------------------------------------------------------------
Price/Costco, Inc.(a) 10,000 198,750
- ----------------------------------------------------------------
Proffitt's, Inc.(a) 4,200 169,575
- ----------------------------------------------------------------
Sports & Recreation, Inc.(a) 50,000 431,250
- ----------------------------------------------------------------
Sports Authority, Inc. (The)(a) 35,000 848,750
- ----------------------------------------------------------------
Stage Stores, Inc.(a) 134,700 2,458,275
- ----------------------------------------------------------------
Staples, Inc.(a) 3,600 67,050
- ----------------------------------------------------------------
</TABLE>
FS-69
<PAGE> 171
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Sunglass Hut International, Inc.(a) 65,000 $ 576,875
- ----------------------------------------------------------------
Talbots, Inc. 25,000 712,500
- ----------------------------------------------------------------
Tiffany & Co. 11,800 436,600
- ----------------------------------------------------------------
U.S. Office Products Co.(a) 10,000 290,000
- ----------------------------------------------------------------
Whole Foods Market, Inc.(a) 6,800 174,250
- ----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,800 49,500
- ----------------------------------------------------------------
Zale Corp.(a) 2,400 46,500
- ----------------------------------------------------------------
21,136,375
- ----------------------------------------------------------------
SCHOOLS-0.02%
Sylvan Learning Systems, Inc.(a) 1,200 50,700
- ----------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.61%
Fisher Scientific International 30,000 1,346,250
- ----------------------------------------------------------------
Input/Output, Inc.(a) 11,000 327,250
- ----------------------------------------------------------------
1,673,500
- ----------------------------------------------------------------
SEMICONDUCTORS-0.44%
Analog Devices, Inc.(a) 6,800 176,800
- ----------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 2,400 84,000
- ----------------------------------------------------------------
SDL, Inc.(a) 35,000 595,000
- ----------------------------------------------------------------
Xilinx, Inc.(a) 10,700 350,425
- ----------------------------------------------------------------
1,206,225
- ----------------------------------------------------------------
SHOES & RELATED APPAREL-0.04%
Kenneth Cole Productions, Inc.(a) 4,500 74,250
- ----------------------------------------------------------------
Nine West Group, Inc.(a) 900 44,887
- ----------------------------------------------------------------
119,137
- ----------------------------------------------------------------
TELECOMMUNICATIONS-3.61%
ADC Telecommunications, Inc.(a) 900 61,537
- ----------------------------------------------------------------
Advanced Fibre Communications, Inc.(a) 17,200 982,550
- ----------------------------------------------------------------
American Portable Telecom, Inc.(a) 60,000 457,500
- ----------------------------------------------------------------
Andrew Corp.(a) 900 43,875
- ----------------------------------------------------------------
Billing Information Concepts(a) 15,000 391,875
- ----------------------------------------------------------------
General Instrument Corp.(a) 23,000 462,875
- ----------------------------------------------------------------
LCC International, Inc.-Class A(a) 85,200 1,246,050
- ----------------------------------------------------------------
Metromedia International Group,
Inc.(a) 50,000 493,750
- ----------------------------------------------------------------
Mobile Telecommunication
Technologies Corp.(a) 4,200 55,650
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
Octel Communications Corp.(a) 30,000 $ 476,250
- ----------------------------------------------------------------
Omnipoint Corp.(a) 20,000 545,000
- ----------------------------------------------------------------
P-COM, Inc.(a) 30,000 660,000
- ----------------------------------------------------------------
RMH Teleservices, Inc.(a) 55,000 405,625
- ----------------------------------------------------------------
Tellabs, Inc.(a) 8,500 723,563
- ----------------------------------------------------------------
Teltrend, Inc.(a) 41,000 1,353,000
- ----------------------------------------------------------------
360 Communications Co.(a) 3,000 67,875
- ----------------------------------------------------------------
Tollgrade Communications, Inc.(a) 35,000 910,000
- ----------------------------------------------------------------
Transaction Network Services, Inc.(a) 30,000 408,750
- ----------------------------------------------------------------
U.S. Long Distance Corp.(a) 15,000 125,625
- ----------------------------------------------------------------
9,871,350
- ----------------------------------------------------------------
TEXTILES-0.69%
Ashworth, Inc.(a) 15,000 97,500
- ----------------------------------------------------------------
G & K Services, Inc.-Class A 28,500 826,500
- ----------------------------------------------------------------
Guess ?, Inc.(a) 75,000 956,250
- ----------------------------------------------------------------
1,880,250
- ----------------------------------------------------------------
TOBACCO-0.27%
Consolidated Cigar Holdings, Inc.(a) 27,000 735,750
- ----------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-1.20%
AirNet Systems, Inc.(a) 6,000 78,000
- ----------------------------------------------------------------
Hvide Marine, Inc.-Class A(a) 120,000 1,785,000
- ----------------------------------------------------------------
Trico Marine Services, Inc.(a) 40,000 1,410,000
- ----------------------------------------------------------------
3,273,000
- ----------------------------------------------------------------
Total Common Stocks 239,699,298
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENTS-10.12%(c)
Daiwa Securities America Inc.,
5.53%, 11/01/96(d) $ 694,693 694,693
- ----------------------------------------------------------------
SBC Capital Markets Inc., 5.55%,
11/01/96(e) 27,000,000 27,000,000
- ----------------------------------------------------------------
Total Repurchase Agreements 27,694,693
- ----------------------------------------------------------------
TOTAL INVESTMENTS-97.70% 267,393,991
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.30% 6,293,618
- ----------------------------------------------------------------
NET ASSETS-100.00% $ 273,687,609
================================================================
</TABLE>
Abbreviations:
ADR -- American Depository Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Deposited in escrow with custodian as collateral for securities sold short.
See Note 7.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 08/15/23.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collateralized by $691,506,000 U.S. Treasury obligations, 0%
to 9.125% due 11/30/96 to 10/31/01.
See Notes to Financial Statements.
FS-70
<PAGE> 172
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$233,856,598) $ 267,393,991
- ---------------------------------------------------------
Receivables for:
Investments sold 139,372
- ---------------------------------------------------------
Investments sold short 1,917,412
- ---------------------------------------------------------
Capital stock sold 12,253,790
- ---------------------------------------------------------
Dividends and interest 55,565
- ---------------------------------------------------------
Investment for deferred compensation
plan 1,508
- ---------------------------------------------------------
Other assets 43,850
- ---------------------------------------------------------
Total assets 281,805,488
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 5,401,638
- ---------------------------------------------------------
Capital stock reacquired 378,040
- ---------------------------------------------------------
Deferred compensation 1,508
- ---------------------------------------------------------
Market value of securities sold short
(proceeds from sales $1,917,412) 2,034,500
- ---------------------------------------------------------
Accrued advisory fees 74,799
- ---------------------------------------------------------
Accrued administrative service fees 5,535
- ---------------------------------------------------------
Accrued directors' fees 630
- ---------------------------------------------------------
Accrued distribution fees 78,807
- ---------------------------------------------------------
Accrued transfer agent fees 44,095
- ---------------------------------------------------------
Accrued operating expenses 98,327
- ---------------------------------------------------------
Total liabilities 8,117,879
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $ 273,687,609
=========================================================
NET ASSETS:
Class A $ 251,252,680
=========================================================
Class B $ 22,434,929
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 22,659,779
=========================================================
Class B:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 2,024,023
=========================================================
CLASS A:
Net asset value and redemption price
per share $ 11.09
=========================================================
Offering price per share:
(Net assets value of $11.09
divided by 94.50%) $ 11.74
=========================================================
CLASS B:
Net asset value and offering price
per share $ 11.08
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period June 17, 1996 (date operations
commenced) through October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $584 foreign
withholding tax) $ 180,536
- --------------------------------------------------------
Interest 419,404
- --------------------------------------------------------
Total investment income 599,940
- --------------------------------------------------------
EXPENSES:
Advisory fees 425,194
- --------------------------------------------------------
Administrative service fees 19,841
- --------------------------------------------------------
Custodian fees 28,363
- --------------------------------------------------------
Directors' fees 3,657
- --------------------------------------------------------
Distribution fees-Class A 195,157
- --------------------------------------------------------
Distribution fees-Class B 9,333
- --------------------------------------------------------
Transfer agent fees-Class A 132,291
- --------------------------------------------------------
Transfer agent fees-Class B 2,247
- --------------------------------------------------------
Dividends on short sales 9,405
- --------------------------------------------------------
Other 88,065
- --------------------------------------------------------
Total expenses 913,553
- --------------------------------------------------------
Less: Fees waived by advisor (144,946)
- --------------------------------------------------------
Expenses paid indirectly (1,037)
- --------------------------------------------------------
Net expenses 767,570
- --------------------------------------------------------
Net investment income (loss) (167,630)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (5,381,138)
- --------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 33,537,393
- --------------------------------------------------------
Securities sold short (117,088)
- --------------------------------------------------------
33,420,305
- --------------------------------------------------------
Net gain on investment securities 28,039,167
- --------------------------------------------------------
Net increase in net assets resulting from
operations $ 27,871,537
========================================================
</TABLE>
See Notes to Financial Statements.
FS-71
<PAGE> 173
STATEMENT OF CHANGES IN NET ASSETS
For the period June 17, 1996 (date operations commenced) through October 31,
1996
<TABLE>
<S> <C>
OPERATIONS:
Net investment income (loss) $ (167,630)
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (5,381,138)
- ---------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 33,420,305
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 27,871,537
- ---------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 222,946,738
- ---------------------------------------------------------------------------------------------------------------------
Class B 22,869,334
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets 273,687,609
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ---------------------------------------------------------------------------------------------------------------------
End of period $ 273,687,609
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 245,649,966
- ---------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (1,524)
- ---------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of investment securities (5,381,138)
- ---------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 33,420,305
- ---------------------------------------------------------------------------------------------------------------------
$ 273,687,609
=====================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Capital Development 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 Capital Development Fund, AIM Aggressive Growth Fund, AIM Blue
Chip Fund, AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund. The
Fund currently offers two different classes of shares: the Class A shares and
the Class B shares. Class A shares commenced operations on June 17, 1996 and
Class B shares commenced sales on October 1, 1996. Class A shares are sold with
a front-end sales charge. Class B shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The 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 long-term 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 is valued at
its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Debt obligations that are issued or
guaranteed by the U.S. Treasury are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market quotations are not readily available 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.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income, dividend expense on short
sales and distributions to shareholders are recorded on the ex-dividend date.
On October 31, 1996,
FS-72
<PAGE> 174
$166,106 was reclassified from undistributed net investment income (loss) to
paid-in capital as a result of a net operating tax loss. Net assets of the
Fund were unaffected by the reclassification.
C. Accounting for Securities Sold Short--When the Fund sells common stock short,
an amount equal to the proceeds of the sales is recorded as an asset. This
asset is offset by a liability (representing the borrowed security) recorded
on the books of the Fund at the market value of the common stock determined
each day in accordance with the procedures for security valuations discussed
in "A" above. The Fund's risk is that the value of the security will increase
rather than decline and thus an unrealized loss will be recorded. When the
Fund closes out a short position by delivering the stock sold short, the Fund
will realize a gain or loss and the liability related to such short position
will be eliminated. The Fund will attempt to hedge against market risk by
entering into short sales of securities that it currently owns or has the
right to acquire through the conversion or exchange of other securities that
it owns. Such short sales may protect the Fund against the risk of losses in
the value of its portfolio securities because any unrealized losses with
respect to such securities may be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in
such portfolio may be wholly or partially offset by a corresponding loss in
the short position.
D. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward of
$4,645,136 (which may be carried forward to offset future taxable gains, if
any) which expires, if not previously utilized, in the year 2004.
E. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. AIM has agreed to
waive advisory fees on the Fund to the extent necessary to keep the annual
expense ratio for Class A shares at 1.34% for two years commencing August 12,
1996. During the period June 17, 1996 (date operations commenced) through
October 31, 1996, AIM waived fees of $144,946.
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 period June 17, 1996 (date
operations commenced) through October 31, 1996, AIM was reimbursed $19,841 for
such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the period June 17, 1996 (date operations
commenced) through October 31, 1996, AFS was paid $75,666 for such services.
The Fund received reductions in transfer agency fees of $746 from dividends
received on balances in cash management accounts. In addition, the Fund incurred
expenses of $291 from pricing services which are paid through directed brokerage
commissions. The effect of the above arrangements resulted in a reduction of the
Fund's total expenses of $1,037 during the period June 17, 1996 (date operations
commenced) through October 31, 1996.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Company has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at the annual rate of 0.35% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets of the Class B shares. Of this amount, the Fund
pays a service fee of 0.25% of the average daily net assets of the Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares of the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more assignees, its rights to all or a portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges payable to AIM Distributors
related to the Class B shares. During the respective commencement periods of
operations through October 31, 1996, the Class A shares and the Class B shares
paid AIM Distributors $195,157 and $9,333, respectively, as compensation
pursuant to the Plans.
AIM Distributors received commissions of $926,213 from Class A capital stock
transactions during the period June 17, 1996 (date operations commenced) through
October 31, 1996. Such commissions are not an expense of the Fund. They are
deducted from, and are not included in, the proceeds from sales of Class A
capital stock. During the period June 17, 1996 (date operations commenced)
through October 31, 1996, AIM Distributors received $733 in contingent deferred
sales charges imposed on redemptions of capital stock. Certain officers and
directors of the Company are officers and directors of AIM, AIM Distributors and
AFS.
During the period June 17, 1996 (date operations commenced) through October
31, 1996 the Fund paid legal fees of $415 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.
FS-73
<PAGE> 175
NOTE 3-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 4-BANK BORROWINGS
Effective July 19, 1996, 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) $325,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM which are
parties to the line of credit may borrow on a first come, first served basis.
Interest on borrowings under the line of credit is payable on maturity or
prepayment date. During the period July 19, 1996 through October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period June 17, 1996 (date operations
commenced) through October 31, 1996 was $226,688,330 and $15,145,287,
respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1996, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 42,977,708
- -------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (10,176,317)
- -------------------------------------------------------
Net unrealized appreciation of
investment securities $ 32,801,391
=======================================================
</TABLE>
Cost of investments for tax purposes is $234,592,600.
NOTE 6-CAPITAL STOCK
Changes in the capital stock outstanding during the period June 17, 1996 (date
operations commenced) through October 31, 1996 were as follows:
<TABLE>
<CAPTION>
1996
------------------------------
SHARES AMOUNT
------------ ---------------
<S> <C> <C>
Sold:
Class A 24,923,432 $ 246,810,746
- -----------------------------------------------------------------------
Class B* 2,026,599 22,898,153
- -----------------------------------------------------------------------
Reacquired:
Class A (2,263,653) (23,864,008)
- -----------------------------------------------------------------------
Class B* (2,576) (28,819)
- -----------------------------------------------------------------------
24,683,802 $ 245,816,072
=======================================================================
* Class B shares commenced sales on October 1, 1996.
</TABLE>
NOTE 7-SECURITIES SOLD SHORT
Outstanding short sales as of October 31, 1996:
<TABLE>
<CAPTION>
PROCEEDS UNREALIZED
SHARES MARKET FROM SHORT APPRECIATION
ISSUER SOLD SHORT VALUE SALES (DEPRECIATION)
- ------------------------ ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Federal National
Mortgage Association 52,000 $2,034,500 $1,917,412 $ (117,088)
============================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the period June 17, 1996 (date operations commenced) through
October 31, 1996 and for a share of Class B capital stock outstanding the period
October 1, 1996 (date sales commenced) through October 31, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B
1996 1996
---------- ----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 11.26
- ------------------------------------------ ---------- ----------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.01)(a)
- ------------------------------------------ ---------- ----------
Net gains (losses) on securities (both
realized and unrealized) 1.10 (0.17)
- ------------------------------------------ ---------- ----------
Total from investment operations 1.09 (0.18)
- ------------------------------------------ ---------- ----------
Net asset value, end of period $ 11.09 $ 11.08
========================================== ========== ==========
Total return(b) 10.90% (1.60)%
========================================== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 251,253 $ 22,435
========================================== ========== ==========
Ratio of expenses to average net
assets(c)(d) 1.35%(e) 1.89%(f)
========================================== ========== ==========
Ratio of net investment income (loss) to
average net assets(c) (0.29)%(e) (0.83)%(f)
========================================== ========== ==========
Portfolio turnover rate 13% 13%
========================================== ========== ==========
Average broker commission rate $ 0.0550 $ 0.0550
========================================== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers. Ratios are annualized and based on average net assets of
$148,555,639 for the Class A shares and $10,988,774 for the Class B shares.
(d) Excluding indirectly paid expenses, the ratios of expenses to average net
assets would have been 1.34% for the Class A shares. The ratio for the
Class B shares would have remained the same.
(e) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to fee waivers is 1.60% and (0.54)%, respectively, for
Class A shares.
(f) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to fee waivers is 2.28% and (1.22)%, respectively, for
Class B shares.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-74
<PAGE> 176
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-79.94%
ADVERTISING/BROADCASTING-0.02%
Interpublic Group of Companies,
Inc. 1,600 $ 90,600
- --------------------------------------------------------------
AEROSPACE/DEFENSE-1.19%
Boeing Co. (The) 21,000 2,071,125
- --------------------------------------------------------------
United Technologies Corp. 40,800 3,085,500
- --------------------------------------------------------------
5,156,625
- --------------------------------------------------------------
AIRLINES-0.98%
AMR Corp.(a) 22,000 2,048,750
- --------------------------------------------------------------
Delta Air Lines, Inc. 24,000 2,211,000
- --------------------------------------------------------------
4,259,750
- --------------------------------------------------------------
BANKING-2.80%
Bank of Boston Corp. 20,000 1,455,000
- --------------------------------------------------------------
Fifth Third Bancorp 37,800 2,820,825
- --------------------------------------------------------------
NationsBank Corp. 64,000 3,864,000
- --------------------------------------------------------------
Norwest Corp. 34,800 1,735,650
- --------------------------------------------------------------
State Street Corp. 29,200 2,299,500
- --------------------------------------------------------------
12,174,975
- --------------------------------------------------------------
BANKING (MONEY CENTER)-0.89%
Chase Manhattan Corp. 20,000 1,852,500
- --------------------------------------------------------------
Citicorp 18,000 2,027,250
- --------------------------------------------------------------
3,879,750
- --------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-1.83%
Coca-Cola Co. (The) 70,000 4,453,750
- --------------------------------------------------------------
PepsiCo, Inc. 100,000 3,487,500
- --------------------------------------------------------------
7,941,250
- --------------------------------------------------------------
BIOTECHNOLOGY-0.52%
Guidant Corp. 33,300 2,272,725
- --------------------------------------------------------------
BUSINESS SERVICES-1.69%
AccuStaff, Inc.(a) 69,300 1,264,725
- --------------------------------------------------------------
Cognizant Corp. 21,700 707,963
- --------------------------------------------------------------
Equifax, Inc. 135,000 3,881,250
- --------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 65,900 1,499,225
- --------------------------------------------------------------
7,353,163
- --------------------------------------------------------------
CHEMICALS-1.08%
Goodrich (B.F.) Co. 56,100 2,236,987
- --------------------------------------------------------------
Monsanto Co. 57,200 2,445,300
- --------------------------------------------------------------
4,682,287
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.37%
IMC Global, Inc. 44,000 1,622,500
- --------------------------------------------------------------
COMPUTER MAINFRAMES-0.56%
International Business Machines
Corp. 15,000 2,411,250
- --------------------------------------------------------------
COMPUTER MINI/PCS-3.35%
Compaq Computer Corp.(a) 50,000 4,268,750
- --------------------------------------------------------------
<CAPTION>
MARKET
COMPUTER MINI/PCS-(CONTINUED) SHARES VALUE
<S> <C> <C>
Dell Computer Corp.(a) 50,000 $ 4,184,375
- --------------------------------------------------------------
Hewlett-Packard Co. 61,000 3,202,500
- --------------------------------------------------------------
Sun Microsystems, Inc. (a) 100,000 2,881,250
- --------------------------------------------------------------
14,536,875
- --------------------------------------------------------------
COMPUTER NETWORKING-0.16%
Ascend Communications, Inc.(a) 14,800 677,100
- --------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-2.22%
Computer Associates International,
Inc. 24,000 1,248,000
- --------------------------------------------------------------
Fiserv, Inc.(a) 62,400 2,355,600
- --------------------------------------------------------------
Microsoft Corp.(a) 49,800 6,050,700
- --------------------------------------------------------------
9,654,300
- --------------------------------------------------------------
CONGLOMERATES-1.71%
Corning Inc. 28,000 1,351,000
- --------------------------------------------------------------
Loews Corp. 45,000 4,134,375
- --------------------------------------------------------------
Tyco International Ltd. 32,000 1,952,000
- --------------------------------------------------------------
7,437,375
- --------------------------------------------------------------
COSMETICS & TOILETRIES-2.44%
Gillette Co. 37,000 3,145,000
- --------------------------------------------------------------
Procter & Gamble Co. (The) 25,000 3,143,750
- --------------------------------------------------------------
Warner-Lambert Co. 44,000 4,312,000
- --------------------------------------------------------------
10,600,750
- --------------------------------------------------------------
ELECTRIC POWER-1.65%
Allegheny Power System, Inc. 49,500 1,299,375
- --------------------------------------------------------------
American Electric Power Co. 73,200 2,964,600
- --------------------------------------------------------------
Consolidated Edison Co. of New
York, Inc. 42,300 1,173,825
- --------------------------------------------------------------
Entergy Corp. 17,200 402,050
- --------------------------------------------------------------
Houston Industries, Inc. 65,500 1,310,000
- --------------------------------------------------------------
7,149,850
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.50%
Emerson Electric Co. 61,000 3,095,750
- --------------------------------------------------------------
General Electric Co. 50,000 5,543,750
- --------------------------------------------------------------
Honeywell, Inc. 31,200 2,203,500
- --------------------------------------------------------------
10,843,000
- --------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-1.20%
Franklin Resources, Inc. 51,450 3,041,981
- --------------------------------------------------------------
Merrill Lynch & Co., Inc. 23,000 2,190,750
- --------------------------------------------------------------
5,232,731
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.74%
Federal Home Loan Mortgage Corp. 107,000 3,410,625
- --------------------------------------------------------------
Federal National Mortgage
Association 108,000 4,441,500
- --------------------------------------------------------------
Student Loan Marketing Association 34,200 4,044,150
- --------------------------------------------------------------
11,896,275
- --------------------------------------------------------------
</TABLE>
FS-75
<PAGE> 177
<TABLE>
<CAPTION>
FINANCE (SAVINGS & LOAN)-1.33%
MARKET
SHARES VALUE
<S> <C> <C>
Great Western Financial Corp. 70,000 $ 2,940,000
- --------------------------------------------------------------
H.F. Ahmanson & Co. 73,900 2,817,437
- --------------------------------------------------------------
5,757,437
- --------------------------------------------------------------
FOOD/PROCESSING-1.40%
ConAgra, Inc. 48,000 2,766,000
- --------------------------------------------------------------
Sara Lee Corp. 78,900 3,313,800
- --------------------------------------------------------------
6,079,800
- --------------------------------------------------------------
FUNERAL SERVICES-0.81%
Service Corp. International 103,300 3,538,025
- --------------------------------------------------------------
HOTELS/MOTELS-0.55%
HFS, Inc.(a) 40,000 2,370,000
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.28%
Conseco Inc. 100,000 4,137,500
- --------------------------------------------------------------
Equitable Companies, Inc. 48,200 1,409,850
- --------------------------------------------------------------
5,547,350
- --------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-4.45%
Allstate Corp. 66,000 4,323,000
- --------------------------------------------------------------
American International Group, Inc. 33,900 4,356,150
- --------------------------------------------------------------
Chubb Corp. 37,000 2,136,750
- --------------------------------------------------------------
CIGNA Corp. 14,900 2,240,588
- --------------------------------------------------------------
MGIC Investment Corp. 21,000 1,706,250
- --------------------------------------------------------------
Travelers Group, Inc. 82,000 4,540,750
- --------------------------------------------------------------
19,303,488
- --------------------------------------------------------------
LEISURE & RECREATION-2.16%
Carnival Corp.-Class A 112,000 4,130,000
- --------------------------------------------------------------
Eastman Kodak Co. 12,000 1,002,000
- --------------------------------------------------------------
Walt Disney Co. (The) 52,000 4,264,000
- --------------------------------------------------------------
9,396,000
- --------------------------------------------------------------
MACHINERY (HEAVY)-1.24%
Caterpillar Inc. 25,000 2,225,000
- --------------------------------------------------------------
Ingersoll-Rand Co. 64,200 3,153,825
- --------------------------------------------------------------
5,378,825
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.07%
Thermo Electron Corp.(a) 135,000 4,657,500
- --------------------------------------------------------------
MEDICAL (DRUGS)-6.69%
Abbott Laboratories 30,000 1,830,000
- --------------------------------------------------------------
American Home Products Corp. 50,000 3,312,500
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 64,900 4,250,950
- --------------------------------------------------------------
Cardinal Health, Inc. 34,000 1,810,500
- --------------------------------------------------------------
Johnson & Johnson 71,900 4,403,875
- --------------------------------------------------------------
Lilly (Eli) & Co. 34,600 3,040,475
- --------------------------------------------------------------
Merck & Co., Inc. 70,200 6,353,100
- --------------------------------------------------------------
Pfizer, Inc. 42,000 4,032,000
- --------------------------------------------------------------
29,033,400
- --------------------------------------------------------------
MEDICAL
(INSTRUMENTS/PRODUCTS)-1.88%
Baxter International Inc. 65,400 3,131,025
- --------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (INSTRUMENTS/PRODUCTS)-(CONTINUED)
Boston Scientific Corp.(a) 39,900 $ 1,925,175
- --------------------------------------------------------------
Medtronic, Inc. 20,000 1,385,000
- --------------------------------------------------------------
Sybron International Corp.(a) 51,600 1,715,700
- --------------------------------------------------------------
8,156,900
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-2.28%
Columbia/HCA Healthcare Corp. 113,000 3,955,000
- --------------------------------------------------------------
HEALTHSOUTH Corp.(a) 152,800 3,017,800
- --------------------------------------------------------------
United Healthcare Corp. 60,000 2,917,500
- --------------------------------------------------------------
9,890,300
- --------------------------------------------------------------
METALS-0.47%
Aluminum Company of America 29,000 2,026,375
- --------------------------------------------------------------
NATURAL GAS PIPELINE-0.76%
El Paso Natural Gas Co. 57,100 3,318,938
- --------------------------------------------------------------
OFFICE AUTOMATION-0.99%
Danka Business Systems PLC-ADR
(United Kingdom) 42,700 1,305,018
- --------------------------------------------------------------
Xerox Corp. 48,600 2,988,900
- --------------------------------------------------------------
4,293,918
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.38%
Apache Corp. 48,400 1,645,600
- --------------------------------------------------------------
OIL & GAS (SERVICES)-3.22%
Exxon Corp. 70,000 3,963,750
- --------------------------------------------------------------
Halliburton Co. 37,000 2,613,125
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New
York shares (Netherlands) 21,000 3,785,250
- --------------------------------------------------------------
Texaco, Inc. 31,000 3,270,500
- --------------------------------------------------------------
Unocal Corp. 8,600 327,875
- --------------------------------------------------------------
13,960,500
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.24%
Baker Hughes, Inc. 69,200 2,387,400
- --------------------------------------------------------------
Schlumberger Ltd. 27,000 2,990,250
- --------------------------------------------------------------
5,377,650
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-2.02%
Bowater, Inc. 47,000 2,032,750
- --------------------------------------------------------------
Kimberly-Clark Corp. 91,000 4,663,750
- --------------------------------------------------------------
Mead Corp. 37,000 2,076,625
- --------------------------------------------------------------
8,773,125
- --------------------------------------------------------------
PUBLISHING-0.36%
New York Times Co.-Class A 36,600 1,582,950
- --------------------------------------------------------------
RAILROADS-0.37%
Canadian National Railway Co.
(Canada) 41,900 1,613,150
- --------------------------------------------------------------
RESTAURANTS-0.03%
Applebee's International, Inc. 6,900 161,287
- --------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.93%
Kroger Co.(a) 114,200 3,140,500
- --------------------------------------------------------------
</TABLE>
FS-76
<PAGE> 178
<TABLE>
<CAPTION>
MARKET
RETAIL (FOOD & DRUG)-(CONTINUED) SHARES VALUE
<S> <C> <C>
Rite Aid Corp. 75,100 $ 3,454,600
- --------------------------------------------------------------
Safeway, Inc.(a) 40,500 1,807,312
- --------------------------------------------------------------
8,402,412
- --------------------------------------------------------------
RETAIL (STORES)-2.34%
CVS Corp. 36,000 1,786,500
- --------------------------------------------------------------
Lowe's Companies, Inc. 83,500 3,173,000
- --------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 23,500 766,688
- --------------------------------------------------------------
Staples, Inc.(a) 80,000 1,440,000
- --------------------------------------------------------------
Sysco Corp. 43,500 1,544,250
- --------------------------------------------------------------
Toys "R" Us, Inc.(a) 51,700 1,473,450
- --------------------------------------------------------------
10,183,888
- --------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.36%
Perkin-Elmer Corp. 21,600 1,568,700
- --------------------------------------------------------------
SEMICONDUCTORS-3.78%
Altera Corp.(a) 59,000 2,924,188
- --------------------------------------------------------------
Applied Materials, Inc.(a) 62,000 3,402,250
- --------------------------------------------------------------
Intel Corp. 28,000 4,287,500
- --------------------------------------------------------------
Motorola, Inc. 54,700 3,131,575
- --------------------------------------------------------------
Texas Instruments, Inc. 30,000 2,677,500
- --------------------------------------------------------------
16,423,013
- --------------------------------------------------------------
SHOES & RELATED APPAREL-0.26%
Nike, Inc. - Class B 19,700 1,108,125
- --------------------------------------------------------------
TELECOMMUNICATIONS-1.74%
Lucent Technologies, Inc. 55,900 3,305,088
- --------------------------------------------------------------
WorldCom, Inc.(a) 176,800 4,243,200
- --------------------------------------------------------------
7,548,288
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TELEPHONE-2.20%
BellSouth Corp. 49,400 $ 2,198,300
- --------------------------------------------------------------
Cincinnati Bell, Inc. 75,000 4,200,000
- --------------------------------------------------------------
SBC Communications, Inc. 57,000 3,163,500
- --------------------------------------------------------------
9,561,800
- --------------------------------------------------------------
TOBACCO-2.45%
Philip Morris Companies, Inc. 183,000 7,205,625
- --------------------------------------------------------------
RJR Nabisco Holdings Corp. 115,000 3,421,250
- --------------------------------------------------------------
10,626,875
- --------------------------------------------------------------
Total Common Stocks 347,158,750
- --------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS-0.34%
INSURANCE (MULTI-LINE
PROPERTY)-0.34%
MGIC Investment Corp.-$3.12 Conv.
Pfd. 21,100 1,474,362
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS-12.96%(b)
5.10%, 06/26/97 $56,730,000(c) 56,280,223
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-5.81%(d)
HSBC Securities, Inc., 5.49%,
05/01/97(e) 25,227,733 25,227,733
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.05% 430,141,068
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.95% 4,140,970
- ---------------------------------------------------------------
NET ASSETS-100.00% $ 434,282,038
- ---------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principle balance was pledged as collateral to cover margin
requirements for open futures contract. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 04/30/97 with maturing value of
$200,030,500. Collateralized by $85,760,000 U.S. Government agency
obligations, 0% to 7.15% due 07/18/97 to 02/14/06 and $116,271,000 U.S.
Treasury obligations, 5.875% to 7.875% due 06/30/01 to 08/15/05 with an
aggregate market value at April 30, 1997 of $204,003,650.
See Notes to Financial Statements.
FS-77
<PAGE> 179
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$387,353,855) $430,141,068
- --------------------------------------------------------
Receivables for:
Investments sold 3,170,112
- --------------------------------------------------------
Capital stock sold 5,666,351
- --------------------------------------------------------
Dividends and interest 273,668
- --------------------------------------------------------
Variation margin 213,000
- --------------------------------------------------------
Investment for deferred compensation plan 2,375
- --------------------------------------------------------
Other assets 59,453
- --------------------------------------------------------
Total assets 439,526,027
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,136,009
- --------------------------------------------------------
Capital stock reacquired 626,002
- --------------------------------------------------------
Deferred compensation 2,375
- --------------------------------------------------------
Accrued advisory fees 237,752
- --------------------------------------------------------
Accrued administrative service fees 5,859
- --------------------------------------------------------
Accrued directors' fees 1,995
- --------------------------------------------------------
Accrued distribution fees 171,767
- --------------------------------------------------------
Accrued transfer agent fees 47,902
- --------------------------------------------------------
Accrued operating expenses 14,328
- --------------------------------------------------------
Total liabilities 5,243,989
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $434,282,038
========================================================
NET ASSETS:
Class A $318,365,527
========================================================
Class B $115,916,511
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 12,041,534
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 4,395,452
========================================================
CLASS A:
Net asset value and redemption price per
share $ 26.44
========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $26.44
divided by 94.50%) $ 27.98
========================================================
CLASS B:
Net asset value and offering price per
share $ 26.37
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $3,596 foreign
withholding tax) $ 1,496,700
- --------------------------------------------------------
Interest 1,200,744
- --------------------------------------------------------
Total investment income 2,697,444
- --------------------------------------------------------
EXPENSES:
Advisory fees 953,904
- --------------------------------------------------------
Custodian fees 26,464
- --------------------------------------------------------
Distribution fees -- Class A 355,285
- --------------------------------------------------------
Distribution fees -- Class B 247,408
- --------------------------------------------------------
Transfer agent fees -- Class A 132,626
- --------------------------------------------------------
Transfer agent fees -- Class B 69,650
- --------------------------------------------------------
Administrative service fees 34,499
- --------------------------------------------------------
Directors' fees 3,261
- --------------------------------------------------------
Other 106,445
- --------------------------------------------------------
Total expenses 1,929,542
- --------------------------------------------------------
Less: Fees waived by advisor (88,557)
- --------------------------------------------------------
Expenses paid indirectly (1,942)
- --------------------------------------------------------
Net expenses 1,839,043
- --------------------------------------------------------
Net investment income 858,401
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain on sales of investment
securities 4,074,170
- --------------------------------------------------------
Net unrealized appreciation of:
Investment securities 15,525,348
- --------------------------------------------------------
Futures contracts 305,318
- --------------------------------------------------------
15,830,666
- --------------------------------------------------------
Net gain on investment securities and
futures contracts 19,904,836
- --------------------------------------------------------
Net increase in net assets resulting from
operations $20,763,237
========================================================
</TABLE>
See Notes to Financial Statements.
FS-78
<PAGE> 180
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the one month ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ONE MONTH ENDED
APRIL 30, OCTOBER 31,
1997 1996
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 858,401 $ 7,068
- -------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 4,074,170 1,953,887
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and futures contracts 15,830,666 254,588
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 20,763,237 2,215,543
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (302,061) --
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains (13,654,606) --
- -------------------------------------------------------------------------------------------------
Capital stock transactions -- net:
Class A 192,860,065 11,821,515
- -------------------------------------------------------------------------------------------------
Class B 106,067,049 8,096,586
- -------------------------------------------------------------------------------------------------
Net increase in net assets 305,733,684 22,133,644
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 128,548,354 106,414,710
- -------------------------------------------------------------------------------------------------
End of period $434,282,038 $128,548,354
=================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $386,410,003 $ 87,482,889
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 765,345 209,005
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities 4,043,977 13,624,413
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 43,062,713 27,232,047
- -------------------------------------------------------------------------------------------------
$434,282,038 $128,548,354
=================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six diversified portfolios:
AIM Blue Chip Fund, AIM Aggressive Growth Fund, AIM Capital Development Fund,
AIM Charter Fund, AIM Constellation Fund, and AIM Weingarten Fund. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class B shares commenced sales on October 1, 1996. Class A
shares are sold with a front-end sales charge. Class B shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
Fund's investment objective is long-term growth of capital. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange is valued at
its last price on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the mean
between the closing bid and asked prices on that day. Each security traded in
the over-the-counter market (but not including securities reported on the
NASDAQ National Market System) is valued at the mean between the last bid and
asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as yield,
type of
FS-79
<PAGE> 181
issue, coupon rate and maturity date. Securities for which market quotations
are not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors of
the Company. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translation--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are recorded on a trade date basis. Realized gains or losses on
sales are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
G. Expenses--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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the fund's average daily net assets in excess of $350 million. AIM has agreed to
waive advisory fees for two years to the extent necessary to keep the annual
expense ratio for Class A shares at 1.31% for such period. During the six months
ended April 30, 1997, AIM voluntarily waived advisory fees in the amounts of
$88,557.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $34,499 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the six months ended April 30,
1997, AFS was paid $98,590 for such services.
The Fund received reductions in transfer agency fees of $1,942 from dividends
received on balances in cash management bank accounts. The effect of the above
arrangement resulted in a reduction of the Fund's total expenses of $1,942
during the six months ended April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares (the "Class A Plan") and with respect to the Fund's Class
B shares (the "Class B Plan") (collectively, the "Plans"). The Fund, pursuant to
the Class A Plan, pays AIM Distributors compensation at an annual rate of 0.35%
of the average daily net assets attributable to the Class A shares. The Class A
Plan is designed to compensate AIM Distributors for certain promotional and
other sales related costs and provides periodic payments to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own Class A shares of the Fund. The Fund,
pursuant to the Class B Plan, pays AIM
FS-80
<PAGE> 182
Distributors compensation at an annual rate of 1.00% of the average daily net
assets attributable to the Class B shares. Of this amount, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class B shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class B shares of
the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more assignees, its rights to all or a portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges payable to AIM Distributors
related to the Class B shares. During the six months ended April 30, 1997, the
Class A shares and the Class B shares paid AIM Distributors $355,285 and
$247,408, respectively, as compensation pursuant to the Plans.
AIM Distributors received commissions of $561,119 from sales of shares of the
Class A capital stock transactions during the six months ended April 30, 1997.
Such commissions are not an expense of the Fund. They are deducted from, and are
not included in, the proceeds from sales of capital stock. During the six months
ended April 30, 1997, AIM Distributors received commissions of $37,936 in
contingent deferred sales charges imposed on redemption of Fund Shares. Certain
officers and directors of the Company are officers and directors of AIM, AFS and
AIM Distributors.
During the six months ended April 30, 1997, the Fund paid legal fees of
$2,574, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel
as counsel to the Company's directors. A member of that firm is a director of
the Company.
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended April 30, 1997 was $297,101,775
and $72,246,352, respectively.
The amount of unrealized appreciation (depreciation) of investment securities on
a tax basis is as follows:
<TABLE>
<CAPTION>
APRIL 30,
1997
-----------
<S> <C>
Aggregate unrealized appreciation of investment
securities $47,802,414
- -----------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (5,027,924)
- -----------------------------------------------------------------------
Net unrealized appreciation of investment securities $42,774,490
=======================================================================
</TABLE>
Costs of investments for tax purposes is $387,366,578.
NOTE 5-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding during the six months ended April 30, 1997
and the one month ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
------------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 9,229,884 $240,812,000 620,358 $16,142,093
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Class B* 4,281,712 111,295,514 313,256 8,163,778
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Issued as reinvestment of dividends:
Class A 475,660 11,415,842 -- --
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Class B* 59,879 1,437,104 -- --
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Reacquired:
Class A (2,282,834) (59,367,777) (165,098) (4,320,578)
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Class B* (256,818) (6,665,569) (2,577) (67,192)
- ----------------------------------------------------------- ---------- ------------ -------- -----------
11,507,483 $298,927,114 765,939 $19,918,101
============================================================ ========== ============ ======== ===========
</TABLE>
* Class B shares commenced sales on October 1, 1996.
FS-81
<PAGE> 183
NOTE 7-OPEN FUTURES CONTRACTS
On April 30, 1997, $2,368,000 principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
-------- --------- ----------- ------------
<S> <C> <C> <C> <C>
S&P 500 Index 142 June 97/Buy $ 275,500
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the Class A shares during the six months ended April 30, 1997,
the one month ended October 31, 1996 and each of the years in the eight-year
period ended September 30, 1996 and for a share of capital stock outstanding of
the Class B shares during the six months ended April 30, 1997 and the period
October 1, 1996 (date sales commenced) through October 31, 1996.
<TABLE>
<CAPTION>
SEPTEMBER 30,
APRIL 30, OCTOBER 31, --------------------------------------------
1997 1996 1996(a) 1995 1994 1993
CLASS A: ---------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.08 $ 25.56 $ 23.83 $ 19.22 $ 18.89 $ 18.24
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.07 -- 0.33 0.14 0.15 0.19
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Net realized and unrealized gains (losses)
on investments 2.51 0.52 4.61 5.05 1.24 0.63
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 2.58 0.52 4.94 5.19 1.39 0.82
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.05) -- (0.21) (0.12) (0.21) (0.17)
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains (2.17) -- (3.00) (0.46) (0.85) --
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (2.22) -- (3.21) (0.58) (1.06) (0.17)
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 26.44 $ 26.08 $ 25.56 $ 23.83 $ 19.22 $ 18.89
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Total return(b) 10.75% 2.04% 22.39% 27.84% 7.69% 4.54%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Ratios/supplement data:
Net assets, end of period (000s omitted) $318,366 $120,448 $106,415 $ 71,324 $ 60,115 $ 65,112
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Ratio of expenses to average net assets(c) 1.30%(d)(e) 1.30% 1.26% 1.3% 1.4% 1.3%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Ratio of net investment income to average net
assets(f) 0.84%(d) 0.12% 0.53% 0.7% 0.8% 1.0%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Portfolio turnover rate 35% 10% 58% 17% 13% 25%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Average brokerage commission rate paid(g) $ 0.0622 $ 0.0665 N/A N/A N/A N/A
- --------------------------------------------- -------- -------- -------- -------- -------- --------
<CAPTION>
SEPTEMBER 30,
--------------------------------------------
1992 1991 1990 1989
CLASS A: -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.77 $ 13.60 $ 13.82 $ 11.48
- --------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.20 0.23 0.25 0.24
- --------------------------------------------- -------- -------- -------- --------
Net realized and unrealized gains (losses)
on investments 1.48 3.19 (0.20) 2.25
- --------------------------------------------- -------- -------- -------- --------
Total from investment operations 1.68 3.42 0.05 2.49
- --------------------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.21) (0.25) (0.27) (0.15)
- --------------------------------------------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- --
- --------------------------------------------- -------- -------- -------- --------
Total distributions (0.21) (0.25) (0.27) (0.15)
- --------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 18.24 $ 16.77 $ 13.60 $ 13.82
- --------------------------------------------- -------- -------- -------- --------
Total return(b) 10.10% 25.52% 0.34% 21.98%
- --------------------------------------------- -------- -------- -------- --------
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 61,601 $ 46,958 $ 31,706 $ 21,170
- --------------------------------------------- -------- -------- -------- --------
Ratio of expenses to average net assets(c) 1.4% 1.5% 1.6% 1.7%
- --------------------------------------------- -------- -------- -------- --------
Ratio of net investment income to average net
assets(f) 1.2% 1.6% 2.0% 1.9%
- --------------------------------------------- -------- -------- -------- --------
Portfolio turnover rate 5% 9% 12% 15%
- --------------------------------------------- -------- -------- -------- --------
Average brokerage commission rate paid(g) N/A N/A N/A N/A
- --------------------------------------------- -------- -------- -------- --------
</TABLE>
(a) The Fund changed investment advisors on June 3, 1996.
(b) Does not deduct sales charges and periods for less than one year are not
annualized.
(c) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.37% (annualized), 1.37% (annualized) and 1.28% for the periods ended
April 30, 1997, October 31, 1996 and September 30, 1996, respectively.
(d) Ratios are annualized and based on average net assets of $204,702,290.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(f) After waiver of fees and/or expense reimbursements. Ratios of net investment
income to average net assets prior to waiver of fees and/or expense
reimbursements were 0.77% (annualized), 0.05% (annualized) and 0.51% for the
periods ended April 30, 1997, October 31, 1996 and September 30, 1996,
respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-82
<PAGE> 184
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
CLASS B: ---------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 26.07 $ 25.56
- ------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income 0.01 (0.01)
- ------------------------------------------------------------ -------- --------
Net realized and unrealized gains on investments 2.49 0.52
- ------------------------------------------------------------ -------- --------
Total from investment operations 2.50 0.51
- ------------------------------------------------------------ -------- --------
Less distributions:
Dividends from net investment income (0.03) --
- ------------------------------------------------------------ -------- --------
Distributions from net realized gains (2.17) --
- ------------------------------------------------------------ -------- --------
Total distributions (2.20) --
- ------------------------------------------------------------ -------- --------
Net asset value, end of period $ 26.37 $ 26.07
============================================================ ======== ========
Total return(a) 10.42% 2.00%
============================================================ ======== ========
Ratios/supplement data:
Net assets, end of period (000s omitted) $115,917 $ 8,101
============================================================ ======== ========
Ratio of expenses to average net assets(b) 2.10%(c)(d) 2.01%(e)
============================================================ ======== ========
Ratio of net investment income (loss) to average net
assets(f) 0.04%(c) (0.58)%(e)
============================================================ ======== ========
Portfolio turnover rate 29% 10%
============================================================ ======== ========
Average brokerage commission rate paid(g) $ 0.0622 $ 0.0665
============================================================ ======== ========
</TABLE>
(a) Does not deduct sales charges and periods for less than one year are not
annualized.
(b) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 2.17% (annualized) and 2.08% (annualized) for the periods 1997-1996,
respectively.
(c) Ratios are annualized and based on average net assets of $49,891,750.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
the same.
(e) Annualized.
(f) After waiver of fees and/or expense reimbursements. Ratios of net
investment income (loss) to average net assets prior to waiver of fees
and/or expense reimbursements were (0.03)% (annualized) and (0.65)%
(annualized) for the periods 1997-1996, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ending
October 31, 1996.
FS-83
<PAGE> 185
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 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............ 4,528,722 62,834 129,363
(3) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
FS-84
<PAGE> 186
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-83.81%
ADVERTISING/BROADCASTING-0.08%
True North Communications, Inc. 148,200 $ 2,834,324
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.89%
Rockwell International Corp. 275,000 18,287,500
- ---------------------------------------------------------------
United Technologies Corp. 200,000 15,125,000
- ---------------------------------------------------------------
33,412,500
- ---------------------------------------------------------------
APPLIANCES-0.36%
Philips Electronics N.V.-ADR-New
York Shares (Netherlands) 250,000 13,375,000
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.38%
Lear Corp.(a) 400,000 14,300,000
- ---------------------------------------------------------------
BANKING-1.24%
Marshall & Ilsley Corp. 300,000 11,512,500
- ---------------------------------------------------------------
NationsBank Corp. 400,000 24,150,000
- ---------------------------------------------------------------
Wells Fargo & Co. 40,000 10,670,000
- ---------------------------------------------------------------
46,332,500
- ---------------------------------------------------------------
BANKING (MONEY CENTER)-1.81%
BankAmerica Corp. 260,000 30,387,500
- ---------------------------------------------------------------
Chase Manhattan Corp. 400,000 37,050,000
- ---------------------------------------------------------------
67,437,500
- ---------------------------------------------------------------
BEVERAGES-0.85%
Coca-Cola Co. (The) 350,000 22,268,750
- ---------------------------------------------------------------
PepsiCo, Inc. 268,500 9,363,938
- ---------------------------------------------------------------
31,632,688
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.63%
Biogen, Inc.(a) 740,000 23,680,000
- ---------------------------------------------------------------
BUSINESS SERVICES-1.66%
CUC International, Inc.(a) 800,000 16,900,000
- ---------------------------------------------------------------
Diebold, Inc. 300,000 10,050,000
- ---------------------------------------------------------------
Equifax, Inc. 800,000 23,000,000
- ---------------------------------------------------------------
Paychex, Inc. 260,000 12,171,250
- ---------------------------------------------------------------
62,121,250
- ---------------------------------------------------------------
COMPUTER MAINFRAMES-0.78%
International Business Machines
Corp. 180,000 28,935,000
- ---------------------------------------------------------------
COMPUTER MINI/PCS-3.63%
Compaq Computer Corp.(a) 120,000 10,245,000
- ---------------------------------------------------------------
Dell Computer Corp.(a) 300,000 25,106,250
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 340,000 18,657,500
- ---------------------------------------------------------------
Hewlett-Packard Co. 1,000,000 52,500,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,000,000 28,812,500
- ---------------------------------------------------------------
135,321,250
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.35%
ECI Telecommunications Ltd.
Designs (Israel) 600,000 13,125,000
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.49%
Seagate Technology, Inc.(a) 400,000 18,350,000
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-3.87%
Computer Associates International,
Inc. 32,300 1,679,600
- ---------------------------------------------------------------
Compuware Corp.(a) 600,000 22,650,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 460,000 17,365,000
- ---------------------------------------------------------------
HBO & Co. 300,000 16,050,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 240,000 29,160,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 1,300,000 33,637,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Wallace Computer Services, Inc. 900,000 $ 24,075,000
- ---------------------------------------------------------------
144,617,100
- ---------------------------------------------------------------
CONGLOMERATES-1.49%
AlliedSignal Inc. 260,000 18,785,000
- ---------------------------------------------------------------
Loews Corp. 400,000 36,750,000
- ---------------------------------------------------------------
55,535,000
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-2.33%
Avon Products, Inc. 300,000 18,487,500
- ---------------------------------------------------------------
Gillette Co. 200,000 17,000,000
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 200,000 25,150,000
- ---------------------------------------------------------------
Warner-Lambert Co.(b) 270,000 26,460,000
- ---------------------------------------------------------------
87,097,500
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.86%
General Electric Co. 200,000 22,175,000
- ---------------------------------------------------------------
Honeywell, Inc. 140,000 9,887,500
- ---------------------------------------------------------------
32,062,500
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-2.47%
Franklin Resources, Inc. 400,000 23,650,000
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 420,000 40,005,000
- ---------------------------------------------------------------
Morgan Stanley Group, Inc. 300,000 18,937,500
- ---------------------------------------------------------------
United Assets Management Corp. 400,000 9,800,000
- ---------------------------------------------------------------
92,392,500
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-5.76%
American Express Co. 500,000 32,937,500
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 400,000 7,900,000
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp. 1,000,000 31,875,000
- ---------------------------------------------------------------
Federal National Mortgage
Association 1,400,000 57,575,000
- ---------------------------------------------------------------
Green Tree Financial Corp. 600,000 17,775,000
- ---------------------------------------------------------------
Household International, Inc. 220,000 19,360,000
- ---------------------------------------------------------------
Student Loan Marketing Association 400,000 47,300,000
- ---------------------------------------------------------------
214,722,500
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-2.12%
Washington Mutual, Inc. 1,600,000 79,000,000
- ---------------------------------------------------------------
FOOD/PROCESSING-0.28%
Interstate Bakeries Corp. 200,000 10,375,000
- ---------------------------------------------------------------
FUNERAL SERVICES-0.55%
Service Corp. International(b) 600,000 20,550,000
- ---------------------------------------------------------------
HOTELS/MOTELS-0.63%
HFS, Inc.(a) 400,000 23,700,000
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.69%
Equitable Companies, Inc. 500,000 14,625,000
- ---------------------------------------------------------------
Provident Companies, Inc. 200,000 11,175,000
- ---------------------------------------------------------------
25,800,000
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-6.07%
Aetna Inc. 200,000 18,225,000
- ---------------------------------------------------------------
Allstate Corp. 900,000 58,950,000
- ---------------------------------------------------------------
American International Group, Inc. 300,000 38,550,000
- ---------------------------------------------------------------
CIGNA Corp. 200,000 30,075,000
- ---------------------------------------------------------------
ITT Hartford Group, Inc. 160,000 11,920,000
- ---------------------------------------------------------------
MBIA, Inc. 120,000 11,685,000
- ---------------------------------------------------------------
Travelers Group, Inc. 550,000 30,456,250
- ---------------------------------------------------------------
Travelers Property Casualty
Corp.-Class A 500,000 16,875,000
- ---------------------------------------------------------------
</TABLE>
FS-85
<PAGE> 187
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(CONTINUED)
USF&G Corp. 500,000 $ 10,000,000
- ---------------------------------------------------------------
226,736,250
- ---------------------------------------------------------------
LEISURE & RECREATION-0.38%
Brunswick Corp. 500,000 14,125,000
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.55%
Thermo Electron Corp.(a) 600,000 20,700,000
- ---------------------------------------------------------------
MEDICAL (DRUGS)-9.76%
Abbott Laboratories 340,000 20,740,000
- ---------------------------------------------------------------
American Home Products Corp. 600,000 39,750,000
- ---------------------------------------------------------------
Bergen Brunswig Corp.-Class A 600,000 20,475,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 1,200,000 78,600,000
- ---------------------------------------------------------------
Johnson & Johnson 500,000 30,625,000
- ---------------------------------------------------------------
Lilly (Eli) & Co.(b) 300,000 26,362,500
- ---------------------------------------------------------------
Merck & Co., Inc. 480,000 43,440,000
- ---------------------------------------------------------------
Pfizer, Inc. 200,000 19,200,000
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR (United
Kingdom) 800,000 64,500,000
- ---------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Israel) 400,000 20,300,000
- ---------------------------------------------------------------
363,992,500
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.45%
Columbia/HCA Healthcare Corp. 800,000 28,000,000
- ---------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 300,000 8,962,500
- ---------------------------------------------------------------
MedPartners, Inc.(a) 1,800,000 32,850,000
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 1,500,000 39,000,000
- ---------------------------------------------------------------
United Healthcare Corp. 400,000 19,450,000
- ---------------------------------------------------------------
128,262,500
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.74%
Baxter International Inc. 600,000 28,725,000
- ---------------------------------------------------------------
Medtronic, Inc. 100,000 6,925,000
- ---------------------------------------------------------------
Omnicare, Inc. 800,000 19,500,000
- ---------------------------------------------------------------
Stryker Corp.(a) 300,000 9,862,500
- ---------------------------------------------------------------
65,012,500
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-2.06%
El Paso Natural Gas Co. 500,000 29,062,500
- ---------------------------------------------------------------
Sonat, Inc. 300,000 17,137,500
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 700,000 30,712,500
- ---------------------------------------------------------------
76,912,500
- ---------------------------------------------------------------
OFFICE AUTOMATION-0.99%
Danka Business Systems PLC-ADR
(United Kingdom) 600,000 18,337,500
- ---------------------------------------------------------------
Xerox Corp. 300,000 18,450,000
- ---------------------------------------------------------------
36,787,500
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.33%
Reynolds & Reynolds Co.- Class A 600,000 12,450,000
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.36%
Apache Corp.(a) 400,000 13,600,000
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-2.64%
Exxon Corp. 520,000 29,445,000
- ---------------------------------------------------------------
Halliburton Co. 300,000 21,187,500
- ---------------------------------------------------------------
Mobil Corp. 140,000 18,200,000
- ---------------------------------------------------------------
Petroleum Geo-Services ASA-ADR(a)
(Norway) 300,000 11,550,000
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New
York shares (Netherlands) 100,000 18,025,000
- ---------------------------------------------------------------
98,407,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-1.80%
Baker Hughes, Inc. 500,000 $ 17,250,000
- ---------------------------------------------------------------
BJ Services Co.(a) 400,000 18,850,000
- ---------------------------------------------------------------
Coastal Corp. 400,000 19,000,000
- ---------------------------------------------------------------
Tidewater, Inc. 300,000 12,037,500
- ---------------------------------------------------------------
67,137,500
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.82%
Kimberly-Clark Corp. 600,000 30,750,000
- ---------------------------------------------------------------
PUBLISHING-0.46%
R.R. Donnelley & Sons Co. 500,000 17,125,000
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-1.42%
Crescent Real Estate Equities,
Inc. 400,000 10,500,000
- ---------------------------------------------------------------
FelCor Suite Hotels, Inc. 260,000 9,327,500
- ---------------------------------------------------------------
National Health Investors, Inc. 135,200 5,036,200
- ---------------------------------------------------------------
Patriot American Hospitality, Inc. 600,000 12,900,000
- ---------------------------------------------------------------
Starwood Lodging Trust 400,000 15,400,000
- ---------------------------------------------------------------
53,163,700
- ---------------------------------------------------------------
RETAIL (FOOD & DRUGS)-0.84%
American Stores Co. 300,000 13,650,000
- ---------------------------------------------------------------
Safeway, Inc.(a) 400,000 17,850,000
- ---------------------------------------------------------------
31,500,000
- ---------------------------------------------------------------
RETAIL (STORES)-2.60%
Blue Square-Israel Ltd.-ADR(a)
(Israel) 470,000 8,753,750
- ---------------------------------------------------------------
Boise Cascade Office Products
Corp.(a) 600,000 10,575,000
- ---------------------------------------------------------------
CompUSA, Inc.(a) 2,000,000 38,500,000
- ---------------------------------------------------------------
Sports Authority, Inc. (The)(a) 1,000,000 17,750,000
- ---------------------------------------------------------------
U.S. Office Products Co.(a) 300,000 7,650,000
- ---------------------------------------------------------------
Walgreen Co. 300,000 13,800,000
- ---------------------------------------------------------------
97,028,750
- ---------------------------------------------------------------
SEMICONDUCTORS-3.21%
Intel Corp. 200,000 30,625,000
- ---------------------------------------------------------------
Texas Instruments, Inc. 1,000,000 89,250,000
- ---------------------------------------------------------------
119,875,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS-3.12%
ADC Telecommunications, Inc.(a) 600,000 15,675,000
- ---------------------------------------------------------------
Andrew Corp.(a) 200,000 4,950,000
- ---------------------------------------------------------------
DSC Communications Corp.(a) 700,000 14,262,500
- ---------------------------------------------------------------
Lucent Technologies, Inc. 200,000 11,825,000
- ---------------------------------------------------------------
Nokia Oy A.B.-Class A-ADR
(Finland) 460,000 29,727,500
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Sweden) 600,000 20,175,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 500,000 19,937,500
- ---------------------------------------------------------------
116,552,500
- ---------------------------------------------------------------
TELEPHONE-2.69%
Cincinnati Bell, Inc. 1,200,000 67,200,000
- ---------------------------------------------------------------
SBC Communications, Inc. 600,000 33,300,000
- ---------------------------------------------------------------
100,500,000
- ---------------------------------------------------------------
TOBACCO-4.07%
Philip Morris Companies, Inc. 2,800,000 110,250,000
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 1,400,000 41,650,000
- ---------------------------------------------------------------
151,900,000
- ---------------------------------------------------------------
TRANSPORTATION-0.25%
Hvide Marine, Inc.-Class A(a) 551,800 9,518,550
- ---------------------------------------------------------------
Total Common Stocks 3,128,746,362
- ---------------------------------------------------------------
</TABLE>
FS-86
<PAGE> 188
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-5.81%
BUSINESS SERVICES-0.48%
Career Horizons, Inc., Conv.
Bonds, 7.00%, 11/01/02(c)
(acquired 10/16/95-02/04/97;
cost $16,536,121) $10,350,000 $ 17,956,112
- --------------------------------------------------------------
COMPUTER NETWORKING-0.29%
Comverse Technology, Inc., Conv.
Sub. Deb., 5.75%, 10/01/06(c)
(acquired 01/21/97-01/22/97;
cost $11,702,662) 10,000,000 10,883,900
- --------------------------------------------------------------
COMPUTER PERIPHERALS-0.73%
Quantum Corp., Conv. Sub. Notes,
5.00%, 03/01/03(c)(acquired
03/13/97-03/14/97; cost
$26,181,500) 14,000,000 27,124,580
- --------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.58%
Baan Co., N.V., (Netherlands)
Conv. Sub. Notes, 4.50%,
12/15/01(c) (acquired
12/12/96-01/07/97; cost
$16,027,500) 16,000,000 21,724,960
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.30%
SCI Systems, Inc., Conv. Sub.
Notes, 5.00%, 05/01/06(c)
(acquired 10/24/96-10/28/96;
cost $9,952,680) 8,000,000 11,210,000
- --------------------------------------------------------------
HOTELS/MOTELS-0.34%
Hilton Hotels Corp., Conv. Sub.
Notes, 5.00%, 05/15/06 12,000,000 12,667,560
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.33%
Diamond Offshore Drilling, Inc.,
Conv. Sub. Notes, 3.75%,
02/15/07 12,000,000 12,235,800
- --------------------------------------------------------------
POLLUTION CONTROL-1.04%
Sanifill, Inc., Conv. Sub. Deb.,
5.00%, 03/01/06 18,000,000 23,044,860
- --------------------------------------------------------------
U.S. Filter Corp., Conv. Sub.
Notes, 6.00%, 09/15/05 9,000,000 15,611,582
- --------------------------------------------------------------
38,656,442
- --------------------------------------------------------------
RESTAURANTS-0.52%
Boston Chicken, Inc., Conv. Sub.
Deb., 7.75%, 05/01/04 18,000,000 19,485,000
- --------------------------------------------------------------
RETAIL (STORES)-0.28%
Staples Inc., Conv. Sub. Deb.,
4.50%, 10/01/00(c) (acquired
09/16/96-10/28/96; cost
$11,027,260) 10,000,000 10,410,300
- --------------------------------------------------------------
SEMICONDUCTORS-0.92%
Altera Corp., Conv. Sub. Notes,
5.75%, 06/15/02(c) (acquired
09/16/96-09/17/96; cost
$11,677,400) 10,000,000 20,278,700
- --------------------------------------------------------------
Analog Devices, Conv. Sub. Notes,
3.50%, 12/01/00 10,000,000 14,039,000
- --------------------------------------------------------------
34,317,700
- --------------------------------------------------------------
Total Convertible Corporate
Bonds 216,672,354
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-7.88%
COSMETICS & TOILETRIES-0.35%
McKesson Corp.-$2.50 Conv. Pfd.(c)
(acquired 02/13/97-04/29/97;
cost $11,905,813) 230,000 $ 13,167,500
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.29%
AES Trust I-$2.69 Conv. Pfd. 200,000 10,925,000
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.08%
Penncorp Financial Group,
Inc.-$3.375 Conv. Pfd. 120,000 9,600,000
- ---------------------------------------------------------------
SunAmerica, Inc.-Series E, $3.10
Dep. Conv. Pfd. 300,000 30,600,000
- ---------------------------------------------------------------
40,200,000
- ---------------------------------------------------------------
FUNERAL SERVICES-1.11%
SCI Financial LLC-Series A, $3.125
Conv. Pfd. 360,000 41,265,000
- ---------------------------------------------------------------
HOTELS/MOTELS-0.45%
Host Marriott Financial
Trust-$3.375 Conv. Pfd.(c)
(acquired 11/25/96-03/19/97;
cost $15,929,000) 300,000 16,651,200
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.57%
Conseco Inc.-$4.278 Conv. PRIDES 400,000 58,600,000
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.47%
Unocal Corp.-$3.125 Conv. Pfd. 320,000 17,725,760
- ---------------------------------------------------------------
RETAIL (STORES)-0.55%
TJX Companies, Inc.-Series E,
$7.00 Conv. Pfd. 80,000 20,680,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS-2.01%
WorldCom, Inc.-$2.68 Dep. Conv.
Pfd. 900,000 75,150,000
- ---------------------------------------------------------------
Total Convertible Preferred
Stocks 294,364,460
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY NOTES-1.33%
6.00%, 09/30/98 $10,000,000 9,988,300
- ---------------------------------------------------------------
5.875%, 10/31/98 10,000,000 9,961,700
- ---------------------------------------------------------------
5.625%, 11/30/98 10,000,000 9,922,600
- ---------------------------------------------------------------
5.875%, 02/28/99 10,000,000 9,941,800
- ---------------------------------------------------------------
6.25%, 03/31/99 10,000,000 10,003,100
- ---------------------------------------------------------------
Total U.S. Treasury Notes 49,817,500
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(d)-0.44%
HSBC Securities Inc., 5.05%,
05/01/97(e) 16,471,349 16,471,349
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.27% 3,706,072,025
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.73% 27,255,511
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,733,327,536
===============================================================
</TABLE>
Abbreviations:
ADR -- American Depository Receipt
Conv. -- Convertible
Deb. -- Debentures
Dep. -- Depository
Pfd. -- Preferred
PRIDES -- Preferred Redemption Increase Dividend Equity Security
Sub. -- Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of these securities are subject to call options written. See Note
7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance
with the procedures established by the Board of Directors. The aggregate
market value of these securities at 04/30/97 was $149,407,252 which
represented 4.00% of the Fund's net assets.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$100,014,028. Collateralized by $96,950,000 U.S. Treasury obligations, 7.50%
to 7.875% due 10/31/99 to 12/31/99 with an aggregate market value at
04/30/97 of $102,002,050.
See Notes to Financial Statements.
FS-87
<PAGE> 189
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,120,727,704) $3,706,072,025
- ------------------------------------------------------------
Cash 7
- ------------------------------------------------------------
Receivable for:
Investments sold 48,915,615
- ------------------------------------------------------------
Capital stock sold 7,224,353
- ------------------------------------------------------------
Dividends and interest 6,001,017
- ------------------------------------------------------------
Investment for deferred compensation plan 34,314
- ------------------------------------------------------------
Other assets 232,354
- ------------------------------------------------------------
Total assets 3,768,479,685
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 23,779,363
- ------------------------------------------------------------
Capital stock reacquired 5,050,489
- ------------------------------------------------------------
Options written 1,962,500
- ------------------------------------------------------------
Deferred compensation 34,314
- ------------------------------------------------------------
Accrued advisory fees 1,832,007
- ------------------------------------------------------------
Accrued administrative services fees 10,726
- ------------------------------------------------------------
Accrued distribution fees 1,570,549
- ------------------------------------------------------------
Accrued transfer agent fees 643,884
- ------------------------------------------------------------
Accrued operating expenses 268,317
- ------------------------------------------------------------
Total liabilities 35,152,149
- ------------------------------------------------------------
Net assets applicable to shares outstanding $3,733,327,536
============================================================
NET ASSETS:
Class A $2,948,273,303
============================================================
Class B $ 752,280,983
============================================================
Institutional Class $ 32,773,250
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 257,010,441
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 65,718,858
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 2,843,951
============================================================
Class A:
Net asset value and redemption price per
share $ 11.47
============================================================
Offering price per share:
(Net asset value of $11.47
divided by 94.50%) $ 12.14
============================================================
Class B:
Net asset value and offering price per
share $ 11.45
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 11.52
============================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $188,101 foreign
withholding tax) $ 25,739,148
- -----------------------------------------------------------
Interest 10,862,728
- -----------------------------------------------------------
Total investment income 36,601,876
- -----------------------------------------------------------
EXPENSES:
Advisory fees 11,175,345
- -----------------------------------------------------------
Administrative services fees 62,783
- -----------------------------------------------------------
Custodian fees 79,299
- -----------------------------------------------------------
Directors' fees 10,974
- -----------------------------------------------------------
Distribution fees-Class A 4,292,872
- -----------------------------------------------------------
Distribution fees-Class B 3,203,810
- -----------------------------------------------------------
Transfer agent fees-Class A 1,879,410
- -----------------------------------------------------------
Transfer agent fees-Class B 612,124
- -----------------------------------------------------------
Transfer agent fees-Institutional Class 1,440
- -----------------------------------------------------------
Other 586,524
- -----------------------------------------------------------
Total expenses 21,904,581
- -----------------------------------------------------------
Less: Advisory fees waived (193,862)
- -----------------------------------------------------------
Expenses paid indirectly (29,281)
- -----------------------------------------------------------
Net expenses 21,681,438
- -----------------------------------------------------------
Net investment income 14,920,438
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain on sales of:
Investment securities 149,439,237
- -----------------------------------------------------------
Foreign currencies 1,974
- -----------------------------------------------------------
Futures contracts 2,973,432
- -----------------------------------------------------------
152,414,643
- -----------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 129,195,133
- -----------------------------------------------------------
Foreign currencies (1,823)
- -----------------------------------------------------------
Futures contracts 51,980
- -----------------------------------------------------------
Option contracts (414,052)
- -----------------------------------------------------------
128,831,238
- -----------------------------------------------------------
Net gain on investment securities, foreign
currencies, futures and option transactions 281,245,881
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $296,166,319
============================================================
</TABLE>
See Notes to Financial Statements.
FS-88
<PAGE> 190
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND THE YEAR ENDED OCTOBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,920,438 $ 45,400,910
- ----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and futures contracts 152,414,643 187,738,534
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 128,831,238 171,775,447
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 296,166,319 404,914,891
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (19,825,669) (34,698,850)
- ----------------------------------------------------------------------------------------------
Class B (2,392,357) (2,262,959)
- ----------------------------------------------------------------------------------------------
Institutional Class (274,510) (506,177)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investments:
Class A (151,133,306) (170,497,932)
- ----------------------------------------------------------------------------------------------
Class B (31,330,634) (8,672,692)
- ----------------------------------------------------------------------------------------------
Institutional Class (1,673,772) (2,168,635)
- ----------------------------------------------------------------------------------------------
Net equalization credits:
Class A 293,484 511,762
- ----------------------------------------------------------------------------------------------
Class B 189,770 219,669
- ----------------------------------------------------------------------------------------------
Institutional Class 5,631 1,194
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 226,440,455 518,654,491
- ----------------------------------------------------------------------------------------------
Class B 222,049,354 417,063,105
- ----------------------------------------------------------------------------------------------
Institutional Class 2,341,356 2,366,710
- ----------------------------------------------------------------------------------------------
Net increase in net assets 540,856,121 1,124,924,577
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,192,471,415 2,067,546,838
- ----------------------------------------------------------------------------------------------
End of period $3,733,327,536 $3,192,471,415
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,995,573,811 $2,544,742,646
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 1,794,279 8,877,492
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies and futures contracts 151,029,177 182,752,246
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 584,930,269 456,099,031
- ----------------------------------------------------------------------------------------------
$3,733,327,536 $3,192,471,415
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-89
<PAGE> 191
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six diversified portfolios:
AIM Charter Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Constellation Fund and AIM Weingarten Fund. The Fund
currently offers three different classes of shares: Class A shares, Class B
shares and the Institutional Class. Matters affecting each portfolio or class
will be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to provide growth of capital, with
current income as a secondary objective.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-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. 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 may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued at the mean between last
bid and asked prices based upon quotes furnished by independent sources.
Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors of the Company. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
D. Expenses-Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
are allocated among the classes.
E. Equalization-The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and costs of repurchases of
Fund shares, equivalent on a per share basis to the amount of undistributed
net investment income, is credited or charged to undistributed net income
when the transaction is recorded so that the undistributed net investment
income per share is unaffected by sales or redemptions of Fund shares.
F. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
G. Foreign Currency Contracts-A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed upon price at a future
date. The Fund may enter into a forward 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.
FS-90
<PAGE> 192
H. Stock Index Futures Contracts-The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and that a change in the value of the contracts may not correlate
with changes in the value of the securities being hedged.
I. Covered Call Options-The fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option period, in return
for the premium paid by the purchaser of the option, the Fund has given up
the opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the risk
of loss should the price of the underlying security decline. During the
option period, the Fund may be required at any time to deliver the underlying
security against payment of the exercise price. This obligation is terminated
upon the expiration of the option period or at such earlier time at which the
Fund effects a closing purchase transaction by purchasing (at a price which
may be higher than that received when the call option was written) a call
option identical to the one originally written.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees paid
by the Fund to AIM to the extent necessary to reduce the fees paid by the Fund
at net asset levels higher than those currently incorporated in the present
advisory fee schedule. 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. The
approval of Board of Directors would be necessary before AIM can discontinue
this waiver. During the six months ended April 30, 1997, AIM waived fees of
$193,862. 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.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $62,783 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A and Class B shares. During the six
months ended April 30, 1997, AFS was paid $1,441,644 for such services. During
the six months ended April 30, 1997, the Fund paid A I M Institutional Fund
Services, Inc. ("AIFS") $1,440 for shareholder and transfer agency services with
respect to the Institutional Class.
The Fund received reductions in transfer agency fees of $27,534 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $1,747 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $29,281 during the six months ended
April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan,
FS-91
<PAGE> 193
pays AIM Distributors compensation at the annual rate of 0.30% of the average
daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more designees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan), and (b) any contingent deferred sales charges received by
AIM Distributors related to the Class B shares. During the six months ended
April 30, 1997, the Class A and Class B shares paid AIM Distributors $4,292,872
and $3,203,810, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,075,461 from sales of Class A
shares of the Fund during the six months ended April 30, 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 six months ended April 30,
1997, AIM Distributors received commissions of $32,837 in contingent deferred
sales charges imposed on 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 six months ended April 30, 1997, the Fund paid legal fees of $7,348
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-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund 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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997 was
$3,547,442,583 and $3,316,306,601, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $624,573,790
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (39,791,370)
- -------------------------------------------------------------
Net unrealized appreciation of investment
securities $584,782,420
=============================================================
</TABLE>
Cost of investments for tax purposes is $3,121,289,605.
FS-92
<PAGE> 194
NOTE 6-CAPITAL STOCK
Changes in the capital stock outstanding for the six months ended April 30, 1997
and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold
- ------------------------------------------------------------------------------------------------------------------------
Class A 30,429,955 $ 348,827,200 71,824,128 $ 752,853,277
- ------------------------------------------------------------------------------------------------------------------------
Class B 20,107,157 229,853,138 41,436,800 435,348,846
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 266,233 3,067,395 448,911 4,759,971
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
- ------------------------------------------------------------------------------------------------------------------------
Class A 15,034,968 162,130,649 19,521,139 192,994,968
- ------------------------------------------------------------------------------------------------------------------------
Class B 2,989,287 32,149,114 1,039,513 10,333,913
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 172,614 1,869,025 252,209 2,504,537
- ------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (24,923,860) (284,517,394) (40,679,494) (427,193,754)
- ------------------------------------------------------------------------------------------------------------------------
Class B (3,513,718) (39,952,898) (2,705,793) (28,619,654)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (228,049) (2,595,064) (464,310) (4,897,798)
- ------------------------------------------------------------------------------------------------------------------------
40,334,587 $ 450,831,165 90,673,103 $ 938,084,306
========================================================================================================================
</TABLE>
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended April 30, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
------------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of Period -- --
- --------------------------------------------------------------------------------------
Written 4,500 $1,548,448
- --------------------------------------------------------------------------------------
Closed -- --
- --------------------------------------------------------------------------------------
Exercised -- --
- --------------------------------------------------------------------------------------
Expired -- --
- --------------------------------------------------------------------------------------
End of period 4,500 $1,548,448
======================================================================================
</TABLE>
Open call option contracts written at April 30, 1997 were as follows:
<TABLE>
<CAPTION>
NUMBER UNREALIZED
CONTRACT STRIKE OF PREMIUM APRIL 30, 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Lilly (Eli) & Co. Jul. 85 1,500 $ 732,475 $ 993,750 $ (261,275)
- ---------------------------------------------------------------------------------------------------------------------------------
Service Corp. International Nov. 35 2,000 331,489 487,500 (156,011)
- ---------------------------------------------------------------------------------------------------------------------------------
Warner-Lambert Co. Jul. 100 1,000 484,484 481,250 3,234
- ---------------------------------------------------------------------------------------------------------------------------------
4,500 $1,548,448 $ 1,962,500 $ (414,052)
=================================================================================================================================
</TABLE>
FS-93
<PAGE> 195
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
the six months ended April 30, 1997 and each of the years in the nine-year
period ended October 31, 1996 and for a Class B share outstanding during the six
months ended April 30, 1997, the year ended October 31, 1996 and the period June
26, 1995 (date sales commenced) through October 31, 1995.
CLASS A:
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, --------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.19 $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42 $ 6.55
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income 0.06 0.19 0.15 0.21 0.17 0.18 0.18
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Net gains on securities (both
realized and unrealized) 0.93 1.43 2.11 (0.45) 1.22 0.16 2.15
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Total from investment
operations 0.99 1.62 2.26 (0.24) 1.39 0.34 2.33
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment
income (0.08) (0.16) (0.20) (0.16) (0.29) (0.17) (0.15)
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Distributions from capital gains (0.63) (0.90) (0.33) (0.16) -- (0.23) (0.31)
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Total distributions (0.71) (1.06) (0.53) (0.32) (0.29) (0.40) (0.46)
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 11.47 $ 11.19 $ 10.63 $ 8.90 $ 9.46 $ 8.36 $ 8.42
================================== ========== ========== ========== ========== ========== ========== ========
Total return(a) 9.31% 16.70% 27.03% (2.55)% 16.92% 4.17% 37.65%
================================== ========== ========== ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,948,273 $2,647,208 $1,974,417 $1,579,074 $1,690,482 $1,256,151 $443,546
================================== ========== ========== ========== ========== ========== ========== ========
Ratio of expenses to average net
assets 1.10%(b)(c) 1.12% 1.17% 1.17% 1.17% 1.17% 1.29%
================================== ========== ========== ========== ========== ========== ========== ========
Ratio of net investment income to
average net assets 0.98%(b) 1.81% 1.55% 2.32% 1.89% 2.14% 2.14%
================================== ========== ========== ========== ========== ========== ========== ========
Portfolio turnover rate 95% 164% 161% 126% 144% 95% 144%
================================== ========== ========== ========== ========== ========== ========== ========
Average broker commission rate(d) $ 0.0623 $ 0.0638 N/A N/A N/A N/A N/A
================================== ========== ========== ========== ========== ========== ========== ========
<CAPTION>
OCTOBER 31,
----------------------------
1990 1989 1988
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 6.97 $ 5.40 $ 6.61
- ---------------------------------- -------- ------- -------
Income from investment operations:
Net investment income 0.18 0.21 0.15
- ---------------------------------- -------- ------- -------
Net gains on securities (both
realized and unrealized) 0.08 1.55 0.16
- ---------------------------------- -------- ------- -------
Total from investment
operations 0.26 1.76 0.31
- ---------------------------------- -------- ------- -------
Less distributions:
Dividends from net investment
income (0.26) (0.19) (0.12)
- ---------------------------------- -------- ------- -------
Distributions from capital gains (0.42) -- (1.40)
- ---------------------------------- -------- ------- -------
Total distributions (0.68) (0.19) (1.52)
- ---------------------------------- -------- ------- -------
Net asset value, end of period $ 6.55 $ 6.97 $ 5.40
================================== ======== ======= =======
Total return(a) 3.86% 33.68% 5.90%
================================== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $102,499 $70,997 $65,799
================================== ======== ======= =======
Ratio of expenses to average net
assets 1.35% 1.35% 1.46%
================================== ======== ======= =======
Ratio of net investment income to
average net assets 2.51% 3.73% 2.83%
================================== ======== ======= =======
Portfolio turnover rate 215% 131% 247%
================================== ======== ======= =======
Average broker commission rate(d) N/A N/A N/A
================================== ======== ======= =======
</TABLE>
(a) Does not deduct sales charges and are not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $2,885,632,617.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratios of expenses to average net assets would have been 1.09%.
(d) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
CLASS B:
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, -------------------
1997 1996 1995
--------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.18 $ 10.62 $ 9.81
- ------------------------------------------------------------ -------- -------- -------
Income from investment operations:
Net investment income 0.01 0.10 0.03
- ------------------------------------------------------------ -------- -------- -------
Net gains on securities (both realized and unrealized) 0.93 1.45 0.80
- ------------------------------------------------------------ -------- -------- -------
Total from investment operations 0.94 1.55 0.83
- ------------------------------------------------------------ -------- -------- -------
Less distributions:
Dividends from net investment income (0.04) (0.09) (0.02)
- ------------------------------------------------------------ -------- -------- -------
Distributions from capital gains (0.63) (0.90) --
- ------------------------------------------------------------ -------- -------- -------
Total distributions (0.67) (0.99) (0.02)
- ------------------------------------------------------------ -------- -------- -------
Net asset value, end of period $ 11.45 $ 11.18 $ 10.62
============================================================ ======== ======== =======
Total return(a) 8.87% 15.90% 8.48%
============================================================ ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $752,281 $515,672 $67,592
============================================================ ======== ======== =======
Ratio of expenses to average net assets 1.85%(b)(c) 1.94% 1.98%(d)
============================================================ ======== ======== =======
Ratio of net investment income to average net assets 0.22%(b) 0.99% 0.74%(d)
============================================================ ======== ======== =======
Portfolio turnover rate 95% 164% 161%
============================================================ ======== ======== =======
Average broker commission rate(e) $ 0.0623 $ 0.0638 N/A
============================================================ ======== ======== =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charge and are not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $646,072,131.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratios of expenses to average net assets would have remained the same.
(d) Annualized.
(e) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-94
<PAGE> 196
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
Charter 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 approve the elimination of provisions of a fundamental investment policy
prohibiting or restricting investments in puts, calls, straddles and
spreads.
(6) To approve the elimination of the fundamental investment policy prohibiting
investments in companies with less than five years of continuous operation.
(7) 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............ 173,793,114 2,961,324 7,253,671
(3) Approval of Sub-Advisory Agreement.......................... 173,153,366 3,196,109 7,658,634
(4) Elimination of Policy concerning Other Investment
Companies................................................... 132,189,441 5,578,624 7,737,685
(5) Elimination of Policy concerning Puts, Calls, Straddles and
Spreads..................................................... 130,439,316 6,922,517 8,143,916
(6) Elimination of Policy concerning Companies with Less Than
Five Years of Continuous Operation.......................... 131,139,307 6,923,959 7,442,483
(7) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
FS-95
<PAGE> 197
SCHEDULE OF INVESTMENTS
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-82.79%
ADVERTISING/BROADCASTING-0.29%
Interpublic Group of Companies,
Inc. 275,000 $ 15,571,875
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.63%
Gulfstream Aerospace Corp.(a) 444,300 11,329,650
- ---------------------------------------------------------------
United Technologies Corp. 300,000 22,687,500
- ---------------------------------------------------------------
34,017,150
- ---------------------------------------------------------------
APPLIANCES-0.25%
Sunbeam Corp., Inc. 425,000 13,493,750
- ---------------------------------------------------------------
BANKING-1.11%
NationsBank Corp. 1,000,000 60,375,000
- ---------------------------------------------------------------
BANKING (MONEY CENTER)-0.51%
Chase Manhattan Corp. 300,000 27,787,500
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.09%
PepsiCo, Inc. 143,000 4,987,125
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.89%
Amgen, Inc.(a) 250,000 14,718,750
- ---------------------------------------------------------------
Biogen, Inc.(a) 621,600 19,891,200
- ---------------------------------------------------------------
Guidant Corp. 200,000 13,650,000
- ---------------------------------------------------------------
48,259,950
- ---------------------------------------------------------------
BUSINESS SERVICES-2.17%
AccuStaff, Inc.(a) 1,800,000 32,850,000
- ---------------------------------------------------------------
Cognizant Corp. 935,700 30,527,213
- ---------------------------------------------------------------
Diebold, Inc. 450,150 15,080,025
- ---------------------------------------------------------------
Equifax, Inc. 1,000,000 28,750,000
- ---------------------------------------------------------------
Ingram Micro, Inc.(a)-Class A 457,200 10,401,300
- ---------------------------------------------------------------
117,608,538
- ---------------------------------------------------------------
CHEMICALS-0.27%
Monsanto Co. 341,900 14,616,225
- ---------------------------------------------------------------
COMPUTER MAINFRAMES-0.59%
International Business Machines
Corp. 200,000 32,150,000
- ---------------------------------------------------------------
COMPUTER MINI/PCS-3.14%
Compaq Computer Corp.(a) 500,000 42,687,500
- ---------------------------------------------------------------
Dell Computer Corp.(a) 350,000 29,290,625
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 350,000 19,206,250
- ---------------------------------------------------------------
Hewlett-Packard Co. 679,500 35,673,750
- ---------------------------------------------------------------
Stratus Computer, Inc.(a) 240,800 9,361,100
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,191,300 34,324,331
- ---------------------------------------------------------------
170,543,556
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-0.57%
Ascend Communications, Inc.(a) 350,000 $ 16,012,500
- ---------------------------------------------------------------
Belden, Inc. 483,300 14,861,475
- ---------------------------------------------------------------
30,873,975
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-1.68%
Adaptec, Inc.(a) 700,000 25,900,000
- ---------------------------------------------------------------
American Power Conversion
Corp.(a) 489,200 9,417,100
- ---------------------------------------------------------------
EMC Corp.(a) 400,000 14,550,000
- ---------------------------------------------------------------
Seagate Technology, Inc.(a) 625,000 28,671,875
- ---------------------------------------------------------------
Storage Technology Corp.(a) 360,000 12,645,000
- ---------------------------------------------------------------
91,183,975
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-4.52%
Adobe Systems, Inc. 500,000 19,562,500
- ---------------------------------------------------------------
BMC Software, Inc.(a) 290,000 12,542,500
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 500,000 16,000,000
- ---------------------------------------------------------------
Computer Associates
International, Inc. 36,000 1,872,000
- ---------------------------------------------------------------
Compuware Corp.(a) 700,000 26,425,000
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 450,000 10,856,250
- ---------------------------------------------------------------
Fiserv, Inc.(a) 708,600 26,749,650
- ---------------------------------------------------------------
HBO & Co. 600,000 32,100,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 300,000 36,450,000
- ---------------------------------------------------------------
National Data Corp. 343,100 12,866,250
- ---------------------------------------------------------------
Parametric Technology Co.(a) 300,000 13,575,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 700,000 18,112,500
- ---------------------------------------------------------------
Synopsys, Inc.(a) 210,900 6,722,438
- ---------------------------------------------------------------
Wallace Computer Services, Inc. 425,000 11,368,750
- ---------------------------------------------------------------
245,202,838
- ---------------------------------------------------------------
CONGLOMERATES-2.66%
AlliedSignal Inc. 292,200 21,111,450
- ---------------------------------------------------------------
Corning Inc. 375,000 18,093,750
- ---------------------------------------------------------------
Johnson Controls, Inc. 400,000 15,350,000
- ---------------------------------------------------------------
Loews Corp. 450,000 41,343,750
- ---------------------------------------------------------------
Tyco International Ltd. 500,000 30,500,000
- ---------------------------------------------------------------
U.S. Industries, Inc.(a) 500,000 18,062,500
- ---------------------------------------------------------------
144,461,450
- ---------------------------------------------------------------
CONTAINERS-0.31%
Sealed Air Corp.(a) 369,000 17,066,250
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-1.46%
Dial Corp. 1,000,000 15,500,000
- ---------------------------------------------------------------
McKesson Corp. 67,200 4,863,600
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 350,000 44,012,500
- ---------------------------------------------------------------
</TABLE>
FS-96
<PAGE> 198
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COSMETICS & TOILETRIES-(CONTINUED)
Warner-Lambert Co. 150,000 $ 14,700,000
- ---------------------------------------------------------------
79,076,100
- ---------------------------------------------------------------
ELECTRIC POWER-0.30%
AES Corp.(a) 250,000 16,312,500
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.82%
General Electric Co. 300,000 33,262,500
- ---------------------------------------------------------------
Honeywell, Inc. 330,400 23,334,500
- ---------------------------------------------------------------
Symbol Technologies, Inc. 670,100 21,694,487
- ---------------------------------------------------------------
Teradyne, Inc.(a) 950,000 31,112,500
- ---------------------------------------------------------------
Thermo Instrument Systems,
Inc.(a) 538,500 16,895,437
- ---------------------------------------------------------------
Waters Corp.(a) 901,900 26,718,787
- ---------------------------------------------------------------
153,018,211
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.87%
Franklin Resources, Inc. 406,500 24,034,312
- ---------------------------------------------------------------
T. Rowe Price Associates 500,000 23,125,000
- ---------------------------------------------------------------
47,159,312
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-5.10%
Federal Home Loan Mortgage Corp. 1,403,800 44,746,125
- ---------------------------------------------------------------
Federal National Mortgage
Association 1,134,500 46,656,313
- ---------------------------------------------------------------
Finova Group, Inc. 227,000 15,577,875
- ---------------------------------------------------------------
Green Tree Financial Corp. 611,400 18,112,725
- ---------------------------------------------------------------
Household International, Inc. 175,000 15,400,000
- ---------------------------------------------------------------
Money Store, Inc. (The) 1,013,500 21,916,937
- ---------------------------------------------------------------
Student Loan Marketing
Association 952,900 112,680,425
- ---------------------------------------------------------------
SunAmerica, Inc. 33,400 1,536,400
- ---------------------------------------------------------------
276,626,800
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-1.52%
H.F. Ahmanson & Co. 800,000 30,500,000
- ---------------------------------------------------------------
ContiFinancial Corp.(a) 342,600 9,849,750
- ---------------------------------------------------------------
Great Western Financial Corp. 1,000,000 42,000,000
- ---------------------------------------------------------------
82,349,750
- ---------------------------------------------------------------
FOOD/PROCESSING-1.37%
ConAgra, Inc. 550,000 31,693,750
- ---------------------------------------------------------------
Dean Foods Co. 725,000 26,734,375
- ---------------------------------------------------------------
Lancaster Colony Corp. 394,233 16,212,832
- ---------------------------------------------------------------
74,640,957
- ---------------------------------------------------------------
FUNERAL SERVICES-0.82%
Service Corp. International 1,305,600 44,716,800
- ---------------------------------------------------------------
FURNITURE-0.30%
Furniture Brands International,
Inc.(a) 1,108,900 16,356,275
- ---------------------------------------------------------------
GAMING-0.23%
International Game Technology 800,000 12,700,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOTELS/MOTELS-0.97%
HFS, Inc.(a) 350,000 $ 20,737,500
- ---------------------------------------------------------------
Host Marriott Corp.(a) 208,500 3,622,687
- ---------------------------------------------------------------
Marriot International, Inc. 515,000 28,453,750
- ---------------------------------------------------------------
52,813,937
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.23%
Conseco Inc. 1,148,900 47,535,738
- ---------------------------------------------------------------
Equitable Companies, Inc. 500,000 14,625,000
- ---------------------------------------------------------------
Equitable of Iowa Companies 92,800 4,535,600
- ---------------------------------------------------------------
66,696,338
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-3.28%
Allstate Corp. 565,300 37,027,150
- ---------------------------------------------------------------
American International Group,
Inc. 225,000 28,912,500
- ---------------------------------------------------------------
Everest Re Holdings, Inc. 800,500 23,014,375
- ---------------------------------------------------------------
ITT Hartford Group, Inc. 375,000 27,937,500
- ---------------------------------------------------------------
MBIA, Inc. 150,000 14,606,250
- ---------------------------------------------------------------
MGIC Investment Corp. 200,000 16,250,000
- ---------------------------------------------------------------
Travelers Group, Inc. 550,000 30,456,250
- ---------------------------------------------------------------
178,204,025
- ---------------------------------------------------------------
LEISURE & RECREATION-0.81%
Carnival Corp.-Class A 800,000 29,500,000
- ---------------------------------------------------------------
Walt Disney Co. (The) 175,000 14,350,000
- ---------------------------------------------------------------
43,850,000
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.59%
Caterpillar Inc. 175,000 15,575,000
- ---------------------------------------------------------------
Ingersoll-Rand Co. 334,100 16,412,663
- ---------------------------------------------------------------
31,987,663
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.06%
Thermo Electron Corp.(a) 1,664,400 57,421,800
- ---------------------------------------------------------------
MEDICAL (DRUGS)-6.24%
Abbott Laboratories 250,000 15,250,000
- ---------------------------------------------------------------
American Home Products Corp. 900,000 59,625,000
- ---------------------------------------------------------------
AmeriSource Health Corp.-Class
A(a) 500,000 22,312,500
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 500,000 32,750,000
- ---------------------------------------------------------------
Cardinal Health, Inc. 500,000 26,625,000
- ---------------------------------------------------------------
ICN Pharmaceuticals, Inc. 1,200,000 25,350,000
- ---------------------------------------------------------------
Johnson & Johnson 500,000 30,625,000
- ---------------------------------------------------------------
Merck & Co., Inc. 500,000 45,250,000
- ---------------------------------------------------------------
Pfizer, Inc. 300,000 28,800,000
- ---------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 180,000 12,982,500
- ---------------------------------------------------------------
Schering-Plough Corp. 175,000 14,000,000
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 700,000 25,025,000
- ---------------------------------------------------------------
338,595,000
- ---------------------------------------------------------------
</TABLE>
FS-97
<PAGE> 199
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-3.71%
Columbia/HCA Healthcare Corp. 875,000 $ 30,625,000
- ---------------------------------------------------------------
Health Care and Retirement
Corp.(a) 222,350 7,031,819
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 1,400,000 27,650,000
- ---------------------------------------------------------------
MedPartners, Inc.(a) 1,100,000 20,075,000
- ---------------------------------------------------------------
Oxford Health Plans, Inc.(a) 300,000 19,762,500
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 1,000,000 31,125,000
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 1,100,000 28,600,000
- ---------------------------------------------------------------
United Healthcare Corp. 550,000 26,743,750
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 262,000 9,923,250
- ---------------------------------------------------------------
201,536,319
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-2.96%
Baxter International Inc. 1,000,000 47,875,000
- ---------------------------------------------------------------
Becton, Dickinson & Co. 600,000 27,600,000
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 300,000 14,475,000
- ---------------------------------------------------------------
DePuy, Inc.(a) 172,200 3,616,200
- ---------------------------------------------------------------
Stryker Corp.(a) 701,600 23,065,100
- ---------------------------------------------------------------
Sybron International Corp.(a) 941,900 31,318,175
- ---------------------------------------------------------------
US Surgical Corp. 375,000 12,843,750
- ---------------------------------------------------------------
160,793,225
- ---------------------------------------------------------------
OFFICE AUTOMATION-0.28%
Xerox Corp. 250,000 15,375,000
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.42%
Reynolds & Reynolds Co.-Class A 1,100,000 22,825,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.24%
Reading & Bates Corp.(a) 575,000 12,865,625
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-1.98%
Exxon Corp. 1,010,000 57,191,250
- ---------------------------------------------------------------
Halliburton Co. 400,000 28,250,000
- ---------------------------------------------------------------
Louisiana Land & Exploration
Co.(a) 360,800 18,040,000
- ---------------------------------------------------------------
Unocal Corp. 108,900 4,151,813
- ---------------------------------------------------------------
107,633,063
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.71%
Baker Hughes, Inc. 550,100 18,978,450
- ---------------------------------------------------------------
BJ Services Co.(a) 142,800 6,729,450
- ---------------------------------------------------------------
Coastal Corp. 300,000 14,250,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 95,300 6,790,125
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 675,000 12,150,000
- ---------------------------------------------------------------
Schlumberger Ltd. 200,000 22,150,000
- ---------------------------------------------------------------
Tidewater, Inc. 300,000 12,037,500
- ---------------------------------------------------------------
93,085,525
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.60%
Kimberly-Clark Corp. 640,500 32,825,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
POLLUTION CONTROL-0.71%
USA Waste Services, Inc.(a) 800,000 $ 26,200,000
- ---------------------------------------------------------------
US Filter Corp.(a) 399,900 12,146,962
- ---------------------------------------------------------------
38,346,962
- ---------------------------------------------------------------
PUBLISHING-0.54%
Gannett Company, Inc. 97,600 8,515,600
- ---------------------------------------------------------------
New York Times Co.-Class A 325,000 14,056,250
- ---------------------------------------------------------------
Times Mirror Co. 122,400 6,762,600
- ---------------------------------------------------------------
29,334,450
- ---------------------------------------------------------------
RESTAURANTS-0.49%
Applebee's International, Inc. 630,800 14,744,950
- ---------------------------------------------------------------
Boston Chicken, Inc.(a) 500,000 11,937,500
- ---------------------------------------------------------------
26,682,450
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.68%
American Stores Co. 456,000 20,748,000
- ---------------------------------------------------------------
Kroger Co.(a) 997,200 27,423,000
- ---------------------------------------------------------------
Rite Aid Corp. 650,000 29,900,000
- ---------------------------------------------------------------
Safeway, Inc.(a) 300,000 13,387,500
- ---------------------------------------------------------------
91,458,500
- ---------------------------------------------------------------
RETAIL (STORES)-5.79%
Barnes & Noble, Inc.(a) 111,200 4,170,000
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 575,000 15,740,625
- ---------------------------------------------------------------
Consolidated Stores Corp.(a) 562,500 22,500,000
- ---------------------------------------------------------------
Costco Companies, Inc.(a) 1,100,000 31,762,500
- ---------------------------------------------------------------
CVS Corp. 450,000 22,331,250
- ---------------------------------------------------------------
Dayton Hudson Corp. 425,000 19,125,000
- ---------------------------------------------------------------
Gap, Inc. 140,800 4,488,000
- ---------------------------------------------------------------
Home Depot, Inc. 250,000 14,500,000
- ---------------------------------------------------------------
Jones Apparel Group, Inc.(a) 200,000 8,350,000
- ---------------------------------------------------------------
Lowe's Companies, Inc. 1,080,000 41,040,000
- ---------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 1,000,000 32,625,000
- ---------------------------------------------------------------
Ross Stores, Inc. 525,000 14,765,625
- ---------------------------------------------------------------
Sysco Corp. 298,600 10,600,300
- ---------------------------------------------------------------
Tech Data Corp.(a) 786,800 19,276,600
- ---------------------------------------------------------------
TJX Companies, Inc. 325,000 15,356,250
- ---------------------------------------------------------------
Toys "R" Us, Inc.(a) 550,000 15,675,000
- ---------------------------------------------------------------
U.S. Office Products Co.(a) 850,000 21,675,000
- ---------------------------------------------------------------
313,981,150
- ---------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.30%
Perkin-Elmer Corp. 225,000 16,340,625
- ---------------------------------------------------------------
SEMICONDUCTORS-5.95%
Advanced Micro Devices, Inc.(a) 600,000 25,500,000
- ---------------------------------------------------------------
Analog Devices, Inc.(a) 500,000 13,375,000
- ---------------------------------------------------------------
Applied Materials, Inc.(a) 1,200,000 65,850,000
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 638,900 8,864,738
- ---------------------------------------------------------------
</TABLE>
FS-98
<PAGE> 200
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-(CONTINUED)
Intel Corp. 100,000 $ 15,312,500
- ---------------------------------------------------------------
KLA Instruments Corp.(a) 700,000 31,150,000
- ---------------------------------------------------------------
Linear Technology Corp. 300,000 15,075,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 425,000 16,256,250
- ---------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 300,000 15,862,500
- ---------------------------------------------------------------
Micron Technology, Inc. 850,000 29,962,500
- ---------------------------------------------------------------
Motorola, Inc. 450,000 25,762,500
- ---------------------------------------------------------------
National Semiconductor Corp.(a) 673,300 16,832,500
- ---------------------------------------------------------------
Novellus Systems, Inc.(a) 125,600 7,253,400
- ---------------------------------------------------------------
Texas Instruments, Inc. 400,000 35,700,000
- ---------------------------------------------------------------
322,756,888
- ---------------------------------------------------------------
TELECOMMUNICATIONS-2.83%
ADC Telecommunications, Inc.(a)(b) 750,000 19,593,750
- ---------------------------------------------------------------
Andrew Corp.(a) 525,000 12,993,750
- ---------------------------------------------------------------
Lucent Technologies, Inc. 600,000 35,475,000
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a) 500,000 13,000,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 800,000 31,900,000
- ---------------------------------------------------------------
WorldCom, Inc.(a) 1,700,000 40,800,000
- ---------------------------------------------------------------
153,762,500
- ---------------------------------------------------------------
TELEPHONE-0.23%
Cincinnati Bell, Inc. 225,000 12,600,000
- ---------------------------------------------------------------
TEXTILES-0.28%
Fruit of The Loom, Inc.-Class A(a) 415,100 14,943,600
- ---------------------------------------------------------------
TOBACCO-3.44%
Philip Morris Companies, Inc. 2,500,000 98,437,500
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 2,306,200 68,609,450
- ---------------------------------------------------------------
Universal Corp. 700,000 19,600,000
- ---------------------------------------------------------------
186,646,950
- ---------------------------------------------------------------
Total Domestic Common Stocks 4,494,518,082
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
DOMESTIC CONVERTIBLE PREFERRED STOCKS-1.19%
FINANCE (CONSUMER CREDIT)-0.43%
SunAmerica, Inc.-Series E,
$3.10 Conv. Pfd. 228,800 23,337,600
- ---------------------------------------------------------------
HOTELS/MOTELS-0.31%
Host Marriott Financial Trust-
$3.375 Conv. Pfd. (acquired
02/12/97-02/19/97; cost
$18,036,739)(c) 310,800 17,250,643
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.45%
MGIC Investment Corp.-$3.12 Conv.
Pfd. 347,600 24,288,550
- ---------------------------------------------------------------
Total Domestic Convertible Preferred
Stocks 64,876,793
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS & NOTES-1.42%
CHEMICALS-0.39%
Sandoz Capital BVI Ltd., Gtd.
Conv. Deb., 2.00%, 10/06/02
(acquired 11/01/96-11/05/96;
cost $18,721,100)(c) $17,000,000 $ 21,335,000
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.57%
SCI Systems, Inc., Conv. Sub.
Notes, 5.00%, 05/01/06 22,050,000 30,897,563
- ---------------------------------------------------------------
POLLUTION CONTROL-0.09%
US Filter Corp., Conv. Sub.
Notes, 6.00%, 09/15/05 2,700,000 4,683,475
- ---------------------------------------------------------------
SEMICONDUCTORS-0.37%
Altera Corp., Conv. Sub. Notes,
5.75%, 06/15/02
(acquired 01/17/97; cost
$16,951,400)(c) 10,000,000 20,278,700
- ---------------------------------------------------------------
Total Domestic Convertible Bonds & Notes 77,194,738
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-8.37%
CANADA-1.48%
Canadian Pacific, Ltd.
(Transportation) 585,000 14,259,375
- ---------------------------------------------------------------
Newbridge Networks Corp.(a)
(Computer Networking) 600,000 19,050,000
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 325,000 23,603,125
- ---------------------------------------------------------------
Philip Environmental, Inc.(a)
(Pollution Control) 1,500,000 23,625,000
- ---------------------------------------------------------------
80,537,500
- ---------------------------------------------------------------
FINLAND-0.29%
Nokia Oy A.B.-Class A-ADR
(Telecommunications) 240,000 15,510,000
- ---------------------------------------------------------------
FRANCE-0.51%
Elf Aquitaine S.A. (Oil &
Gas-Services) 285,000 27,638,139
- ---------------------------------------------------------------
GERMANY-0.30%
Adidas A.G. (Shoes & Related
Apparel) 78,800 8,213,073
- ---------------------------------------------------------------
VEBA A.G. (Electric Power) 158,000 8,138,122
- ---------------------------------------------------------------
16,351,195
- ---------------------------------------------------------------
HONG KONG-0.88%
HSBC Holdings PLC (Banking) 820,000 20,747,434
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Real Estate) 2,505,000 27,163,235
- ---------------------------------------------------------------
47,910,669
- ---------------------------------------------------------------
IRELAND-0.36%
Elan Corp.
PLC-ADR(a)(Medical-Drugs) 580,000 19,720,000
- ---------------------------------------------------------------
ISRAEL-0.38%
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 405,800 20,594,350
- ---------------------------------------------------------------
</TABLE>
FS-99
<PAGE> 201
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ITALY-0.64%
Telecom Italia Mobile S.p.A.
(Telecommunications) 6,000,000 $ 18,821,674
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 6,000,000 15,885,058
- ---------------------------------------------------------------
34,706,732
- ---------------------------------------------------------------
MALAYSIA-0.20%
Malayan Banking Berhad (Banking) 1,074,000 10,693,803
- ---------------------------------------------------------------
NETHERLANDS-1.05%
Gucci Group N.V.-ADR-New York
Registered Shares (Textiles) 250,000 17,343,750
- ---------------------------------------------------------------
Philips Electronics N.V.-ADR-New
York Shares (Appliances) 320,300 17,136,050
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New
York Shares (Oil &
Gas-Services) 125,000 22,531,250
- ---------------------------------------------------------------
57,011,050
- ---------------------------------------------------------------
SWEDEN-0.55%
Telefonaktiebolaget LM
Ericsson-ADR
(Telecommunications) 881,300 29,633,713
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-1.73%
Danka Business Systems PLC-ADR
(Office Automation) 401,900 $ 12,283,069
- ---------------------------------------------------------------
Granada Group PLC (Leisure &
Recreation) 1,330,000 19,184,765
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 775,000 62,484,375
- ---------------------------------------------------------------
93,952,209
- ---------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 454,259,360
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
COMMERCIAL PAPER TRUST-0.55%
Citibank, N.A., 5.895%,
12/26/97(d) $30,000,000 30,000,000
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS(e)-5.24%
Goldman, Sachs & Co., 5.375%,
05/01/97(f) 86,853,893 86,853,893
- ---------------------------------------------------------------
HSBC Securities, Inc., 5.55%,
05/01/97(g) 197,510,181 197,510,181
- ---------------------------------------------------------------
Total Repurchase Agreements 284,364,074
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.56% 5,405,213,047
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.44% 23,707,955
- ---------------------------------------------------------------
TOTAL NET ASSETS-100.00% $5,428,921,002
===============================================================
</TABLE>
Abbreviations:
<TABLE>
<S> <C>
ADR -American Depository Receipt
Conv. -Convertible
Pfd. -Preferred
Gtd. -Guaranteed
Sub. -Subordinated
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security
(b) A portion of this security is subject to call options written. See Note 6.
(c) Restricted Security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at April 30, 1997 was $58,864,343
which represented 1.08% of the Fund's net assets.
(d) Variable rate trust certificates representing an interest in a trust
(comprised of eligible debt obligations) entitling the Fund 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 April 30, 1997.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% 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.
(f) Joint repurchase agreement entered into on 04/30/97 with maturing value of
$701,547,221. Collateralized by $757,320,000 U.S. Treasury obligations, 0%
to 8.875% due 07/17/97 to 02/15/26 with an aggregate market value at April
30, 1997 of $716,184,843.
(g) Joint repurchase agreement entered into on 04/30/97 with maturing value of
$500,077,083. Collateralized by $285,655,288 U.S. Government agency
obligations, 0% to 8.00% due 04/01/19 to 12/01/35 and $321,339,000 U.S.
Treasury obligations, 4.75% to 9.25% due 09/30/97 to 10/31/99 with an
aggregate market value at April 30, 1997 of $510,003,616.
See Notes to Financial Statements.
FS-100
<PAGE> 202
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$4,524,773,802) $5,405,213,047
- --------------------------------------------------------
Foreign currencies, at market value
(cost $10,528) 10,792
- --------------------------------------------------------
Receivables for:
Investments sold 90,580,668
- --------------------------------------------------------
Options purchased 281,250
- --------------------------------------------------------
Capital stock sold 4,604,126
- --------------------------------------------------------
Dividends and interest 4,277,796
- --------------------------------------------------------
Investment for deferred compensation
plan 66,430
- --------------------------------------------------------
Other assets 126,497
- --------------------------------------------------------
Total assets 5,505,160,606
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 59,109,537
- --------------------------------------------------------
Options written 750,000
- --------------------------------------------------------
Capital stock reacquired 9,292,445
- --------------------------------------------------------
Deferred compensation 66,430
- --------------------------------------------------------
Accrued advisory fees 2,614,487
- --------------------------------------------------------
Accrued administrative service fees 10,510
- --------------------------------------------------------
Accrued distribution fees 2,109,588
- --------------------------------------------------------
Accrued transfer agent fees 1,541,871
- --------------------------------------------------------
Accrued operating expenses 744,736
- --------------------------------------------------------
Total liabilities 76,239,604
- --------------------------------------------------------
Net assets applicable to shares
outstanding $5,428,921,002
========================================================
NET ASSETS:
Class A $5,014,448,112
========================================================
Class B $ 351,019,539
========================================================
Institutional Class $ 63,453,351
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
CLASS A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 264,935,631
========================================================
CLASS B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 18,779,084
========================================================
INSTITUTIONAL CLASS:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 3,310,794
- --------------------------------------------------------
CLASS A:
Net asset value and redemption price
per share $ 18.93
========================================================
Offering price per share:
(Net asset value of
$18.93 divided by 94.50%) $ 20.03
========================================================
CLASS B:
Net asset value and offering price per
share $ 18.69
========================================================
INSTITUTIONAL CLASS:
Net asset value, offering and
redemption price per share $ 19.17
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $396,081 foreign
withholding tax) $ 24,799,615
- ----------------------------------------------------------
Interest 6,302,042
- ----------------------------------------------------------
Total investment income 31,101,657
- ----------------------------------------------------------
EXPENSES:
Advisory fees 17,460,585
- ----------------------------------------------------------
Administrative service fees 73,693
- ----------------------------------------------------------
Custodian fees 191,071
- ----------------------------------------------------------
Directors' fees 15,990
- ----------------------------------------------------------
Distribution fees-Class A 7,688,203
- ----------------------------------------------------------
Distribution fees-Class B 1,589,373
- ----------------------------------------------------------
Transfer agent fees-Class A 4,286,458
- ----------------------------------------------------------
Transfer agent fees-Class B 385,368
- ----------------------------------------------------------
Transfer agent fees-Institutional Class 2,855
- ----------------------------------------------------------
Other 847,420
- ----------------------------------------------------------
Total expenses 32,541,016
- ----------------------------------------------------------
Less: Fees waived by advisor (949,019)
- ----------------------------------------------------------
Expenses paid indirectly (45,865)
- ----------------------------------------------------------
Net expenses 31,546,132
- ----------------------------------------------------------
Net investment (loss) (444,475)
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 447,720,009
- ----------------------------------------------------------
Foreign currencies (2,571,094)
- ----------------------------------------------------------
Options contracts 4,829,479
- ----------------------------------------------------------
449,978,394
- ----------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (153,788,488)
- ----------------------------------------------------------
Foreign currencies (53,868)
- ----------------------------------------------------------
Options contracts 2,178,320
- ----------------------------------------------------------
(151,664,036)
- ----------------------------------------------------------
Net gain on investment securities,
foreign currencies and option
contracts 298,314,358
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $ 297,869,883
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-101
<PAGE> 203
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the year ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (444,475) $ 14,147,587
- ----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies, futures and options contracts 449,978,394 590,548,116
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies, and options contracts (151,664,036) 79,138,554
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 297,869,883 683,834,257
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (14,825,812) --
- ----------------------------------------------------------------------------------------------
Institutional Class (446,594) --
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (552,424,286) (606,609,217)
- ----------------------------------------------------------------------------------------------
Class B (32,141,402) (7,814,517)
- ----------------------------------------------------------------------------------------------
Institutional Class (6,654,246) (7,332,667)
- ----------------------------------------------------------------------------------------------
Net equalization credits:
Class A 1,412,885 2,368,957
- ----------------------------------------------------------------------------------------------
Class B 62,469 992,175
- ----------------------------------------------------------------------------------------------
Institutional Class 86,077 65,590
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 322,422,079 362,344,237
- ----------------------------------------------------------------------------------------------
Class B 101,653,884 210,825,508
- ----------------------------------------------------------------------------------------------
Institutional Class 6,470,978 5,462,015
- ----------------------------------------------------------------------------------------------
Net increase in net assets 123,485,915 644,136,338
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,305,435,087 4,661,298,749
- ----------------------------------------------------------------------------------------------
End of period $5,428,921,002 $5,305,435,087
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,079,731,400 $3,649,184,459
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 30,361,176 44,516,626
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies, futures and options
contracts 439,469,771 580,711,311
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and option contracts 879,358,655 1,031,022,691
- ----------------------------------------------------------------------------------------------
$5,428,921,002 $5,305,435,087
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-102
<PAGE> 204
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series 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 Weingarten Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund and AIM Constellation Fund. The Fund
currently offers three different classes of shares: the Class A shares, Class B
shares and the Institutional Class. Matters affecting each portfolio or class
will be voted on exclusively by such shareholders. The assets, liabilities and
operations of each portfolio are accounted for separately. The Fund's investment
objective is to seek growth of capital principally through investment in common
stocks of seasoned and better capitalized companies. Information presented in
these financial statements pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange (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. 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 an independent pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, corporate and maturity date. Securities for
which market quotations are not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Company's officers in a manner specifically authorized by the Board
of Directors of the Company. Short-term obligations having 60 days or less
to maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
or under the supervision of the Board of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a currency contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the
U.S. dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include
the possibility of an illiquid market and that a change in the value of
the contract may not correlate with changes in the securities being hedged.
E. Covered Call Options--The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent
FS-103
<PAGE> 205
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The current market
value of a written option is the mean between the last bid and asked prices
on that day. If a written call option expires on the stipulated expiration
date, or if the Fund enters into a closing purchase transaction, the Fund
realizes a gain (or a loss if the closing purchase transaction exceeds the
premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised,
the Fund realizes a gain or a loss from the sale of the underlying security
and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Put options--The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, a
Fund pays an option premium. The option's underlying instrument may be a
security, or a futures contract. Put options may be used by a Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or
a portion of the Fund's resulting losses. At the same time, because the
maximum the Fund has at risk is the cost of the option, purchasing put
options does not eliminate the potential for the Fund to profit from an
increase in the value of the securities hedged.
G. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
H. 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.
I. 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.
J. Equalization--The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and the costs of repurchases
of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of 1.0%
of the first $30 million of the Fund's average daily net assets, plus 0.75% of
the Fund's average daily net assets in excess of $30 million to and including
$350 million, plus 0.625% of the Fund's average daily net assets in excess of
$350 million. AIM is currently voluntarily waiving a portion of its advisory
fees payable by the Fund to AIM to the extent necessary to reduce the fees paid
by the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver of fees is entirely voluntary but approval is
required by the Board of Directors of the Company for any decision by AIM to
discontinue the waiver. During the six months ended April 30, 1997, AIM waived
fees of $949,019. 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.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $73,693 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A shares and Class B shares. During the
six months ended April 30, 1997, AFS was reimbursed $2,228,690 for such
services.
During the six months ended April 30, 1997, the Fund, pursuant to a transfer
agency and service agreement, paid A I M Institutional Fund Services, Inc.
("AIFS") $2,855 for shareholder and transfer agency services with respect to the
Institutional Class.
FS-104
<PAGE> 206
The Fund received reductions in transfer agency fees of $42,960 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $2,905 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $45,865 during the six months ended
April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A and Class B shares and a master distribution agreement with Fund
Management Company ("FMC") to serve as the distributor for the Institutional
Class. The Company has adopted Plans pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares (the "Class A Plan") and with respect
to the Fund's Class B shares (the "Class B Plan") (collectively, the "Plans").
The Fund, pursuant to the Class A Plan, pays AIM Distributors compensation at
the annual rate of 0.30% of the average daily net assets attributable to the
Class A shares. The Class A Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own Class A shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
B shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares of the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more designees, its rights to all or a designated portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges received by AIM
Distributors related to the Class B shares. During the six months ended April
30, 1997, the Class A shares and the Class B shares paid AIM Distributors
$7,688,203 and $1,589,373, respectively, as compensation under the Plans.
AIM Distributors received commissions of $831,559 from sales of shares of the
Class A shares of the Fund during the year six months ended April 30, 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 six months
ended April 30, 1997, AIM Distributors received commissions of $24,937 in
contingent deferred sales charges imposed on 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 six months ended April 30, 1997, the Fund paid legal fees of
$10,693 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-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended April 30, 1997 was $3,610,400,083
and $4,082,664,624, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of April 30, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 980,079,896
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (105,092,131)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $ 874,987,765
==========================================================
</TABLE>
Cost of investments for tax purposes is $4,530,225,282.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund 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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 6-OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended April 30, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 55,804 $ 22,601,072
- -----------------------------------------------------------
Written 62,525 18,316,598
- -----------------------------------------------------------
Closed (79,359) (30,366,331)
- -----------------------------------------------------------
Exercised (9,500) (3,963,917)
- -----------------------------------------------------------
Expired (21,970) (6,081,525)
- -----------------------------------------------------------
End of period 7,500 $ 505,897
- -----------------------------------------------------------
</TABLE>
FS-105
<PAGE> 207
Open call option contracts written at April 30, 1997 were as follows:
<TABLE>
<CAPTION>
APRIL 30, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
ISSUE -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ADC Telecommunications, Inc. April 27 75 $505,897 $750,000 $(244,103)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 7-PUT OPTIONS WRITTEN
Transactions in put options purchased during the six months ended April 30, 1997
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ----------
<S> <C> <C>
Beginning of period -- --
- --------------------------------------------------------------------------------------
Purchased 7,500 $1,053,750
- --------------------------------------------------------------------------------------
Exercised -- --
- --------------------------------------------------------------------------------------
End of period 7,500 $1,053,750
- --------------------------------------------------------------------------------------
</TABLE>
Open put option contracts purchased at April 30, 1997 were as follows:
<TABLE>
<CAPTION>
APRIL 30, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
ISSUE -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ADC Telecommunications, Inc. April 22.5 75 $1,053,750 $281,250 $772,500
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in the capital stock outstanding during the six months ended April 30,
1997 and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 18,222,095 $353,778,240 34,550,539 $648,183,624
- ---------------------------------------------------------------------------------------------------------------------
Class B 5,136,342 98,559,132 12,381,545 231,706,372
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 187,453 3,617,225 516,716 9,877,153
- ---------------------------------------------------------------------------------------------------------------------
Issued as a reinvestment of dividends:
Class A 29,415,287 528,056,969 32,395,132 557,844,149
- ---------------------------------------------------------------------------------------------------------------------
Class B 1,715,463 30,689,638 425,933 7,326,082
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 313,585 5,650,803 338,803 5,871,449
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (29,281,788) (559,413,130) (44,929,759) (843,683,536)
- ---------------------------------------------------------------------------------------------------------------------
Class B (1,461,847) (27,594,886) (1,500,861) (28,206,946)
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class (146,120) (2,797,050) (552,275) (10,286,587)
- ---------------------------------------------------------------------------------------------------------------------
24,100,470 $430,546,941 33,625,773 $578,631,760
=====================================================================================================================
</TABLE>
FS-106
<PAGE> 208
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
the six months ended April 30, 1997, each of the years in the eight-year period
ended October 31, 1996 and the ten months ended October 31, 1988 and for a Class
B share outstanding during the six months ended April 30, 1997, the year ended
October 31, 1996 and the period June 26, 1995 (date sales commenced) through
October 31, 1995.
CLASS A:
<TABLE>
<CAPTION>
October 31,
April 30, ---------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.19 $ 20.33 $ 17.82 $ 17.62 $ 16.68 $ 15.76
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income -- 0.06 -- 0.07 0.10 0.10
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Net gains (losses) on securities (both
realized and unrealized) 1.04 2.51 4.36 0.57 0.93 0.98
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.04 2.57 4.36 0.64 1.03 1.08
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.06) -- (0.07) (0.11) (0.09) (0.07)
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized capital
gains (2.24) (2.71) (1.78) (0.33) -- (0.09)
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Total distributions (2.30) (2.71) (1.85) (0.44) (0.09) (0.16)
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.93 $ 20.19 $ 20.33 $ 17.82 $ 17.62 $ 16.68
========================================== ========== ========== ========== ========== ========== ==========
Total return(b) 5.67% 14.81% 28.20% 3.76% 6.17% 6.85%
========================================== ========== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,014,448 $4,977,493 $4,564,730 $3,965,858 $4,999,983 $5,198,835
========================================== ========== ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(c) 1.11%(d)(e) 1.12% 1.17% 1.21% 1.13% 1.13%
========================================== ========== ========== ========== ========== ========== ==========
Ratio of net investment income to average
net assets(g) 0.03%(d) 0.33% (0.02)% 0.45% 0.62% 0.60%
========================================== ========== ========== ========== ========== ========== ==========
Portfolio turnover rate 68% 159% 139% 136% 109% 37%
========================================== ========== ========== ========== ========== ========== ==========
Average broker commission rate paid(h) $ 0.0622 $ 0.0615 N/A N/A N/A N/A
========================================== ========== ========== ========== ========== ========== ==========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) -- -- -- -- -- --
========================================== ========== ========== ========== ========== ========== ==========
Average amount of debt outstanding during
the period (000s omitted)(i) -- -- $ 593 -- -- --
========================================== ========== ========== ========== ========== ========== ==========
Average number of shares outstanding
during the period (000s omitted)(i) 264,280 248,189 229,272 249,351 314,490 246,273
========================================== ========== ========== ========== ========== ========== ==========
Average amount of debt per share during
the period -- -- $ 0.003 -- -- --
========================================== ========== ========== ========== ========== ========== ==========
<CAPTION>
October 31,
---------------------------------------------
1991 1990 1989 1988(a)
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.15 $ 12.32 $ 9.23 $ 8.36
- ------------------------------------------ ---------- ---------- -------- --------
Income from investment operations:
Net investment income 0.11 0.09 0.10 0.07
- ------------------------------------------ ---------- ---------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 4.80 (0.56) 3.10 0.80
- ------------------------------------------ ---------- ---------- -------- --------
Total from investment operations 4.91 (0.47) 3.20 0.87
- ------------------------------------------ ---------- ---------- -------- --------
Less distributions:
Dividends from net investment income (0.09) (0.06) (0.11) --
- ------------------------------------------ ---------- ---------- -------- --------
Distributions from net realized capital
gains (0.21) (0.64) -- --
- ------------------------------------------ ---------- ---------- -------- --------
Total distributions (0.30) (0.70) (0.11) --
- ------------------------------------------ ---------- ---------- -------- --------
Net asset value, end of period $ 15.76 $ 11.15 $ 12.32 $ 9.23
========================================== ========== ========== ======== ========
Total return(b) 44.88% (4.03)% 35.13% 10.41%
========================================== ========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,534,331 $ 632,522 $393,320 $297,284
========================================== ========== ========== ======== ========
Ratio of expenses to average net assets(c) 1.18% 1.25% 1.19% 1.08%(f)
========================================== ========== ========== ======== ========
Ratio of net investment income to average
net assets(g) 0.72% 0.75% 0.96% 0.90%(f)
========================================== ========== ========== ======== ========
Portfolio turnover rate 46% 79% 87% 93%
========================================== ========== ========== ======== ========
Average broker commission rate paid(h) N/A N/A N/A N/A
========================================== ========== ========== ======== ========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) -- -- $ 3,781 --
========================================== ========== ========== ======== ========
Average amount of debt outstanding during
the period (000s omitted)(i) -- $ 485 $ 1,083 $ 229
========================================== ========== ========== ======== ========
Average number of shares outstanding
during the period (000s omitted)(i) 102,353 44,770 31,275 33,031
========================================== ========== ========== ======== ========
Average amount of debt per share during
the period -- $ 0.011 $ 0.035 $ 0.007
========================================== ========== ========== ======== ========
</TABLE>
(a) The Fund changed investment advisors on September 30, 1988.
(b) Does not deduct sales charges and, for periods less than one year, total
returns are not annualized.
(c) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.14% (annualized), 1.15%, 1.19%, 1.24%, 1.17% and 1.15% for the
periods 1997-1992, respectively.
(d) Ratios are annualized and based on average net assets of $5,167,944,740.
(e) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
(f) Annualized.
(g) After waiver of fees and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to waiver of fees and/or expense
reimbursements were 0.00% (annualized), 0.30%, (0.04%), 0.42%, 0.58% and
0.58% for the periods 1997-1992, respectively.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(i) Averages computed on a daily basis.
FS-107
<PAGE> 209
CLASS B:
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, ---------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 19.98 $ 20.28 $ 18.56
- ------------------------------------------------------------ ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.05) (0.05)(a) (0.03)
- ------------------------------------------------------------ ---------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) 1.00 2.46 1.75
- ------------------------------------------------------------ ---------- ---------- ----------
Total from investment operations 0.95 2.41 1.72
- ------------------------------------------------------------ ---------- ---------- ----------
Less distributions:
Distributions from capital gains (2.24) (2.71) --
- ------------------------------------------------------------ ---------- ---------- ----------
Net asset value, end of period $ 18.69 $ 19.98 $ 20.28
============================================================ ========== ========== ==========
Total return(b) 5.23% 13.95% 9.27%
============================================================ ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000's omitted) $ 351,020 $ 267,459 $ 42,238
============================================================ ========== ========== ==========
Ratio of expenses to average net assets(c) 1.88%(d)(e) 1.95% 1.91%(f)
============================================================ ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(g) (0.74)%(d) (0.50)% (0.76)%(f)
============================================================ ========== ========== ==========
Portfolio turnover rate 68% 159% 139%
============================================================ ========== ========== ==========
Average broker commission rate paid(h) $ 0.0622 $ 0.0615 N/A
============================================================ ========== ========== ==========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) -- -- --
============================================================ ========== ========== ==========
Average amount of debt outstanding during the
period (000s omitted)(i) -- -- $ 3
============================================================ ========== ========== ==========
Average number of shares outstanding during the
period (000s omitted)(i) 16,619 7,956 1,036
============================================================ ========== ========== ==========
Average amount of debt per share during the period -- -- $ 0.0039
============================================================ ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.89% (annualized), 1.98% and 1.94% (annualized) for the periods
1997-1995, respectively.
(d) Ratios are annualized and based on average net assets of $320,508,971.
(e) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
(f) Annualized.
(g) After waiver of fees and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to waiver of fees and/or expense
reimbursements were (0.75)% (annualized), (0.53)% and (0.79)% (annualized)
for the periods 1997-1995, respectively.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(i) Averages computed on a daily basis.
FS-108
<PAGE> 210
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 approve the elimination of the fundamental investment policy prohibiting
or restricting the Fund's investments in puts, calls, straddles and spreads.
(6) 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............ 146,733,416 2,498,355 6,552,908
(3) Approval of Sub-Advisory Agreement.......................... 146,153,496 2,885,840 6,745,343
(4) Elimination of Fundamental Investment Policy Concerning
Investments in Other Investment Companies................... 111,841,005 5,168,602 6,908,560
(5) Elimination of Fundamental Investment Policy concerning
Puts, Calls, Straddles and Spreads.......................... 110,091,179 6,531,415 7,295,571
(6) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
FS-109
<PAGE> 211
SCHEDULE OF INVESTMENTS
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-83.91%
ADVERTISING/BROADCASTING-0.99%
American Radio Systems Corp.(a) 300,000 $ 8,775,000
- ------------------------------------------------------------------
Chancellor Corp.-Class A(a) 154,000 4,312,000
- ------------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 1,500,000 72,750,000
- ------------------------------------------------------------------
Jacor Communications, Inc.(a) 786,700 22,125,938
- ------------------------------------------------------------------
Paxson Communications Corp.(a) 750,000 7,500,000
- ------------------------------------------------------------------
True North Communications, Inc. 61,400 1,174,275
- ------------------------------------------------------------------
116,637,213
- ------------------------------------------------------------------
AIRLINES-0.12%
Southwest Airlines Co. 500,000 13,750,000
- ------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.14%
Mark IV Industries, Inc. 689,063 16,020,703
- ------------------------------------------------------------------
BANKING-0.62%
Bank of Boston Corp. 1,000,000 72,750,000
- ------------------------------------------------------------------
BEVERAGES-ALCOHOLIC-0.10%
Cerner Corp.(a) 725,000 11,690,625
- ------------------------------------------------------------------
BIOTECHNOLOGY-0.92%
Amgen, Inc.(a) 912,700 53,735,212
- ------------------------------------------------------------------
Biogen, Inc.(a) 668,100 21,379,200
- ------------------------------------------------------------------
Guidant Corp. 500,000 34,125,000
- ------------------------------------------------------------------
109,239,412
- ------------------------------------------------------------------
BUSINESS SERVICES-1.25%
AccuStaff, Inc.(a) 1,000,000 18,250,000
- ------------------------------------------------------------------
Corrections Corp. of America(a) 357,100 11,650,388
- ------------------------------------------------------------------
CUC International, Inc.(a) 900,000 19,012,500
- ------------------------------------------------------------------
Equifax, Inc. 500,000 14,375,000
- ------------------------------------------------------------------
HealthCare COMPARE Corp.(a) 493,900 21,422,912
- ------------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 1,350,000 30,712,500
- ------------------------------------------------------------------
Paychex, Inc. 700,000 32,768,750
- ------------------------------------------------------------------
148,192,050
- ------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.20%
IMC Global, Inc. 625,000 23,046,875
- ------------------------------------------------------------------
COMPUTER MINI/PCS-3.61%
Compaq Computer Corp.(a) 1,350,000 115,256,250
- ------------------------------------------------------------------
Dell Computer Corp.(a) 1,538,400 128,744,850
- ------------------------------------------------------------------
Gateway 2000, Inc.(a) 500,000 27,437,500
- ------------------------------------------------------------------
Hewlett-Packard Co. 750,000 39,375,000
- ------------------------------------------------------------------
Sun Microsystems, Inc.(a) 4,000,000 115,250,000
- ------------------------------------------------------------------
426,063,600
- ------------------------------------------------------------------
COMPUTER NETWORKING-0.88%
ACT Networks, Inc.(a)(b) 500,000 6,750,000
- ------------------------------------------------------------------
Ascend Communications, Inc.(a) 625,000 28,593,750
- ------------------------------------------------------------------
Cabletron Systems, Inc.(a) 2,000,000 69,000,000
- ------------------------------------------------------------------
104,343,750
- ------------------------------------------------------------------
COMPUTER PERIPHERALS-1.78%
Adaptec, Inc.(a) 1,700,000 62,900,000
- ------------------------------------------------------------------
EMC Corp.(a) 2,000,000 72,750,000
- ------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER PERIPHERALS-(CONTINUED)
Microchip Technology, Inc.(a) 2,100,075 $ 65,627,344
- ------------------------------------------------------------------
Storage Technology Corp.(a) 250,000 8,781,250
- ------------------------------------------------------------------
210,058,594
- ------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-9.95%
Adobe Systems, Inc. 1,350,000 52,818,750
- ------------------------------------------------------------------
Affiliated Computer Services,
Inc.(a) 1,000,000 26,000,000
- ------------------------------------------------------------------
BDM International Inc.(a) 400,000 9,300,000
- ------------------------------------------------------------------
BISYS Group, Inc. (The)(a) 463,200 14,822,400
- ------------------------------------------------------------------
BMC Software, Inc.(a) 2,000,000 86,500,000
- ------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 2,000,000 64,000,000
- ------------------------------------------------------------------
Centura Software Corp.(a) 42,893 85,786
- ------------------------------------------------------------------
Computer Associates International,
Inc. 500,000 26,000,000
- ------------------------------------------------------------------
Computer Sciences Corp.(a) 400,000 25,000,000
- ------------------------------------------------------------------
Compuware Corp.(a) 2,000,000 75,500,000
- ------------------------------------------------------------------
CSG Systems International, Inc.(a) 510,000 9,052,500
- ------------------------------------------------------------------
DST Systems, Inc.(a) 1,000,000 28,375,000
- ------------------------------------------------------------------
Electronic Arts, Inc.(a) 500,000 12,062,500
- ------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 317,200 12,450,100
- ------------------------------------------------------------------
First Data Corp. 850,000 29,325,000
- ------------------------------------------------------------------
Fiserv, Inc.(a) 625,000 23,593,750
- ------------------------------------------------------------------
HBO & Co. 900,000 48,150,000
- ------------------------------------------------------------------
HPR, Inc.(a) 500,000 7,062,500
- ------------------------------------------------------------------
IDX Systems Corp.(a) 356,900 10,617,775
- ------------------------------------------------------------------
McAfee Associates, Inc.(a) 1,000,000 55,750,000
- ------------------------------------------------------------------
Microsoft Corp.(a) 1,000,000 121,500,000
- ------------------------------------------------------------------
National Data Corp. 750,000 28,125,000
- ------------------------------------------------------------------
Network General Corp.(a)(b) 1,985,700 27,303,375
- ------------------------------------------------------------------
Oracle Corp.(a) 1,600,000 63,600,000
- ------------------------------------------------------------------
Parametric Technology Co.(a) 2,317,300 104,857,825
- ------------------------------------------------------------------
Physician Computer Network, Inc.(a) 1,500,000 7,968,750
- ------------------------------------------------------------------
Security Dynamics Technologies,
Inc.(a) 1,000,000 25,250,000
- ------------------------------------------------------------------
Sterling Commerce, Inc.(a) 2,000,000 51,750,000
- ------------------------------------------------------------------
Sterling Software, Inc.(a) 500,000 15,250,000
- ------------------------------------------------------------------
SunGard Data Systems Inc.(a) 530,000 23,518,750
- ------------------------------------------------------------------
Sybase, Inc.(a) 1,000,000 14,750,000
- ------------------------------------------------------------------
Synopsys, Inc.(a) 2,000,000 63,750,000
- ------------------------------------------------------------------
Transition Systems, Inc.(a) 33,300 399,600
- ------------------------------------------------------------------
Wind River Systems(a) 450,000 10,350,000
- ------------------------------------------------------------------
1,174,839,361
- ------------------------------------------------------------------
CONGLOMERATES-0.77%
Corning Inc. 1,000,000 48,250,000
- ------------------------------------------------------------------
Tyco International Ltd. 411,982 25,130,902
- ------------------------------------------------------------------
U.S. Industries, Inc.(a) 500,000 18,062,500
- ------------------------------------------------------------------
91,443,402
- ------------------------------------------------------------------
CONSUMER NON-DURABLES-0.05%
Central Garden and Pet Co.(a) 300,000 5,981,250
- ------------------------------------------------------------------
COSMETICS & TOILETRIES-0.57%
General Nutrition Companies, Inc.(a) 1,750,000 37,625,000
- ------------------------------------------------------------------
</TABLE>
FS-110
<PAGE> 212
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COSMETICS & TOILETRIES-(CONTINUED)
McKesson Corp. 167,600 $ 12,130,050
- ------------------------------------------------------------------
Rexall Sundown, Inc.(a) 877,500 17,440,313
- ------------------------------------------------------------------
67,195,363
- ------------------------------------------------------------------
ELECTRIC POWER-0.30%
AES Corp.(a) 550,000 35,887,500
- ------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.79%
AMETEK, Inc. 300,000 6,712,500
- ------------------------------------------------------------------
Berg Electronics Corp.(a) 500,000 15,000,000
- ------------------------------------------------------------------
BMC Industries, Inc. 500,000 14,500,000
- ------------------------------------------------------------------
Methode Electronics, Inc.-Class A 450,000 6,356,250
- ------------------------------------------------------------------
Micron Electronics, Inc.(a) 1,200,000 24,450,000
- ------------------------------------------------------------------
Molex, Inc.-Class A 292,969 8,496,094
- ------------------------------------------------------------------
Raychem Corp. 270,300 17,434,350
- ------------------------------------------------------------------
SCI Systems, Inc.(a) 105,300 6,502,275
- ------------------------------------------------------------------
Symbol Technologies, Inc.(a) 900,000 29,137,500
- ------------------------------------------------------------------
Teradyne, Inc.(a) 2,000,000 65,500,000
- ------------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 550,000 17,256,250
- ------------------------------------------------------------------
211,345,219
- ------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTERS-0.30%
Arrow Electronics, Inc.(a) 421,100 23,423,687
- ------------------------------------------------------------------
Avnet, Inc. 200,000 12,175,000
- ------------------------------------------------------------------
35,598,687
- ------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.12%
Imperial Credit Industries, Inc.(a) 1,000,000 14,562,500
- ------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-4.37%
Aames Financial Corp.(b) 1,060,500 16,305,187
- ------------------------------------------------------------------
American Express Co. 580,700 38,253,612
- ------------------------------------------------------------------
Capital One Financial Corp. 1,700,000 61,412,500
- ------------------------------------------------------------------
Cityscape Financial Corp.(a) 183,700 2,456,988
- ------------------------------------------------------------------
Concord EFS, Inc.(a) 2,250,000 44,437,500
- ------------------------------------------------------------------
Credit Acceptance Corp.(a) 500,000 5,406,250
- ------------------------------------------------------------------
Green Tree Financial Corp. 2,500,000 74,062,500
- ------------------------------------------------------------------
Household International, Inc. 650,000 57,200,000
- ------------------------------------------------------------------
IMC Mortgage Co.(a)(b) 1,398,000 15,727,500
- ------------------------------------------------------------------
MBNA Corp. 2,000,000 66,000,000
- ------------------------------------------------------------------
Money Store, Inc. (The) 1,579,800 34,163,175
- ------------------------------------------------------------------
PMT Services, Inc.(a) 1,000,000 11,875,000
- ------------------------------------------------------------------
Southern Pacific Funding Corp.(a) 300,000 3,187,500
- ------------------------------------------------------------------
Student Loan Marketing Association 450,000 53,212,500
- ------------------------------------------------------------------
SunAmerica, Inc. 700,000 32,200,000
- ------------------------------------------------------------------
515,900,212
- ------------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.21%
Washington Mutual, Inc. 510,600 25,210,875
- ------------------------------------------------------------------
FUNERAL SERVICES-1.30%
Equity Corp. International(a) 400,000 8,600,000
- ------------------------------------------------------------------
Service Corp. International 3,500,000 119,875,000
- ------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 750,000 24,750,000
- ------------------------------------------------------------------
153,225,000
- ------------------------------------------------------------------
FURNITURE-0.29%
Leggett & Platt, Inc. 1,000,000 34,750,000
- ------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING-0.84%
Circus Circus Enterprises(a) 1,250,000 $ 30,156,250
- ------------------------------------------------------------------
GTECH Holdings Corp.(a) 750,000 23,062,500
- ------------------------------------------------------------------
International Game Technology 1,358,300 21,563,013
- ------------------------------------------------------------------
MGM Grand, Inc.(a) 732,100 24,708,375
- ------------------------------------------------------------------
99,490,138
- ------------------------------------------------------------------
HOTELS/MOTELS-1.05%
Choice Hotels International, Inc.(a) 1,500,000 21,000,000
- ------------------------------------------------------------------
Doubletree Corp.(a) 702,800 29,517,600
- ------------------------------------------------------------------
HFS, Inc.(a) 750,000 44,437,500
- ------------------------------------------------------------------
Promus Hotel Corp.(a) 650,000 22,912,500
- ------------------------------------------------------------------
Sun International Hotels Ltd.(a) 200,000 6,075,000
- ------------------------------------------------------------------
123,942,600
- ------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.40%
Compdent Corp.(a)(b) 350,800 5,656,650
- ------------------------------------------------------------------
Conseco Inc. 1,000,000 41,375,000
- ------------------------------------------------------------------
47,031,650
- ------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-1.15%
CapMAC Holdings, Inc. 850,000 22,100,000
- ------------------------------------------------------------------
MGIC Investment Corp. 1,000,000 81,250,000
- ------------------------------------------------------------------
Progressive Corp. 44,900 3,418,012
- ------------------------------------------------------------------
Providian Corp. 500,000 28,875,000
- ------------------------------------------------------------------
135,643,012
- ------------------------------------------------------------------
LEISURE & RECREATION-0.71%
Harley-Davidson, Inc. 1,500,000 59,250,000
- ------------------------------------------------------------------
Regal Cinemas, Inc.(a) 500,000 13,625,000
- ------------------------------------------------------------------
Speedway Motorsports, Inc.(a) 511,200 10,671,300
- ------------------------------------------------------------------
83,546,300
- ------------------------------------------------------------------
MACHINE TOOLS-0.23%
Precision Castparts Corp. 500,000 26,750,000
- ------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.49%
Pentair, Inc. 500,000 14,937,500
- ------------------------------------------------------------------
Thermo Electron Corp.(a) 1,250,000 43,125,000
- ------------------------------------------------------------------
58,062,500
- ------------------------------------------------------------------
MEDICAL (DRUGS)-2.26%
Cardinal Health, Inc. 2,143,200 114,125,400
- ------------------------------------------------------------------
Covance, Inc.(a) 1,650,000 24,337,500
- ------------------------------------------------------------------
Curative Technologies, Inc.(a) 282,200 6,666,975
- ------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 900,000 26,100,000
- ------------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 700,000 25,725,000
- ------------------------------------------------------------------
Forest Laboratories, Inc.(a) 500,000 17,062,500
- ------------------------------------------------------------------
Jones Medical Industries, Inc. 1,121,350 39,527,588
- ------------------------------------------------------------------
Parexel International Corp.(a) 458,200 12,829,600
- ------------------------------------------------------------------
266,374,563
- ------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-8.72%
American HomePatient, Inc.(a)(b) 750,000 14,437,500
- ------------------------------------------------------------------
Columbia/HCA Healthcare Corp. 1,700,000 59,500,000
- ------------------------------------------------------------------
FPA Medical Management, Inc.(a) 1,000,000 16,250,000
- ------------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 600,000 17,925,000
- ------------------------------------------------------------------
Health Care and Retirement
Corp.(a)(b) 1,500,000 47,437,500
- ------------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 3,184,687 85,190,377
- ------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 6,200,000 122,450,000
- ------------------------------------------------------------------
</TABLE>
FS-111
<PAGE> 213
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Humana, Inc.(a) 1,975,000 $ 42,956,250
- ------------------------------------------------------------------
Lincare Holdings, Inc.(a) 1,100,000 43,175,000
- ------------------------------------------------------------------
MedPartners, Inc.(a) 800,000 14,600,000
- ------------------------------------------------------------------
Multicare Companies, Inc.(a) 702,700 13,087,787
- ------------------------------------------------------------------
OccuSystems, Inc.(a) 430,000 8,868,750
- ------------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 524,200 6,290,400
- ------------------------------------------------------------------
Oxford Health Plans, Inc.(a) 1,450,000 95,518,750
- ------------------------------------------------------------------
PacifiCare Health Systems,
Inc.-Class B(a) 300,000 24,075,000
- ------------------------------------------------------------------
PhyCor, Inc.(a) 1,050,000 27,956,250
- ------------------------------------------------------------------
Quorum Health Group, Inc.(a) 1,100,000 34,237,500
- ------------------------------------------------------------------
Tenet Healthcare Corp.(a) 4,950,000 128,700,000
- ------------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 1,000,000 32,125,000
- ------------------------------------------------------------------
United Healthcare Corp. 1,250,000 60,781,250
- ------------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 1,350,000 51,131,250
- ------------------------------------------------------------------
Vencor, Inc.(a) 1,250,000 52,031,250
- ------------------------------------------------------------------
Wellpoint Health Networks, Inc.(a) 752,000 31,772,000
- ------------------------------------------------------------------
1,030,496,814
- ------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-3.10%
Boston Scientific Corp.(a) 680,952 32,855,934
- ------------------------------------------------------------------
Dentsply International, Inc. 550,000 27,225,000
- ------------------------------------------------------------------
Gulf South Medical Supply,
Inc.(a)(b) 1,054,700 15,029,475
- ------------------------------------------------------------------
Hillenbrand Industries, Inc. 650,000 27,950,000
- ------------------------------------------------------------------
Invacare Corp. 885,200 17,593,350
- ------------------------------------------------------------------
Omnicare, Inc. 3,250,000 79,218,750
- ------------------------------------------------------------------
Physician Sales & Service, Inc.(a) 750,000 10,875,000
- ------------------------------------------------------------------
Quintiles Transnational Corp.(a) 750,000 38,156,250
- ------------------------------------------------------------------
Steris Corp.(a) 500,000 16,375,000
- ------------------------------------------------------------------
Sybron International Corp.(a) 2,000,000 66,500,000
- ------------------------------------------------------------------
US Surgical Corp. 1,000,000 34,250,000
- ------------------------------------------------------------------
366,028,759
- ------------------------------------------------------------------
OFFICE AUTOMATION-0.31%
Xerox Corp. 600,000 36,900,000
- ------------------------------------------------------------------
OFFICE PRODUCTS-0.57%
Avery Dennison Corp. 600,000 22,050,000
- ------------------------------------------------------------------
Reynolds & Reynolds Co.-Class A 2,155,400 44,724,550
- ------------------------------------------------------------------
66,774,550
- ------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.65%
Apache Corp. 686,800 23,351,200
- ------------------------------------------------------------------
Burlington Resources, Inc. 750,000 31,781,250
- ------------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 1,500,000 21,187,500
- ------------------------------------------------------------------
76,319,950
- ------------------------------------------------------------------
OIL & GAS (SERVICES)-1.36%
Camco International, Inc. 963,700 42,764,187
- ------------------------------------------------------------------
Energy Ventures, Inc.(a) 300,000 20,062,500
- ------------------------------------------------------------------
Global Marine, Inc.(a) 1,750,000 35,218,750
- ------------------------------------------------------------------
Halliburton Co. 500,000 35,312,500
- ------------------------------------------------------------------
Pennzoil Co. 450,000 22,162,500
- ------------------------------------------------------------------
Veritas DGC, Inc.(a) 250,000 4,812,500
- ------------------------------------------------------------------
160,332,937
- ------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-3.44%
Baker Hughes, Inc. 1,500,000 $ 51,750,000
- ------------------------------------------------------------------
BJ Services Co.(a) 500,000 23,562,500
- ------------------------------------------------------------------
Cooper Cameron Corp.(a) 500,000 35,625,000
- ------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 750,000 48,281,250
- ------------------------------------------------------------------
ENSCO International, Inc.(a) 1,000,000 47,500,000
- ------------------------------------------------------------------
Falcon Drilling Co., Inc.(a) 800,000 30,600,000
- ------------------------------------------------------------------
Marine Drilling Companies,
Inc.(a)(b) 2,139,100 33,690,825
- ------------------------------------------------------------------
Nabors Industries, Inc.(a) 1,000,000 18,750,000
- ------------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 1,208,100 20,839,725
- ------------------------------------------------------------------
Rowan Companies, Inc.(a) 750,000 13,500,000
- ------------------------------------------------------------------
Smith International, Inc.(a) 1,000,000 47,375,000
- ------------------------------------------------------------------
Varco International, Inc.(a)(b) 1,500,000 34,500,000
- ------------------------------------------------------------------
405,974,300
- ------------------------------------------------------------------
POLLUTION CONTROL-1.10%
United Waste Systems, Inc.(a) 1,300,000 43,875,000
- ------------------------------------------------------------------
US Filter Corp.(a) 1,300,000 39,487,500
- ------------------------------------------------------------------
USA Waste Services, Inc.(a) 1,410,000 46,177,500
- ------------------------------------------------------------------
129,540,000
- ------------------------------------------------------------------
PUBLISHING-0.25%
Gartner Group, Inc.(a) 500,000 13,125,000
- ------------------------------------------------------------------
Times Mirror Co. 300,000 16,575,000
- ------------------------------------------------------------------
29,700,000
- ------------------------------------------------------------------
RESTAURANTS-1.03%
Apple South, Inc. 1,000,000 13,000,000
- ------------------------------------------------------------------
Applebee's International, Inc. 1,000,000 23,375,000
- ------------------------------------------------------------------
Cracker Barrel Old Country Store,
Inc. 1,250,000 33,437,500
- ------------------------------------------------------------------
Lone Star Steakhouse & Saloon(a) 1,000,000 19,750,000
- ------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 538,900 10,575,913
- ------------------------------------------------------------------
Planet Hollywood International,
Inc.-Class A(a) 425,000 7,809,375
- ------------------------------------------------------------------
Starbucks Corp.(a) 450,000 13,443,750
- ------------------------------------------------------------------
121,391,538
- ------------------------------------------------------------------
RETAIL (FOOD & DRUG)-2.56%
American Stores Co. 1,300,000 59,150,000
- ------------------------------------------------------------------
Kroger Co.(a) 2,400,000 66,000,000
- ------------------------------------------------------------------
Quality Food Centers, Inc.(a) 600,000 24,075,000
- ------------------------------------------------------------------
Revco D.S., Inc.(a) 800,000 34,800,000
- ------------------------------------------------------------------
Rite Aid Corp. 713,420 32,817,320
- ------------------------------------------------------------------
Safeway, Inc.(a) 1,925,000 85,903,125
- ------------------------------------------------------------------
302,745,445
- ------------------------------------------------------------------
RETAIL (STORES)-8.79%
Bed Bath & Beyond, Inc.(a) 1,000,000 27,375,000
- ------------------------------------------------------------------
Blyth Industries, Inc.(a) 172,000 6,794,000
- ------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 1,049,700 50,385,600
- ------------------------------------------------------------------
CompUSA, Inc.(a) 3,000,000 57,750,000
- ------------------------------------------------------------------
Consolidated Stores Corp.(a) 2,250,000 90,000,000
- ------------------------------------------------------------------
Dayton Hudson Corp. 1,750,000 78,750,000
- ------------------------------------------------------------------
Dollar General Corp. 950,066 30,045,837
- ------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 600,000 23,700,000
- ------------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 845,400 8,718,187
- ------------------------------------------------------------------
Gap, Inc. 500,000 15,937,500
- ------------------------------------------------------------------
Global DirectMail Corp.(a) 549,700 9,688,462
- ------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 73,100 1,562,513
- ------------------------------------------------------------------
</TABLE>
FS-112
<PAGE> 214
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Home Depot, Inc. 100,000 $ 5,800,000
- ------------------------------------------------------------------
Jones Apparel Group, Inc.(a) 1,150,000 48,012,500
- ------------------------------------------------------------------
Kohl's Corp.(a) 700,000 34,212,500
- ------------------------------------------------------------------
Lowe's Companies, Inc. 1,600,000 60,800,000
- ------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a)(b) 1,400,050 34,826,244
- ------------------------------------------------------------------
Meyer (Fred), Inc.(a) 706,300 29,046,587
- ------------------------------------------------------------------
Micro Warehouse, Inc.(a) 1,159,600 20,003,100
- ------------------------------------------------------------------
Oakley, Inc.(a) 500,000 5,125,000
- ------------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 750,000 24,468,750
- ------------------------------------------------------------------
Petco Animal Supplies, Inc.(a)(b) 850,000 18,168,750
- ------------------------------------------------------------------
PETsMART, Inc.(a) 2,000,000 33,625,000
- ------------------------------------------------------------------
Ross Stores, Inc. 734,000 20,643,750
- ------------------------------------------------------------------
Saks Holdings, Inc.(a) 89,900 1,719,338
- ------------------------------------------------------------------
Sports Authority, Inc. (The)(a)(b) 1,250,000 22,187,500
- ------------------------------------------------------------------
Staples, Inc.(a) 3,500,000 63,000,000
- ------------------------------------------------------------------
Tech Data Corp.(a) 1,687,300 41,338,850
- ------------------------------------------------------------------
Tiffany & Co. 1,000,000 39,625,000
- ------------------------------------------------------------------
TJX Companies, Inc. 750,000 35,437,500
- ------------------------------------------------------------------
Toys "R" Us, Inc.(a) 2,000,000 57,000,000
- ------------------------------------------------------------------
Viking Office Products, Inc.(a) 2,000,000 27,250,000
- ------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 500,000 15,500,000
- ------------------------------------------------------------------
1,038,497,468
- ------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.49%
Perkin-Elmer Corp. 794,800 57,722,350
- ------------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.07%
Rural/Metro Corp.(a) 300,000 8,625,000
- ------------------------------------------------------------------
SEMICONDUCTORS-7.70%
Advanced Micro Devices, Inc.(a) 1,250,000 53,125,000
- ------------------------------------------------------------------
Altera Corp.(a) 1,821,400 90,273,137
- ------------------------------------------------------------------
Analog Devices, Inc.(a) 1,000,000 26,750,000
- ------------------------------------------------------------------
Applied Materials, Inc.(a) 1,150,000 63,106,250
- ------------------------------------------------------------------
Atmel Corp.(a) 500,000 12,437,500
- ------------------------------------------------------------------
Intel Corp. 150,000 22,968,750
- ------------------------------------------------------------------
Kemet Corp.(a) 279,900 5,458,050
- ------------------------------------------------------------------
KLA Instruments Corp.(a) 1,500,000 66,750,000
- ------------------------------------------------------------------
Lam Research Corp.(a) 525,000 15,225,000
- ------------------------------------------------------------------
Linear Technology Corp. 1,500,000 75,375,000
- ------------------------------------------------------------------
LSI Logic Corp.(a) 1,500,000 57,375,000
- ------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 1,275,000 67,415,625
- ------------------------------------------------------------------
Micron Technology, Inc. 800,000 28,200,000
- ------------------------------------------------------------------
Motorola, Inc. 1,000,000 57,250,000
- ------------------------------------------------------------------
National Semiconductor Corp.(a) 2,250,000 56,250,000
- ------------------------------------------------------------------
Novellus Systems, Inc.(a) 500,000 28,875,000
- ------------------------------------------------------------------
Solectron Corp.(a) 300,000 17,212,500
- ------------------------------------------------------------------
Tencor Instruments(a) 511,700 22,706,687
- ------------------------------------------------------------------
Texas Instruments, Inc. 700,000 62,475,000
- ------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 225,000 7,087,500
- ------------------------------------------------------------------
Xilinx, Inc.(a) 1,500,000 73,500,000
- ------------------------------------------------------------------
909,815,999
- ------------------------------------------------------------------
SHOES & RELATED APPAREL-0.54%
Nine West Group, Inc.(a) 1,113,100 44,106,587
- ------------------------------------------------------------------
Wolverine World Wide, Inc. 500,000 20,125,000
- ------------------------------------------------------------------
64,231,587
- ------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-3.42%
ACC Corp. 81,500 $ 1,293,813
- ------------------------------------------------------------------
ADC Telecommunications, Inc.(a) 3,000,000 78,375,000
- ------------------------------------------------------------------
Andrew Corp.(a) 1,014,500 25,108,875
- ------------------------------------------------------------------
Aspect Telecommunications Corp.(a) 1,200,000 21,300,000
- ------------------------------------------------------------------
Billing Information Concepts(a)(b) 780,000 18,622,500
- ------------------------------------------------------------------
DSC Communications Corp.(a) 2,000,000 40,750,000
- ------------------------------------------------------------------
Lucent Technologies, Inc. 1,000,000 59,125,000
- ------------------------------------------------------------------
PairGain Technologies, Inc.(a)(b) 1,000,000 26,000,000
- ------------------------------------------------------------------
QUALCOMM, Inc.(a) 300,000 14,025,000
- ------------------------------------------------------------------
Tellabs, Inc.(a) 2,000,000 79,750,000
- ------------------------------------------------------------------
U.S. Long Distance Corp.(a) 343,300 4,162,512
- ------------------------------------------------------------------
WorldCom, Inc.(a) 1,500,000 36,000,000
- ------------------------------------------------------------------
404,512,700
- ------------------------------------------------------------------
TELEPHONE-0.24%
Cincinnati Bell, Inc. 500,000 28,000,000
- ------------------------------------------------------------------
TEXTILES-1.41%
Liz Claiborne, Inc. 1,250,000 56,562,500
- ------------------------------------------------------------------
Nautica Enterprises, Inc.(a) 1,500,000 33,187,500
- ------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 1,150,000 45,712,500
- ------------------------------------------------------------------
Unifi, Inc. 1,000,000 31,000,000
- ------------------------------------------------------------------
166,462,500
- ------------------------------------------------------------------
TRANSPORTATION-0.07%
AirNet Systems, Inc.(a) 560,000 8,680,000
- ------------------------------------------------------------------
TRUCKING-0.33%
Consolidated Freightways, Inc. 825,000 24,543,750
- ------------------------------------------------------------------
USFreightways Corp. 550,000 14,850,000
- ------------------------------------------------------------------
39,393,750
- ------------------------------------------------------------------
Total Domestic Common Stocks 9,910,718,601
- ------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-0.07%
INSURANCE (MULTI-LINE PROPERTY)-0.07%
MGIC Investment Corp.-$3.12 Conv.
Pfd. 116,500 8,140,438
- ------------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks 8,140,438
- ------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.54%
CANADA-1.28%
CanWest Global Communications Corp.
(Electronic
Components/Miscellaneous) 2,250,000 30,093,750
- ------------------------------------------------------------------
Newbridge Networks Corp. (Computer
Networking)(a) 2,000,000 63,500,000
- ------------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 550,000 39,943,750
- ------------------------------------------------------------------
Potash Corp. of Saskatchewan Inc.
(Metals) 225,000 17,296,875
- ------------------------------------------------------------------
150,834,375
- ------------------------------------------------------------------
FINLAND-0.62%
Nokia Oy A.B.-Class
A-ADR (Telecommunications) 999,950 64,621,769
- ------------------------------------------------------------------
Nokia Oy A.B.-Class A
(Telecommunications) 152,650 9,437,154
- ------------------------------------------------------------------
74,058,923
- ------------------------------------------------------------------
FRANCE-0.10%
SGS-Thomson Microelectronics
N.V.-New York shares
(Semiconductors)(a) 146,100 11,450,588
- ------------------------------------------------------------------
IRELAND-0.52%
CBT Group PLC-ADR (Computer
Software/Services)(a) 49,400 2,402,075
- ------------------------------------------------------------------
Elan Corp. PLC-ADR
(Medical-Drugs)(a) 1,750,000 59,500,000
- ------------------------------------------------------------------
61,902,075
- ------------------------------------------------------------------
</TABLE>
FS-113
<PAGE> 215
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ISRAEL-0.17%
Tecnomatix Technologies Ltd.
(Computer Software/Services)(a) 329,500 $ 8,443,438
- ------------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 225,000 11,418,750
- ------------------------------------------------------------------
19,862,188
- ------------------------------------------------------------------
ITALY-0.05%
Telecom Italia Mobile S.p.A.
(Telecommunications) 1,074,000 3,369,080
- ------------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 1,074,000 2,843,425
- ------------------------------------------------------------------
6,212,505
- ------------------------------------------------------------------
NETHERLANDS-0.61%
Baan Co., N.V.
(Computer Software/Services)(a) 550,000 29,562,500
- ------------------------------------------------------------------
Gucci Group N.V.-ADR (Textiles) 500,000 34,687,500
- ------------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Publishing) 328,500 6,794,924
- ------------------------------------------------------------------
71,044,924
- ------------------------------------------------------------------
SWEDEN-0.57%
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 2,000,000 67,250,000
- ------------------------------------------------------------------
UNITED KINGDOM-0.62%
Burton Group PLC (Retail-Stores) 2,700,000 6,673,419
- ------------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 2,000,000 61,125,000
- ------------------------------------------------------------------
Granada Group PLC (Leisure &
Recreation) 390,000 5,625,608
- ------------------------------------------------------------------
73,424,027
- ------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 536,039,605
- ------------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS-0.22%
ADVERTISING/BROADCASTING-0.06%
Jacor Communications Inc., Sr. Conv.
LYONS, 5.50%, 06/12/11(c) $14,450,000 6,683,125
- ------------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-0.15%
Aames Financial Corp., Conv. Sub.
Deb., 5.50%, 03/15/06(b) $ 7,150,000 $ 6,353,848
- -------------------------------------------------------------------
Cityscape Financial Corp., Conv.
Sub. Deb., 6.00%, 05/01/06(d)
(Acquired 08/06/96 - 04/17/97;
Cost $7,563,854) 17,345,000 11,504,765
- -------------------------------------------------------------------
17,858,613
- -------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.01%
Multicare Companies Inc., Conv. Sub.
Deb., 7.00%, 03/15/03(d) (Acquired
01/13/97; Cost $1,800,000)(c) 1,500,000 1,717,500
- -------------------------------------------------------------------
Total Domestic Convertible Bonds 26,259,238
- -------------------------------------------------------------------
FOREIGN CONVERTIBLE BONDS-0.22%
NETHERLANDS-0.16%
Baan Co., N.V. (Computer
Software/Services), Conv. Sub.
Notes, 4.50%, 12/15/01(d)
(Acquired 01/13/97 - 01/24/97;
Cost $16,084,313) 13,965,000 18,961,817
- -------------------------------------------------------------------
SWITZERLAND-0.06%
Sandoz Capital BVI Ltd. (Chemicals),
Sr. Conv. Deb., 2.00%, 10/06/02(d)
(Acquired 11/04/96 - 11/13/96;
Cost $6,240,625) 5,540,000 6,952,700
- -------------------------------------------------------------------
Total Foreign Convertible Bonds 25,914,517
- -------------------------------------------------------------------
REPURCHASE AGREEMENTS-4.75%(e)
Goldman, Sachs & Co., 5.375%,
05/01/97(f) 5,270,186 5,270,186
- -------------------------------------------------------------------
Goldman, Sachs & Co., 5.375%,
05/01/97(g) 555,263,395 555,263,395
- -------------------------------------------------------------------
Total Repurchase Agreements 560,533,581
- -------------------------------------------------------------------
TIME DEPOSIT-0.16%
Deutsche Morgan Grenfelt/C.J.
Lawrence Inc.
5.75%, 05/01/97 20,000,000 20,000,000
- -------------------------------------------------------------------
U.S. TREASURY BILLS-5.63%(h)
5.10%, 06/26/97 664,537,605(i) 664,537,605
- -------------------------------------------------------------------
TOTAL INVESTMENTS-99.50% 11,752,143,585
- -------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.50% 59,404,105
- -------------------------------------------------------------------
NET ASSETS-100.00% $11,811,547,690
===================================================================
</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 April 30,
1997 was $342,996,854 which represented 2.90% 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
aggregate market value of this security at April 30, 1997 was $39,136,782,
which represents 0.33% of the Fund's net assets.
(e) Collateral on repurchase agreements, include the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$825,123,177. Collaterized by $823,214,000 U.S. Treasury obligations, 0% to
9.375% due 07/03/97 to 02/15/27 with an aggregate market value of
$842,392,678.
(g) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$701,547,221. Collaterized by $757,320,000 U.S. Treasury obligations at 0%
to 9.375% due 07/17/97 to 02/15/26 with an aggregate market value of
$716,184,843.
(h) 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.
(i) A portion of the principal balance was pledged as collateral to cover margin
requirements for open future contracts. See Note 6.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
LYONS - Liquid Yield Option Notes
Sr. - Senior
Sub. - Subordinated
See Notes to Financial Statements.
FS-114
<PAGE> 216
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$9,635,077,907) $11,752,143,585
- ------------------------------------------------------------
Foreign currencies, at market value (cost
$757) 739
- ------------------------------------------------------------
Receivables for:
Investments sold 130,129,821
- ------------------------------------------------------------
Capital stock sold 21,450,503
- ------------------------------------------------------------
Dividends and interest 2,980,490
- ------------------------------------------------------------
Variation margin 2,455,500
- ------------------------------------------------------------
Investment for deferred compensation plan 73,882
- ------------------------------------------------------------
Other assets 44,900
- ------------------------------------------------------------
Total assets 11,909,279,420
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 48,427,070
- ------------------------------------------------------------
Capital stock reacquired 35,154,727
- ------------------------------------------------------------
Deferred compensation 73,882
- ------------------------------------------------------------
Accrued advisory fees 5,764,650
- ------------------------------------------------------------
Accrued administrative services fees 21,231
- ------------------------------------------------------------
Accrued directors' fees 17,187
- ------------------------------------------------------------
Accrued distribution fees 4,135,002
- ------------------------------------------------------------
Accrued transfer agent fees 2,160,574
- ------------------------------------------------------------
Accrued operating expenses 1,977,407
- ------------------------------------------------------------
Total liabilities 97,731,730
- ------------------------------------------------------------
Net assets applicable to shares outstanding $11,811,547,690
============================================================
NET ASSETS:
Class A $11,505,285,655
============================================================
Institutional Class $ 306,262,035
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 479,369,178
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 12,459,982
============================================================
CLASS A:
Net asset value and redemption price per
share $ 24.00
============================================================
Offering price per share:
(Net asset value of $24.00 divided by
94.50%) $ 25.40
============================================================
INSTITUTIONAL CLASS:
Net asset value, offering and redemption
price per share $ 24.58
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $408,840 foreign
withholding tax) $ 14,766,590
- ------------------------------------------------------------
Interest 30,752,729
- ------------------------------------------------------------
Total investment income 45,519,319
- ------------------------------------------------------------
EXPENSES:
Advisory fees 38,143,072
- ------------------------------------------------------------
Administrative service fees 131,642
- ------------------------------------------------------------
Custodian fees 442,449
- ------------------------------------------------------------
Directors' fees 34,340
- ------------------------------------------------------------
Distribution fees-Class A 17,790,913
- ------------------------------------------------------------
Transfer agent fees-Class A 9,637,007
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 14,456
- ------------------------------------------------------------
Other 2,325,081
- ------------------------------------------------------------
Total expenses 68,518,960
- ------------------------------------------------------------
Less: Fees waived by advisor (1,273,103)
- ------------------------------------------------------------
Expenses paid indirectly (99,884)
- ------------------------------------------------------------
Net expenses 67,145,973
- ------------------------------------------------------------
Net investment income (loss) (21,626,654)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 253,029,008
- ------------------------------------------------------------
Foreign currencies (304,504)
- ------------------------------------------------------------
Futures contracts 104,122,264
- ------------------------------------------------------------
356,846,768
- ------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities (614,289,674)
- ------------------------------------------------------------
Foreign currencies (11,004)
- ------------------------------------------------------------
Futures contracts (33,091,970)
- ------------------------------------------------------------
(647,392,648)
- ------------------------------------------------------------
Net gain (loss) on investment
securities, foreign currencies and
futures contracts (290,545,880)
- ------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ (312,172,534)
============================================================
</TABLE>
See Notes to Financial Statements.
FS-115
<PAGE> 217
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the year ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (21,626,654) $ (25,042,610)
- -----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and futures contracts 356,846,768 394,119,929
- -----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and futures contracts (647,392,648) 672,745,646
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (312,172,534) 1,041,822,965
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (401,530,087) (233,242,373)
- -----------------------------------------------------------------------------------------------
Institutional Class (10,336,039) (4,789,469)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 956,209,959 3,470,281,071
- -----------------------------------------------------------------------------------------------
Institutional Class 30,835,429 135,200,711
- -----------------------------------------------------------------------------------------------
Net increase in net assets 263,006,728 4,409,272,905
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 11,548,540,962 7,139,268,057
- -----------------------------------------------------------------------------------------------
End of period $11,811,547,690 $11,548,540,962
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 9,395,851,171 $ 8,408,805,783
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (21,751,192) (124,538)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies and futures contracts 333,181,244 388,200,602
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 2,104,266,467 2,751,659,115
- -----------------------------------------------------------------------------------------------
$11,811,547,690 $11,548,540,962
===============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
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 two different classes of shares: the Class A shares and the
Institutional Class. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to 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
FS-116
<PAGE> 218
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market quotations are not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors of the Company. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing
the net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which 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 specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses--Distribution and transfer agency expenses directly attributable
to a class of shares and charged to that class' operations. All other
expenses which are attributable to more than one class are allocated
between the classes.
E. Foreign Currency Translation--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward 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 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 voluntary 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 six months ended
April 30, 1997, AIM waived fees of $1,273,103. 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.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $131,642 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Class A shares. During the six months ended April 30, 1997, AFS
was paid $5,265,385 for such services. During the six months ended April 30,
1997, the Fund paid A I M Institutional Fund Services, Inc. ("AIFS") with
FS-117
<PAGE> 219
respect to the Institutional Class $14,456 for shareholder and transfer agency
services.
The Fund received reductions in transfer agency fees of $93,574 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $6,310 from pricing services which are paid through
directed brokerage commissions. The effect of the above arrangements resulted in
a reduction of the Fund's total expenses of $99,884 during the six months ended
April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Company has
adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), with
respect to the Class A shares, whereby the Fund pays AIM Distributors an annual
rate of 0.30% of the Class A shares average daily net assets as compensation for
services related to the sales and distribution of the Class A shares. The Plan
provides that payments to dealers and financial institutions that provide
continuing personal shareholder services to their customers who purchase and own
shares of the Class A shares, in amounts of up to 0.25% of the average net
assets of the Class A shares attributable to the customers of such dealers or
financial institutions, may be characterized as a service fee. The Plan also
provides that payments in excess of service fees are characterized as an asset-
based sales charge under the Plan. The Plan also imposes a cap on the total
amount of sales charges, including asset-based sales charges, that may be paid
by the Company with respect to the Fund's Class A shares. During the six months
ended April 30, 1997, the Class A shares paid AIM Distributors $17,790,913 as
compensation under the Plan.
AIM Distributors received commissions of $6,178,551 from Class A capital stock
transactions during the six months ended April 30, 1997. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of capital stock. During the six months ended April 30,
1997, AIM Distributors received commissions of $145,208 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 six months ended April 30, 1997, the Fund paid legal fees of
$20,475 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-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 4-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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997 was
$4,450,537,743 and $3,841,421,244, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,499,681,274
- -------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (384,213,274)
- -------------------------------------------------------
Net unrealized appreciation of
investment securities $2,115,468,000
=======================================================
</TABLE>
Cost of investments for tax purposes is $9,636,675,585.
NOTE 6-FUTURES CONTRACT
On April 30, 1997, $27,285,000 par value U.S. Treasury obligations were pledged
as collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at April 30, 1997:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
Unrealized
Appreciation
(Depreciation)
--------------
<S> <C>
S&P 500 Index/1,637 contracts/Jun 97/Buy $(12,789,125)
========================================================
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the capital stock outstanding for the six months ended April 30, 1997
and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 114,119,928 $ 2,895,955,476 282,903,859 $ 6,791,107,589
- -------------------- ----------- --------------- ------------ ---------------
Institutional Class 3,519,313 91,297,192 7,711,696 189,568,037
- -------------------- ----------- --------------- ------------ ---------------
Issued as
reinvestment of
dividends:
Class A 15,529,296 381,399,365 10,007,849 218,670,843
- -------------------- ----------- --------------- ------------ ---------------
Institutional Class 387,258 9,720,186 200,095 4,444,113
- -------------------- ----------- --------------- ------------ ---------------
Reacquired:
Class A (92,033,269) (2,321,144,882) (146,642,433) (3,539,497,361)
- -------------------- ----------- --------------- ------------ ---------------
Institutional Class (2,711,919) (70,181,949) (2,422,264) (58,811,439)
- -------------------- ----------- --------------- ------------ ---------------
38,810,607 $ 987,045,388 151,758,802 $ 3,605,481,782
==================== =========== =============== ============ ===============
</TABLE>
FS-118
<PAGE> 220
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the six months ended April 30, 1997, each of the years in the
eight-year period ended October 31, 1996 and the ten months ended October 31,
1988.
<TABLE>
<CAPTION>
October 31,
April 30, ------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
----------- ----------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72 $ 6.59
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.06) (0.05) (0.02) (0.04) (0.04) (0.03)
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Net gains (losses) on
securities (both realized
and unrealized) (0.54) 2.60 5.95 1.29 3.83 1.76 5.16
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Total from investment
operations (0.59) 2.54 5.90 1.27 3.79 1.72 5.13
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Less distributions:
Dividends from net
investment income -- -- -- -- -- -- --
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Distributions from capital
gains (0.89) (0.75) (0.52) -- -- (0.19) --
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Total distributions (0.89) (0.75) (0.52) -- -- (0.19) --
- ------------------------------- ----------- ----------- ---------- ---------- ---------- -------- --------
Net asset value, end of period $ 24.00 $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72
=============================== =========== =========== ========== ========== ========== ======== =========
Total return(b) (2.41)% 11.26% 33.43% 7.45% 28.60% 14.82% 77.85%
=============================== =========== =========== ========== ========== ========== ======== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $11,505,286 $11,255,506 $7,000,350 $3,726,029 $2,756,497 $966,472 $342,835
=============================== =========== =========== ========== ========== ========== ======== =========
Ratio of expenses to average
net assets(c) 1.12%(d)(e) 1.14% 1.16% 1.20% 1.22% 1.21% 1.35%
=============================== =========== =========== ========== ========== ========== ======== =========
Ratio of net investment income
(loss) to average net
assets(f) (0.37)%(d) (0.27)% (0.32)% (0.15)% (0.31)% (0.42)% (0.41)%
=============================== =========== =========== ========== ========== ========== ======== =========
Portfolio turnover rate 33% 58% 45% 79% 70% 62% 109%
=============================== =========== =========== ========== ========== ========== ======== =========
Average broker commission rate
paid(h) $ 0.0588 $ 0.0596 N/A N/A N/A N/A N/A
=============================== =========== =========== ========== ========== ========== ======== =========
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) -- -- -- -- -- -- --
=============================== =========== =========== ========== ========== ========== ======== =========
Average amount of debt
outstanding during the period
(000s omitted)(i) -- -- -- -- -- -- --
=============================== =========== =========== ========== ========== ========== ======== =========
Average amount of shares
outstanding during the period
(000s omitted)(i) 468,998 381,030 244,731 182,897 124,101 55,902 21,205
=============================== =========== =========== ========== ========== ========== ======== =========
Average amount of debt per
share during the period -- -- -- -- -- -- --
=============================== =========== =========== ========== ========== ========== ======== =========
<CAPTION>
October 31,
------------------------------
1990 1989 1988(a)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 9.40 $ 7.34 $ 6.35
- ------------------------------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss) (0.03) 0.01 (0.03)
- ------------------------------- -------- -------- --------
Net gains (losses) on
securities (both realized
and unrealized) (1.23) 2.46 1.02
- ------------------------------- -------- -------- --------
Total from investment
operations (1.26) 2.47 0.99
- ------------------------------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.01) -- --
- ------------------------------- -------- -------- --------
Distributions from capital
gains (1.54) (0.41) --
- ------------------------------- -------- -------- --------
Total distributions (1.55) (0.41) --
- ------------------------------- -------- -------- --------
Net asset value, end of period $ 6.59 $ 9.40 $ 7.34
=============================== ======== ======== ========
Total return(b) (16.17)% 35.50% 15.59%
=============================== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $ 83,304 $ 74,731 $ 78,272
=============================== ======== ======== ========
Ratio of expenses to average
net assets(c) 1.37% 1.36% 1.30%(g)
=============================== ======== ======== ========
Ratio of net investment income
(loss) to average net
assets(f) (0.44)% 0.07% (0.57)%(g)
=============================== ======== ======== ========
Portfolio turnover rate 192% 149% 131%
=============================== ======== ======== ========
Average broker commission rate
paid(h) N/A N/A N/A
=============================== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) -- $ 9,610 $ 5,266
=============================== ======== ======== ========
Average amount of debt
outstanding during the period
(000s omitted)(i) $ 2,344 $ 2,609 $ 2,148
=============================== ======== ======== ========
Average amount of shares
outstanding during the period
(000s omitted)(i) 11,397 10,050 10,845
=============================== ======== ======== ========
Average amount of debt per
share during the period $ 0.21 $ 0.26 $ 0.20
=============================== ======== ======== ========
(a) The Fund changed investment advisors on September 30, 1988.
(b) Does not deduct sales charges and for periods less than one
year, total returns are not annualized.
(c) Ratios of expenses prior to waiver of advisory fees are
1.14% (annualized), 1.16%, 1.18% and 1.21% for the periods
1997-1994, respectively.
(d) Ratios are annualized and based on average net assets of
$11,958,901,203.
(e) Ratio includes expenses paid indirectly. Excluding expenses
paid indirectly, the ratio of expenses to average net assets
would have remained the same.
(f) Ratios of net investment income (loss) prior to waiver of
advisory fees are (0.39)% (annualized), (0.29)%, (0.34)% and
(0.16)% for the periods 1997-1994, respectively.
(g) Annualized.
(h) Disclosure requirement beginning with the Fund's fiscal year
ending October 31, 1996.
(i) Averages computed on a daily basis.
</TABLE>
FS-119
<PAGE> 221
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>
FS-120
<PAGE> 222
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-95.09%
ADVERTISING/BROADCASTING-3.10%
American Radio Systems Corp.(a) 100,000 $ 2,925,000
- ---------------------------------------------------------------
CKS Group, Inc.(a) 200,000 4,225,000
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 300,000 14,550,000
- ---------------------------------------------------------------
Evergreen Media Corp. -- Class
A(a) 200,000 6,475,000
- ---------------------------------------------------------------
Heftel Broadcasting Corp.(a) 401,400 20,070,000
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 352,800 9,922,500
- ---------------------------------------------------------------
Meredith Corp. 200,000 4,700,000
- ---------------------------------------------------------------
Telemundo Group, Inc.-Class A(a) 175,000 4,593,750
- ---------------------------------------------------------------
67,461,250
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.56%
BE Aerospace, Inc.(a) 355,000 8,741,875
- ---------------------------------------------------------------
REMEC, Inc.(a) 150,000 3,450,000
- ---------------------------------------------------------------
12,191,875
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS &
TIRES-0.29%
Borg-Warner Automotive, Inc. 150,000 6,300,000
- ---------------------------------------------------------------
BANKING-0.77%
Bank United Corp.-Class A(a) 175,000 5,337,500
- ---------------------------------------------------------------
First Republic Bancorp, Inc.(a) 300,000 6,262,500
- ---------------------------------------------------------------
First Savings Bank of Washington
Bancorp, Inc. 250,000 5,250,000
- ---------------------------------------------------------------
16,850,000
- ---------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.26%
Cerner Corp.(a) 350,000 5,643,750
- ---------------------------------------------------------------
BUILDING MATERIALS-0.15%
Danaher Corp. 70,000 3,158,750
- ---------------------------------------------------------------
BUSINESS SERVICES-2.78%
AccuStaff, Inc.(a) 181,000 3,303,250
- ---------------------------------------------------------------
Cambridge Technology Partners,
Inc.(a) 225,000 5,990,625
- ---------------------------------------------------------------
Caribiner International, Inc.(a) 100,000 5,300,000
- ---------------------------------------------------------------
Claremont Technology Group,
Inc.(a) 76,600 1,034,100
- ---------------------------------------------------------------
Data Processing Resources
Corp.(a) 86,500 1,589,437
- ---------------------------------------------------------------
IntelliQuest Information Group,
Inc.(a) 375,000 6,093,750
- ---------------------------------------------------------------
MedQuist, Inc.(a) 175,000 4,418,750
- ---------------------------------------------------------------
NOVA Corp.(a) 175,000 3,150,000
- ---------------------------------------------------------------
Pharmaceutical Product
Development, Inc.(a) 175,000 2,931,250
- ---------------------------------------------------------------
RemedyTemp, Inc.-Class A(a) 165,000 2,516,250
- ---------------------------------------------------------------
Robert Half International,
Inc.(a) 300,000 11,775,000
- ---------------------------------------------------------------
Romac International, Inc.(a) 300,000 5,850,000
- ---------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 60,000 1,380,000
- ---------------------------------------------------------------
Vincam Group, Inc. (The)(a) 100,000 3,250,000
- ---------------------------------------------------------------
Whittman-Hart, Inc.(a) 100,000 1,900,000
- ---------------------------------------------------------------
60,482,412
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER MINI/PCS-0.22%
Stratus Computer, Inc.(a) 125,000 $ 4,859,375
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.97%
Coherent Communications Systems
Corp.(a) 500,000 8,187,500
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 125,000 4,906,250
- ---------------------------------------------------------------
Digital Microwave Corp.(a) 150,000 3,862,500
- ---------------------------------------------------------------
International Network Services(a) 13,500 276,750
- ---------------------------------------------------------------
Network Appliance, Inc.(a) 75,000 2,184,375
- ---------------------------------------------------------------
VideoServer, Inc.(a) 100,000 1,687,500
- ---------------------------------------------------------------
21,104,875
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.68%
Encad, Inc.(a) 200,000 7,350,000
- ---------------------------------------------------------------
MicroTouch Systems, Inc.(a) 350,000 7,481,250
- ---------------------------------------------------------------
14,831,250
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-12.70%
Affiliated Computer Services,
Inc.(a) 600,000 15,600,000
- ---------------------------------------------------------------
Analysts International Corp. 200,000 5,700,000
- ---------------------------------------------------------------
BDM International Inc.(a) 500,000 11,625,000
- ---------------------------------------------------------------
BISYS Group, Inc. (The)(a) 150,000 4,800,000
- ---------------------------------------------------------------
CBT Group PLC-ADR(a) (Ireland) 156,400 7,604,950
- ---------------------------------------------------------------
Centura Software Corp.(a) 14,930 29,860
- ---------------------------------------------------------------
Cognos, Inc.(a) (Canada) 250,000 6,343,750
- ---------------------------------------------------------------
Computer Data Systems, Inc. 181,300 3,943,275
- ---------------------------------------------------------------
Computer Horizons Corp.(a) 100,000 4,350,000
- ---------------------------------------------------------------
Computer Task Group, Inc. 100,000 4,312,500
- ---------------------------------------------------------------
Cooper & Chyan Technology,
Inc.(a) 367,000 8,899,750
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 250,000 4,437,500
- ---------------------------------------------------------------
Documentum, Inc.(a) 100,000 1,850,000
- ---------------------------------------------------------------
Engineering Animation, Inc.(a)(b) 310,100 7,132,300
- ---------------------------------------------------------------
HBO & Co. 125,000 6,687,500
- ---------------------------------------------------------------
HPR, Inc.(a) 500,000 7,062,500
- ---------------------------------------------------------------
IDX Systems Corp.(a) 165,600 4,926,600
- ---------------------------------------------------------------
Imnet Systems, Inc.(a) 325,000 5,971,875
- ---------------------------------------------------------------
Indus Group, Inc.(a) 300,000 4,537,500
- ---------------------------------------------------------------
Integrated Measurement Systems,
Inc.(a) 300,000 3,975,000
- ---------------------------------------------------------------
Jack Henry & Associates 225,000 4,275,000
- ---------------------------------------------------------------
JDA Software Group, Inc.(a) 250,000 6,312,500
- ---------------------------------------------------------------
Keane, Inc.(a) 53,400 2,476,425
- ---------------------------------------------------------------
McAfee Associates, Inc.(a) 200,000 11,150,000
- ---------------------------------------------------------------
Midway Games Inc.(a) 200,000 3,600,000
- ---------------------------------------------------------------
National Data Corp. 200,000 7,500,000
- ---------------------------------------------------------------
National TechTeam, Inc.(a) 250,000 3,875,000
- ---------------------------------------------------------------
Network General Corp.(a) 485,800 6,679,750
- ---------------------------------------------------------------
Peerless Systems Corp.(a) 250,000 2,968,750
- ---------------------------------------------------------------
</TABLE>
FS-121
<PAGE> 223
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
PeopleSoft, Inc.(a) 125,000 $ 5,187,500
- ---------------------------------------------------------------
Physician Computer Network,
Inc.(a) 398,000 2,114,375
- ---------------------------------------------------------------
RadiSys Corp.(a) 100,000 2,937,500
- ---------------------------------------------------------------
Raptor Systems, Inc.(a) 100,000 1,150,000
- ---------------------------------------------------------------
Renaissance Solutions, Inc.(a) 125,000 2,718,750
- ---------------------------------------------------------------
Saville Systems Ireland
PLC-ADR(a) (Ireland) 350,000 14,393,750
- ---------------------------------------------------------------
Scopus Technology, Inc.(a) 44,600 1,193,050
- ---------------------------------------------------------------
Security Dynamics Technologies,
Inc.(a) 300,000 7,575,000
- ---------------------------------------------------------------
SPSS, Inc.(a) 210,000 5,565,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 159,260 4,120,852
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 100,000 3,050,000
- ---------------------------------------------------------------
SunGard Data Systems Inc.(a) 300,000 13,312,500
- ---------------------------------------------------------------
Sykes Enterprises, Inc.(a) 60,900 1,735,650
- ---------------------------------------------------------------
Technology Solutions Co.(a) 250,000 6,593,750
- ---------------------------------------------------------------
Transition Systems, Inc.(a) 373,200 4,478,400
- ---------------------------------------------------------------
Trusted Information System,
Inc.(a) 200,000 1,800,000
- ---------------------------------------------------------------
Vantive Corp.(a) 80,000 1,590,000
- ---------------------------------------------------------------
Veritas Software Corp.(a) 360,000 12,105,000
- ---------------------------------------------------------------
Viasoft, Inc.(a) 175,000 7,437,500
- ---------------------------------------------------------------
Wind River Systems(a) 187,500 4,312,500
- ---------------------------------------------------------------
Yahoo! Inc.(a) 127,500 4,350,938
- ---------------------------------------------------------------
276,349,300
- ---------------------------------------------------------------
CONSUMER NON-DURABLES-0.42%
Central Garden and Pet Co.(a) 275,000 5,482,812
- ---------------------------------------------------------------
Herbalife International, Inc. 233,300 3,761,963
- ---------------------------------------------------------------
9,244,775
- ---------------------------------------------------------------
CONTAINERS-0.14%
Apogee Enterprises, Inc. 200,000 3,000,000
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-1.19%
Helen of Troy Ltd.(a) 550,000 12,787,500
- ---------------------------------------------------------------
NBTY, Inc.(a) 275,000 5,225,000
- ---------------------------------------------------------------
Rexall Sundown, Inc.(a) 400,000 7,950,000
- ---------------------------------------------------------------
25,962,500
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-4.13%
AMETEK, Inc. 200,000 4,475,000
- ---------------------------------------------------------------
ANADIGICS, Inc.(a) 246,300 6,957,975
- ---------------------------------------------------------------
ASE Test Ltd. 65,400 2,427,975
- ---------------------------------------------------------------
Benchmarq Microelectronics,
Inc.(a) 400,000 7,000,000
- ---------------------------------------------------------------
BMC Industries, Inc. 500,000 14,500,000
- ---------------------------------------------------------------
Cyberoptics Corp.(a) 200,000 3,225,000
- ---------------------------------------------------------------
Micro Linear Corp.(a) 200,000 3,175,000
- ---------------------------------------------------------------
Micron Electronics, Inc.(a) 365,000 7,436,875
- ---------------------------------------------------------------
Perceptron, Inc.(a) 200,000 5,650,000
- ---------------------------------------------------------------
Sawtek Inc.(a) 178,500 5,288,063
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 22,600 1,395,550
- ---------------------------------------------------------------
Sipex Corp.(a)(b) 420,000 10,080,000
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONIC
COMPONENTS/MISCELLANEOUS-(CONTINUED)
Symbol Technologies, Inc.(a) 300,000 $ 9,712,500
- ---------------------------------------------------------------
Technitrol, Inc. 300,000 6,037,500
- ---------------------------------------------------------------
ThermoQuest Corp.(a) 200,000 2,600,000
- ---------------------------------------------------------------
89,961,438
- ---------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.18%
Halter Marine Group, Inc.(a) 200,000 3,925,000
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.20%
Imperial Credit Industries,
Inc.(a) 300,000 4,368,750
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-4.14%
Aames Financial Corp. 214,650 3,300,241
- ---------------------------------------------------------------
AmeriCredit Corp.(a) 300,000 4,312,500
- ---------------------------------------------------------------
Amresco, Inc.(a) 400,000 5,825,000
- ---------------------------------------------------------------
Cityscape Financial Corp.(a) 225,000 3,009,375
- ---------------------------------------------------------------
CMAC Investment Corp. 300,000 11,400,000
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 600,000 11,850,000
- ---------------------------------------------------------------
Consumer Portfolio Services,
Inc.(a) 350,000 2,712,500
- ---------------------------------------------------------------
Delta Financial Corp.(a) 250,000 3,375,000
- ---------------------------------------------------------------
First Alliance Corp.(a) 200,000 4,100,000
- ---------------------------------------------------------------
FIRSTPLUS Financial Group,
Inc.(a) 450,000 9,956,250
- ---------------------------------------------------------------
IMC Mortgage Co.(a) 300,000 3,375,000
- ---------------------------------------------------------------
Metris Companies Inc.(a) 125,000 3,125,000
- ---------------------------------------------------------------
Money Store, Inc. (The) 716,600 15,496,475
- ---------------------------------------------------------------
PMT Services, Inc.(a) 300,000 3,562,500
- ---------------------------------------------------------------
Southern Pacific Funding Corp.(a) 250,000 2,656,250
- ---------------------------------------------------------------
Union Acceptance Corp.(a) 200,000 2,100,000
- ---------------------------------------------------------------
90,156,091
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.70%
Bay View Capital Corp. 150,000 7,284,375
- ---------------------------------------------------------------
Ocwen Financial Corp.(a) 120,000 3,780,000
- ---------------------------------------------------------------
TCF Financial Corp. 100,000 4,087,500
- ---------------------------------------------------------------
15,151,875
- ---------------------------------------------------------------
FOOD/PROCESSING-0.37%
Delta & Pine Land Co. 133,333 3,333,325
- ---------------------------------------------------------------
Smithfield Foods, Inc.(a) 100,000 4,612,500
- ---------------------------------------------------------------
7,945,825
- ---------------------------------------------------------------
FUNERAL SERVICES-1.01%
Equity Corp. International(a) 450,000 9,675,000
- ---------------------------------------------------------------
Stewart Enterprises, Inc.- Class
A 375,000 12,375,000
- ---------------------------------------------------------------
22,050,000
- ---------------------------------------------------------------
FURNITURE-0.48%
Ethan Allen Interiors, Inc. 125,000 5,531,250
- ---------------------------------------------------------------
Herman Miller, Inc. 150,000 4,856,250
- ---------------------------------------------------------------
10,387,500
- ---------------------------------------------------------------
GAMING-0.17%
Primadonna Resorts, Inc.(a) 200,000 3,750,000
- ---------------------------------------------------------------
</TABLE>
FS-122
<PAGE> 224
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOME BUILDING-0.09%
American Homestar Corp.(a) 125,000 $ 2,031,250
- ---------------------------------------------------------------
HOTELS/MOTELS-0.51%
Prime Hospitality Corp.(a) 450,000 7,481,250
- ---------------------------------------------------------------
Suburban Lodges of America,
Inc.(a) 80,000 1,290,000
- ---------------------------------------------------------------
Wyndham Hotel Corp.(a) 83,300 2,301,163
- ---------------------------------------------------------------
11,072,413
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.49%
Compdent Corp.(a) 66,500 1,072,313
- ---------------------------------------------------------------
CRA Managed Care, Inc.(a) 100,000 3,525,000
- ---------------------------------------------------------------
First Commonwealth, Inc.(a) 162,500 1,990,625
- ---------------------------------------------------------------
Penn Treaty American Corp.(a) 150,000 4,050,000
- ---------------------------------------------------------------
10,637,938
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-0.93%
CapMAC Holdings, Inc. 250,000 6,500,000
- ---------------------------------------------------------------
HCC Insurance Holdings, Inc. 250,000 6,281,250
- ---------------------------------------------------------------
Vesta Insurance Group, Inc. 178,500 7,452,375
- ---------------------------------------------------------------
20,233,625
- ---------------------------------------------------------------
LEISURE & RECREATION-1.15%
Avid Technology, Inc.(a) 200,000 3,875,000
- ---------------------------------------------------------------
Cannondale Corp.(a) 200,000 3,900,000
- ---------------------------------------------------------------
North Face, Inc.(a) 200,000 2,825,000
- ---------------------------------------------------------------
Penske Motorsports, Inc.(a) 100,000 2,937,500
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 200,000 6,375,000
- ---------------------------------------------------------------
West Marine, Inc.(a) 200,000 5,200,000
- ---------------------------------------------------------------
25,112,500
- ---------------------------------------------------------------
MACHINE TOOLS-0.25%
Precision Castparts Corp. 100,000 5,350,000
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.09%
Rental Service Corp.(a) 103,600 1,916,600
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.53%
Kulicke & Soffa Industries,
Inc.(a) 250,000 6,984,375
- ---------------------------------------------------------------
Prime Service, Inc.(a) 200,000 4,475,000
- ---------------------------------------------------------------
11,459,375
- ---------------------------------------------------------------
MEDICAL (DRUGS)-2.66%
Arbor Drugs, Inc. 300,000 5,512,500
- ---------------------------------------------------------------
Biovail Corporation
International(a) (Canada) 300,000 7,500,000
- ---------------------------------------------------------------
Cardinal Health, Inc. 278,700 14,840,775
- ---------------------------------------------------------------
Curative Technologies, Inc.(a) 150,000 3,543,750
- ---------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 207,000 6,003,000
- ---------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 125,000 4,593,750
- ---------------------------------------------------------------
Medicis Pharmaceutical Corp.(a) 405,000 9,922,500
- ---------------------------------------------------------------
Parexel International Corp.(a) 214,800 6,014,400
- ---------------------------------------------------------------
57,930,675
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-11.55%
ABR Information Services, Inc.(a) 240,000 $ 4,830,000
- ---------------------------------------------------------------
ADAC Laboratories 250,000 5,781,250
- ---------------------------------------------------------------
American HomePatient, Inc.(a) 337,350 6,493,988
- ---------------------------------------------------------------
American Medserve Corp.(a) 191,700 2,084,738
- ---------------------------------------------------------------
Arbor Health Care Co.(a)(b) 450,000 11,025,000
- ---------------------------------------------------------------
Atria Communities, Inc.(a) 250,000 2,812,500
- ---------------------------------------------------------------
CareMatrix Corp.(a) 350,000 6,956,250
- ---------------------------------------------------------------
EmCare Holdings, Inc.(a) 200,000 5,625,000
- ---------------------------------------------------------------
Envoy Corp.(a) 300,000 6,262,500
- ---------------------------------------------------------------
FPA Medical Management, Inc.(a) 375,000 6,093,750
- ---------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 150,000 4,481,250
- ---------------------------------------------------------------
Health Care and Retirement
Corp.(a) 300,000 9,487,500
- ---------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 737,662 19,732,458
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 1,000,000 19,750,000
- ---------------------------------------------------------------
Hologic, Inc.(a) 300,000 6,225,000
- ---------------------------------------------------------------
Integrated Health Services,
Inc.(a) 225,000 7,228,125
- ---------------------------------------------------------------
Lincare Holdings, Inc.(a) 200,000 7,850,000
- ---------------------------------------------------------------
MedPartners, Inc.(a) 150,000 2,737,500
- ---------------------------------------------------------------
Multicare Companies, Inc.(a) 375,000 6,984,375
- ---------------------------------------------------------------
NCS HealthCare, Inc.-Class A(a) 125,000 2,843,750
- ---------------------------------------------------------------
NovaCare, Inc.(a) 300,000 3,412,500
- ---------------------------------------------------------------
OccuSystems, Inc.(a) 287,200 5,923,500
- ---------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 625,000 7,500,000
- ---------------------------------------------------------------
Oxford Health Plans, Inc.(a) 100,000 6,587,500
- ---------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 150,000 4,950,000
- ---------------------------------------------------------------
PhyCor, Inc.(a) 187,500 4,992,187
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 250,000 7,781,250
- ---------------------------------------------------------------
Renal Care Group, Inc.(a) 200,000 6,000,000
- ---------------------------------------------------------------
Renal Treatment Centers, Inc.(a) 200,000 4,325,000
- ---------------------------------------------------------------
RoTech Medical Corp.(a) 500,000 7,875,000
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 94,800 2,287,050
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 540,000 14,040,000
- ---------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 150,000 4,818,750
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 400,000 15,150,000
- ---------------------------------------------------------------
Vencor, Inc.(a) 250,000 10,406,250
- ---------------------------------------------------------------
251,333,921
- ---------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-4.22%
Acuson Corp.(a) 250,000 6,062,500
- ---------------------------------------------------------------
Arterial Vascular Engineering,
Inc.(a) 150,000 2,231,250
- ---------------------------------------------------------------
Capstone Pharmacy Services,
Inc.(a) 105,000 885,937
- ---------------------------------------------------------------
CardioThoracic Systems, Inc.(a) 100,000 1,587,500
- ---------------------------------------------------------------
Dentsply International, Inc. 250,000 12,375,000
- ---------------------------------------------------------------
ESC Medical Systems Ltd.(a)
(Israel) 47,850 1,285,969
- ---------------------------------------------------------------
Henry Schein, Inc.(a) 200,000 5,550,000
- ---------------------------------------------------------------
MiniMed, Inc.(a) 150,000 3,712,500
- ---------------------------------------------------------------
National Dentex Corp.(a)(b) 185,000 3,156,563
- ---------------------------------------------------------------
</TABLE>
FS-123
<PAGE> 225
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS-(CONTINUED)
Omnicare, Inc. 500,000 $ 12,187,500
- ---------------------------------------------------------------
Patterson Dental Co.(a) 300,000 10,050,000
- ---------------------------------------------------------------
Physician Sales & Service, Inc.(a) 200,000 2,900,000
- ---------------------------------------------------------------
ResMed, Inc.(a) 275,000 4,812,500
- ---------------------------------------------------------------
Suburban Ostomy Supply Co.,
Inc.(a)(b) 556,900 5,012,100
- ---------------------------------------------------------------
Sybron International Corp.(a) 600,000 19,950,000
- ---------------------------------------------------------------
91,759,319
- ---------------------------------------------------------------
METALS-0.13%
Northwest Pipe Co.(a) 150,000 2,400,000
- ---------------------------------------------------------------
Shaw Group, Inc.(a) 36,700 495,450
- ---------------------------------------------------------------
2,895,450
- ---------------------------------------------------------------
OFFICE AUTOMATION-0.35%
Danka Business Systems PLC-ADR
(United Kingdom) 250,000 7,640,625
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.49%
Daisytek International Corp.(a)(b) 393,000 10,709,250
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.80%
Cliffs Drilling Co.(a) 145,000 8,845,000
- ---------------------------------------------------------------
Patterson Energy, Inc.(a) 120,000 3,450,000
- ---------------------------------------------------------------
Precision Drilling Corp.(a)
(Canada) 150,000 5,212,500
- ---------------------------------------------------------------
17,507,500
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.60%
Devon Energy Corp.(a) 225,000 7,425,000
- ---------------------------------------------------------------
Edge Petroleum Corp.(a) 225,000 3,065,625
- ---------------------------------------------------------------
St. Mary Land & Exploration Co. 100,000 2,600,000
- ---------------------------------------------------------------
13,090,625
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-2.13%
Camco International, Inc. 225,000 9,984,375
- ---------------------------------------------------------------
Energy Ventures, Inc.(a) 250,000 16,718,750
- ---------------------------------------------------------------
Global Industries Ltd.(a) 250,000 5,250,000
- ---------------------------------------------------------------
Newpark Resources, Inc.(a) 100,000 4,487,500
- ---------------------------------------------------------------
SEACOR Holdings Inc.(a) 50,000 2,150,000
- ---------------------------------------------------------------
Veritas DGC, Inc.(a) 400,000 7,700,000
- ---------------------------------------------------------------
46,290,625
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.39%
Marine Drilling Companies, Inc.(a) 377,600 5,947,200
- ---------------------------------------------------------------
National-Oilwell, Inc.(a) 400,000 15,550,000
- ---------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 169,200 2,918,700
- ---------------------------------------------------------------
Varco International, Inc.(a) 250,000 5,750,000
- ---------------------------------------------------------------
30,165,900
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.19%
Schweitzer-Mauduit International,
Inc. 125,000 4,078,125
- ---------------------------------------------------------------
POLLUTION CONTROL-2.00%
Philip Environmental, Inc.(a)
(Canada) 475,000 7,481,250
- ---------------------------------------------------------------
Tetra Technologies, Inc.(a) 265,000 6,161,250
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
POLLUTION CONTROL-(CONTINUED)
United Waste Systems, Inc.(a) 100,000 $ 3,375,000
- ---------------------------------------------------------------
US Filter Corp.(a) 450,000 13,668,750
- ---------------------------------------------------------------
USA Waste Services, Inc.(a) 390,000 12,772,500
- ---------------------------------------------------------------
43,458,750
- ---------------------------------------------------------------
PUBLISHING-0.22%
World Color Press, Inc.(a) 200,000 4,800,000
- ---------------------------------------------------------------
RESTAURANTS-1.64%
Apple South, Inc. 499,962 6,499,506
- ---------------------------------------------------------------
CKE Restaurants, Inc. 225,000 4,415,625
- ---------------------------------------------------------------
Foodmaker, Inc.(a) 770,000 8,373,750
- ---------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(a) 275,000 3,862,891
- ---------------------------------------------------------------
NPC International Inc.(a) 52,500 577,500
- ---------------------------------------------------------------
Papa John's International, Inc.(a) 200,000 5,150,000
- ---------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 200,000 3,850,000
- ---------------------------------------------------------------
Starbucks Corp.(a) 100,000 2,987,500
- ---------------------------------------------------------------
35,716,772
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.87%
Quality Food Centers, Inc.(a) 350,000 14,043,750
- ---------------------------------------------------------------
Twinlab Corp.(a) 375,000 4,968,750
- ---------------------------------------------------------------
19,012,500
- ---------------------------------------------------------------
RETAIL (STORES)-9.15%
Blyth Industries, Inc.(a) 400,000 15,800,000
- ---------------------------------------------------------------
Buckle, Inc. (The)(a) 340,000 5,015,000
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 162,500 7,800,000
- ---------------------------------------------------------------
CompUSA, Inc.(a) 600,000 11,550,000
- ---------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 175,000 6,912,500
- ---------------------------------------------------------------
Duty Free International, Inc. 400,000 5,650,000
- ---------------------------------------------------------------
Eagle Hardware & Garden, Inc.(a) 550,000 10,312,500
- ---------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 322,800 3,328,875
- ---------------------------------------------------------------
Footstar, Inc.(a) 125,000 2,593,750
- ---------------------------------------------------------------
Gadzooks, Inc.(a) 100,000 2,787,500
- ---------------------------------------------------------------
Hollywood Entertainment Corp.(a) 300,000 6,412,500
- ---------------------------------------------------------------
Inacom Corp.(a) 150,000 3,318,750
- ---------------------------------------------------------------
Insight Enterprises, Inc.(a) 350,000 8,312,500
- ---------------------------------------------------------------
Just for Feet, Inc.(a) 400,000 6,350,000
- ---------------------------------------------------------------
Loehmann's Holdings, Inc.(a)(b) 125,000 859,375
- ---------------------------------------------------------------
Marks Bros. Jewelers, Inc.(a) 200,000 2,225,000
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 325,000 8,084,375
- ---------------------------------------------------------------
Meyer (Fred), Inc.(a) 100,000 4,112,500
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 200,000 3,850,000
- ---------------------------------------------------------------
Micro Warehouse, Inc.(a) 200,000 3,450,000
- ---------------------------------------------------------------
MicroAge, Inc. 350,000 4,418,750
- ---------------------------------------------------------------
MSC Industrial Direct Co., Inc.-
Class A(a) 125,000 3,843,750
- ---------------------------------------------------------------
99 Cents Only Stores(a) 100,000 2,162,500
- ---------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 200,000 7,000,000
- ---------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 450,000 9,618,750
- ---------------------------------------------------------------
</TABLE>
FS-124
<PAGE> 226
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Pier 1 Imports, Inc. 600,000 $ 11,850,000
- ---------------------------------------------------------------
Sports Authority, Inc. (The)(a) 300,000 5,325,000
- ---------------------------------------------------------------
Stein Mart, Inc.(a) 200,000 5,800,000
- ---------------------------------------------------------------
Tech Data Corp.(a) 545,000 13,352,500
- ---------------------------------------------------------------
Wet Seal, Inc.-Class A(a) 225,000 5,568,750
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 175,000 5,425,000
- ---------------------------------------------------------------
Wilmar Industries, Inc.(a) 150,000 2,475,000
- ---------------------------------------------------------------
Zale Corp.(a) 200,000 3,700,000
- ---------------------------------------------------------------
199,265,125
- ---------------------------------------------------------------
SCHOOLS-0.27%
Children's Comprehensive
Services, Inc.(a) 275,000 3,231,250
- ---------------------------------------------------------------
Strayer Education, Inc. 100,000 2,575,000
- ---------------------------------------------------------------
5,806,250
- ---------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.49%
Datum, Inc.(a) 133,300 3,099,225
- ---------------------------------------------------------------
Dynatech Corp.(a) 100,000 3,475,000
- ---------------------------------------------------------------
Thermo Optek Corp.(a) 350,000 4,068,750
- ---------------------------------------------------------------
10,642,975
- ---------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.22%
Cornell Corrections, Inc.(a) 200,000 1,875,000
- ---------------------------------------------------------------
Rural/Metro Corp.(a) 100,000 2,875,000
- ---------------------------------------------------------------
4,750,000
- ---------------------------------------------------------------
SEMICONDUCTORS-5.66%
Actel Corp.(a) 100,000 1,787,500
- ---------------------------------------------------------------
Burr-Brown Corp.(a) 100,000 2,950,000
- ---------------------------------------------------------------
Computer Products, Inc.(a) 550,000 9,418,750
- ---------------------------------------------------------------
Cymer, Inc.(a) 150,000 6,168,750
- ---------------------------------------------------------------
Dallas Semiconductor Corp.(a) 250,000 9,125,000
- ---------------------------------------------------------------
DuPont Photomasks, Inc.(a) 150,000 7,181,250
- ---------------------------------------------------------------
GaSonics International Corp.(a) 123,200 1,047,200
- ---------------------------------------------------------------
HADCO Corp.(a) 230,000 9,832,500
- ---------------------------------------------------------------
Integrated Device Technology, Inc.(a) 450,000 5,287,500
- ---------------------------------------------------------------
Kemet Corp.(a) 300,000 5,850,000
- ---------------------------------------------------------------
Lattice Semiconductor Corp.(a) 275,000 15,365,625
- ---------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 235,700 6,452,288
- ---------------------------------------------------------------
Photronics, Inc.(a) 200,000 6,925,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 150,000 7,500,000
- ---------------------------------------------------------------
Sierra Semiconductor Corp.(a) 400,000 6,750,000
- ---------------------------------------------------------------
Silicon Valley Group, Inc.(a) 250,000 5,140,625
- ---------------------------------------------------------------
Tower Semiconductor Ltd. 350,000 4,375,000
- ---------------------------------------------------------------
Triquint Semiconductor, Inc.(a) 235,000 6,991,250
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 162,500 5,118,750
- ---------------------------------------------------------------
123,266,988
- ---------------------------------------------------------------
SHOES & RELATED APPAREL-1.70%
Converse, Inc.(a) 500,000 7,500,000
- ---------------------------------------------------------------
Genesco Inc.(a) 200,000 2,325,000
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SHOES & RELATED APPAREL-(CONTINUED)
Pacific Sunwear of California(a) 200,000 $ 6,250,000
- ---------------------------------------------------------------
Stride Rite Corp. 250,000 3,437,500
- ---------------------------------------------------------------
Vans, Inc.(a) 250,000 2,406,250
- ---------------------------------------------------------------
Wolverine World Wide, Inc. 375,000 15,093,750
- ---------------------------------------------------------------
37,012,500
- ---------------------------------------------------------------
STEEL-0.52%
Maverick Tube Corp.(a) 279,100 6,105,313
- ---------------------------------------------------------------
Tubos de Acero de Mexico S.A.(a)
(Mexico) 325,000 5,321,875
- ---------------------------------------------------------------
11,427,188
- ---------------------------------------------------------------
TELECOMMUNICATIONS-5.47%
ADC Telecommunications, Inc.(a) 552,200 14,426,225
- ---------------------------------------------------------------
Adtran, Inc.(a) 100,000 2,962,500
- ---------------------------------------------------------------
Advanced Fibre Communications,
Inc.(a) 125,000 4,984,375
- ---------------------------------------------------------------
Andrew Corp.(a) 201,600 4,989,600
- ---------------------------------------------------------------
Anicom, Inc.(a) 400,000 3,300,000
- ---------------------------------------------------------------
Aspect Telecommunications Corp.(a) 250,000 4,437,500
- ---------------------------------------------------------------
Billing Information Concepts(a) 350,000 8,356,250
- ---------------------------------------------------------------
Brightpoint, Inc.(a)(b) 937,406 20,505,762
- ---------------------------------------------------------------
CellStar Corp.(a) 275,000 6,600,000
- ---------------------------------------------------------------
Davox Corp.(a) 150,000 4,950,000
- ---------------------------------------------------------------
MasTec, Inc.(a) 150,000 4,350,000
- ---------------------------------------------------------------
NACT Telecommunications, Inc.(a) 100,000 687,500
- ---------------------------------------------------------------
P-COM, Inc.(a) 100,000 2,862,500
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a) 189,600 4,929,600
- ---------------------------------------------------------------
Precision Response Corp.(a) 50,000 818,750
- ---------------------------------------------------------------
Premiere Technologies, Inc.(a) 250,000 5,968,750
- ---------------------------------------------------------------
Proxim, Inc.(a) 100,000 2,012,500
- ---------------------------------------------------------------
Tel-Save Holdings, Inc.(a) 200,000 2,800,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 200,000 7,975,000
- ---------------------------------------------------------------
Tollgrade Communications, Inc.(a) 200,000 3,950,000
- ---------------------------------------------------------------
U.S. Long Distance Corp.(a) 350,000 4,243,750
- ---------------------------------------------------------------
Xpedite Systems, Inc.(a) 100,000 2,012,500
- ---------------------------------------------------------------
Yurie Systems, Inc.(a) 100,000 962,500
- ---------------------------------------------------------------
119,085,562
- ---------------------------------------------------------------
TEXTILES-2.14%
G & K Services, Inc.-Class A(a) 200,000 5,800,000
- ---------------------------------------------------------------
Mohawk Industries, Inc.(a) 250,000 5,593,750
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 390,000 8,628,750
- ---------------------------------------------------------------
Quicksilver, Inc.(a) 150,000 3,262,500
- ---------------------------------------------------------------
St. John Knits, Inc. 250,000 9,593,750
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 150,000 5,962,500
- ---------------------------------------------------------------
WestPoint Stevens, Inc.(a) 200,000 7,825,000
- ---------------------------------------------------------------
46,666,250
- ---------------------------------------------------------------
TRANSPORTATION-0.45%
Hub Group, Inc.(a) 200,000 5,300,000
- ---------------------------------------------------------------
</TABLE>
FS-125
<PAGE> 227
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRANSPORTATION-(CONTINUED)
Trico Marine Services, Inc.(a) 125,000 $ 4,437,500
- ---------------------------------------------------------------
9,737,500
- ---------------------------------------------------------------
TRUCKING-0.13%
Swift Transportation Co., Inc.(a) 100,000 2,850,000
- ---------------------------------------------------------------
Total Common Stocks 2,069,850,667
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.41%
ADVERTISING/BROADCASTING-0.07%
Jacor Communications Inc.,
Conv. Sr. LYON,
5.50%, 06/12/11(c) $ 3,200,000 1,480,000
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.34%
Aames Financial Corp.,
Conv. Sub. Deb.,
5.50%, 03/15/06 1,560,000 1,386,294
- ---------------------------------------------------------------
Cityscape Financial Corp.,
Conv. Sub. Deb.,
6.00%, 05/01/06(d)
(Acquired 08/06/96; Cost
$1,326,624) 960,000 636,758
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-(CONTINUED)
Southern Pacific Funding Corp.,
Conv. Sub. Notes,
6.75%, 10/15/06 $ 6,750,000 $ 5,332,500
- ---------------------------------------------------------------
7,355,552
- ---------------------------------------------------------------
Total Convertible Corporate
Bonds 8,835,552
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-1.87%
U.S. Treasury Bills-1.87%(e)
5.10%, 06/26/97(f) 41,160,000 40,828,458
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-1.89%(g)
HSBC Securities, Inc.
5.05%, 05/01/97(h) 4,935,390 4,935,390
- ---------------------------------------------------------------
5.49%, 05/01/97(i) 36,238,378 36,238,378
- ---------------------------------------------------------------
Total Repurchase Agreements 41,173,768
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.26% 2,160,688,445
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.74% 16,030,352
- ---------------------------------------------------------------
NET ASSETS -100.00% $2,176,718,797
===============================================================
</TABLE>
Investment Abbreviations:
ADR -- American Depository Receipt
Conv. -- Convertible
Deb. -- Debentures
LYON -- Liquid Yield Option Notes
Sr. -- Senior
Sub. -- Subordinated
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 at 04/30/97 was
$63,287,088 which represented 2.91% of the Fund's net assets.
(c) Zero coupon bond. Interest rate shown represents the rate of original issue
discount.
(d) Restricted security. May be resold to qualified 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 04/30/97 was $636,758 which represented 0.03% of the Fund's net
assets.
(e) U.S. Treasury bills are traded on 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 6.
(g) 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.
(h) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$100,014,028. Collateralized by $96,950,000 U.S. Treasury obligations, 7.50%
to 7.875% due 10/31/99 to 12/31/99 with an aggregate market value at
04/30/97 of $102,002,050.
(i) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$200,030,500. Collateralized by $116,271,000 U.S. Treasury obligations,
5.875% to 7.875% due 06/30/01 to 08/15/05 and $85,760,000 U.S. Government
agency obligations, 0% to 7.15% due 07/18/97 to 02/14/06 with an aggregate
market value at 04/30/97 of $204,003,650.
See Notes to Financial Statements.
FS-126
<PAGE> 228
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,826,531,956) $2,160,688,445
- --------------------------------------------------------
Receivables for:
Investments sold 27,207,337
- --------------------------------------------------------
Capital stock sold 3,108,203
- --------------------------------------------------------
Dividends and interest 218,165
- --------------------------------------------------------
Variation margin 150,000
- --------------------------------------------------------
Investment for deferred compensation
plan 26,760
- --------------------------------------------------------
Other assets 94,307
- --------------------------------------------------------
Total assets 2,191,493,217
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 6,161,450
- --------------------------------------------------------
Capital stock reacquired 5,970,653
- --------------------------------------------------------
Deferred compensation 26,760
- --------------------------------------------------------
Accrued advisory fees 1,139,436
- --------------------------------------------------------
Accrued administrative services fees 8,183
- --------------------------------------------------------
Accrued distribution fees 791,602
- --------------------------------------------------------
Accrued directors fees 5,714
- --------------------------------------------------------
Accrued transfer agent fees 462,405
- --------------------------------------------------------
Accrued operating expenses 208,217
- --------------------------------------------------------
Total liabilities 14,774,420
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $2,176,718,797
========================================================
Capital stock, $.001 par value per share:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 59,821,734
========================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 36.39
- --------------------------------------------------------
OFFERING PRICE PER SHARE:
(Net asset value of $36.39
divided by 94.50%) $ 38.51
========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,462,377
- --------------------------------------------------------
Dividends (net of $7,376 foreign
withholding tax) 1,233,237
- --------------------------------------------------------
Total investment income 3,695,614
- --------------------------------------------------------
EXPENSES:
Advisory fees 8,135,710
- --------------------------------------------------------
Custodian fees 72,204
- --------------------------------------------------------
Directors' fees 11,408
- --------------------------------------------------------
Distribution fees 3,203,882
- --------------------------------------------------------
Administrative services fees 51,740
- --------------------------------------------------------
Transfer agent fees 1,728,703
- --------------------------------------------------------
Other 330,251
- --------------------------------------------------------
Total expenses 13,533,898
- --------------------------------------------------------
Less: Expenses paid indirectly (21,810)
- --------------------------------------------------------
Net expenses 13,512,088
- --------------------------------------------------------
Net investment income (loss) (9,816,474)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities (54,620,324)
- --------------------------------------------------------
Futures contracts 10,934,911
- --------------------------------------------------------
(43,685,413)
- --------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities (320,721,159)
- --------------------------------------------------------
Futures contracts (4,932,050)
- --------------------------------------------------------
(325,653,209)
- --------------------------------------------------------
Net gain (loss) on investment
securities and futures contracts (369,338,622)
- --------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(379,155,096)
========================================================
</TABLE>
See Notes to Financial Statements.
FS-127
<PAGE> 229
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND THE YEAR ENDED OCTOBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (9,816,474) $ (19,703,976)
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities
and futures contracts (43,685,413) 141,538,687
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and futures contracts (325,653,209) 211,197,677
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (379,155,096) 333,032,388
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities (138,552,307) (54,512,548)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions (56,137,743) 226,490,173
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (573,845,146) 505,010,013
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,750,563,943 2,245,553,930
- ---------------------------------------------------------------------------------------------
End of period $2,176,718,797 $2,750,563,943
=============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,901,777,366 $1,957,915,109
- ---------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (9,860,637) (44,163)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and futures contracts (48,508,221) 133,729,499
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 333,310,289 658,963,498
- ---------------------------------------------------------------------------------------------
$2,176,718,797 $2,750,563,943
=============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Growth Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six diversified
portfolios: AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund, AIM Constellation Fund and AIM Weingarten
Fund. 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. The Fund has
temporarily discontinued public sales of its shares to new investors. The Fund
is a diversified portfolio which seeks to achieve long-term growth of capital by
investing primarily in common stocks, convertible bonds, convertible preferred
stocks and warrants of companies which in the opinion of the Fund's investment
advisor are expected to achieve earnings growth over time at a rate in excess of
15% per year.
Information presented in these financial statements pertains only to the Fund.
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. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last price on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. 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
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Company's officers in a manner
specifically authorized by the Board of Directors of the Company. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not
FS-128
<PAGE> 230
be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are recorded on a trade date basis. Realized gains or losses on
sales are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and that a change in the value of contracts may not correlate with
changes in the value of the securities being hedged.
E. Foreign Currency Transactions--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward 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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the fund's average daily net assets in excess of $150 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $51,740 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the six months ended April 30,
1997, AFS was paid $932,435 for such services.
The Fund received reductions in transfer agency fees of $20,308 from dividends
received on balances in cash management accounts. In addition, the Fund incurred
expenses of $1,502 from pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $21,810 during the six months ended
April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. The Company has adopted a plan pursuant to rule 12b-1 under the 1940 Act
(the "Plan"), whereby the Fund pays to AIM Distributors an annual rate of 0.25%
of the Fund's average daily net assets as compensation for services related to
the sales and distribution of the Fund's shares. The Plan provides that payments
to dealers and financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions, may be characterized as
a service fee. Any amounts not paid as a service fee under the Plan would
constitute an assets-based sales charge. The Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Company with respect to the Fund's shares. During the six months
ended April 30, 1997, the Fund paid AIM Distributors $3,203,882 as compensation
under the Plan.
AIM Distributors received commissions of $464,530 from sales of shares of the
Fund's capital stock during the six months ended April 30, 1997. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of capital stock. During the six months
ended April 30, 1997, AIM Distributors received $60,656 in contingent deferred
sales charges imposed on redemptions of the Fund's capital stock. Certain
officers and directors of the Company are officers and directors of AIM, AFS and
AIM Distributors.
During the six months ended April 30, 1997, the Fund paid legal fees of $8,010
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
FS-129
<PAGE> 231
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended April 30, 1997 were $895,057,405
and $995,995,419, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 463,850,725
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (130,204,448)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $ 333,646,277
==========================================================
</TABLE>
Cost of investment for tax purposes is $1,827,042,168.
NOTE 5-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-FUTURES CONTRACTS
On April 30, 1997, $1,668,000 par value U.S. Treasury obligations were pledged
as collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at April 30, 1997:
(Contracts -- $500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
--------------
<S> <C>
S&P 500 Index/100 Contracts/June
97/Buy $(846,200)
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the six months ended April 30, 1997
and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold 11,500,320 $ 483,235,051 30,538,437 $ 1,334,476,880
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends 3,068,744 127,935,858 1,291,013 49,897,557
- ------------------------------------------------------------------------------------------------------------------------
Reacquired (15,971,688) (667,308,652) (26,568,998) (1,157,884,264)
- ------------------------------------------------------------------------------------------------------------------------
(1,402,624) $ (56,137,743) 5,260,452 $ 226,490,173
========================================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during the six months ended April 30, 1997, each of the years in the
three-year period ended October 31, 1996, the ten month period ended October 31,
1993 and each of the years in the five-year period ended December 31, 1992.
<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
APRIL 30, ------------------------------------------------ --------------------
1997 1996 1995 1994 1993 1992(a) 1991
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 44.93 $ 40.13 $ 28.37 $ 23.85 $ 18.52 $ 16.06 $ 11.85
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.16) (0.32) (0.04) (0.05) (0.02) (0.03) (0.04)
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (6.08) 6.09 11.80 4.57 5.35 3.41 7.29
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Total from investment
operations (6.24) 5.77 11.76 4.52 5.33 3.38 7.25
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income -- -- -- -- -- -- --
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Distributions from capital gains (2.30) (0.97) -- -- -- (0.92) (3.04)
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Total distributions (2.30) (0.97) -- -- -- (0.92) (3.04)
- ------------------------------------ ---------- ---------- ---------- -------- -------- -------- --------
Net asset value, end of period $ 36.39 $ 44.93 $ 40.13 $ 28.37 $ 23.85 $ 18.52 $ 16.06
==================================== ========== ========== ========== ======== ======== ======== ========
Total return(b) (14.54)% 14.77% 41.45% 18.96% 28.78% 21.34% 63.90%
==================================== ========== ========== ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,176,719 $2,750,564 $2,245,554 $687,238 $217,256 $ 38,238 $ 16,218
==================================== ========== ========== ========== ======== ======== ======== ========
Ratio of expenses to average net
assets(c) 1.06%(d)(e) 1.11% 1.08% 1.07% 1.00%(g) 1.25% 1.25%
==================================== ========== ========== ========== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets(f) (0.77)%(d) (0.76)% (0.19)% (0.26)% (0.24)%(g) (0.59)% (0.31)%
==================================== ========== ========== ========== ======== ======== ======== ========
Portfolio turnover rate 36% 79% 52% 75% 61% 164% 165%
==================================== ========== ========== ========== ======== ======== ======== ========
Average broker commission rate
paid(h) $ 0.0539 $ 0.0545 N/A N/A N/A N/A N/A
==================================== ========== ========== ========== ======== ======== ======== ========
<CAPTION>
DECEMBER 31,
--------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.30 $ 11.07 $ 9.86
- ------------------------------------ ------- -------- --------
Income from investment operations:
Net investment income (loss) 0.08 0.03 0.05
- ------------------------------------ ------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.95) 2.28 1.21
- ------------------------------------ ------- -------- --------
Total from investment
operations (0.87) 2.31 1.26
- ------------------------------------ ------- -------- --------
Less distributions:
Dividends from net investment
income (0.09) (0.03) (0.05)
- ------------------------------------ ------- -------- --------
Distributions from capital gains (0.49) (0.05) --
- ------------------------------------ ------- -------- --------
Total distributions (0.58) (0.08) (0.05)
- ------------------------------------ ------- -------- --------
Net asset value, end of period $ 11.85 $ 13.30 $ 11.07
- ------------------------------------ ======= ======== ========
Total return(b) (6.50)% 20.89% 12.77%
- ------------------------------------ ======= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $ 9,234 $ 11,712 $ 12,793
- ------------------------------------ ======= ======== ========
Ratio of expenses to average net
assets(c) 1.25% 1.25% 1.22%
- ------------------------------------ ======= ======== ========
Ratio of net investment income
(loss) to average net assets(f) 0.62% 0.24% 0.38%
- ------------------------------------ ======= ======== ========
Portfolio turnover rate 137% 69% 56%
- ------------------------------------ ======= ======== ========
Average broker commission rate
paid(h) N/A N/A N/A
- ------------------------------------ ======= ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
and expense reimbursements were 1.15%, 1.09%, 1.17% (annualized), 1.65%,
1.83%, 1.99%, 1.80% and 1.56% for 1995-88, respectively.
(d) Ratios are annualized and based on average net assets of $2,584,346,866.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 1.05%.
(f) Ratios of net investment income (loss) to average net assets prior to
reduction of advisory fees and expense reimbursements were (0.26)%,
(0.28)%, (0.41)% (annualized), (0.99)%, (0.89)%, (0.11)%, (0.31)% and 0.04%
for 1995-88, respectively.
(g) Annualized.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
NOTE 9-LEGAL PROCEEDINGS
A claim, Saltzberg v. AIM Equity Funds, Inc., et al., was filed in Southern
District Court in Texas in October 1996 against AIM and certain other
subsidiaries of AIM Management. The claim was instituted under section 36(b) of
the Investment Company Act of 1940 and seeks to recover damages allegedly
suffered by the Fund in connection with fees paid for marketing and shareholder
services after the Fund was closed to new investors. AIM Management is
investigating whether there is any basis at all for this claim and intends to
defend it vigorously.
NOTE 10-FUND REOPENING AND CLOSING
The Fund was reopened to new investors on June 4, 1997 and subsequently closed
to new investors effective as of the close of business June 5, 1997.
FS-130
<PAGE> 232
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
Aggressive Growth Fund (the "Fund") and A I M Advisors, Inc.
(3) To approve the elimination of the fundamental investment policy prohibiting
the Fund from investing in other investment companies.
(4) 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............ 31,114,791 731,317 1,218,650
Elimination of policy prohibiting investments in other
(3) investment companies........................................ 23,839,643 1,595,508 1,270,078
(4) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
FS-131
<PAGE> 233
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-96.96%
ADVERTISING/BROADCASTING-4.01%
Alliance Communications Corp.-Class
B(a) (Canada) 60,000 $ 504,375
- ----------------------------------------------------------------
Argyle Television, Inc.-Class A(a) 17,500 439,687
- ----------------------------------------------------------------
Chancellor Corp.-Class A(a) 10,000 280,000
- ----------------------------------------------------------------
Cox Radio, Inc.-Class A(a) 85,000 1,721,250
- ----------------------------------------------------------------
Eagle River Interactive, Inc.(a) 42,000 456,750
- ----------------------------------------------------------------
Emmis Broadcasting Corp.-Class A(a) 5,000 175,000
- ----------------------------------------------------------------
Evergreen Media Corp.-Class A(a) 30,000 971,250
- ----------------------------------------------------------------
Film Roman, Inc.(a) 110,000 206,250
- ----------------------------------------------------------------
Heftel Broadcasting Corp.(a) 39,300 1,965,000
- ----------------------------------------------------------------
Jacor Communications, Inc.(a) 5,000 140,625
- ----------------------------------------------------------------
Lamar Advertising Co.(a) 140,000 2,765,000
- ----------------------------------------------------------------
Leap Group, Inc. (The)(a) 5,000 23,750
- ----------------------------------------------------------------
Metro Networks, Inc.(a) 61,600 1,563,100
- ----------------------------------------------------------------
Snyder Communications, Inc.(a) 65,000 1,348,750
- ----------------------------------------------------------------
Universal Outdoor Holdings, Inc.(a) 70,000 1,907,500
- ----------------------------------------------------------------
Univision Communications, Inc.(a) 64,000 2,176,000
- ----------------------------------------------------------------
16,644,287
- ----------------------------------------------------------------
AEROSPACE/DEFENSE-0.59%
DONCASTERS PLC-ADR(a) (United
Kingdom) 26,400 594,000
- ----------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 69,200 1,764,600
- ----------------------------------------------------------------
Tracor, Inc.(a) 3,900 84,825
- ----------------------------------------------------------------
2,443,425
- ----------------------------------------------------------------
AIRLINES-0.58%
ASA Holdings, Inc. 10,000 212,500
- ----------------------------------------------------------------
Aviation Sales Co.(a) 20,000 485,000
- ----------------------------------------------------------------
China Eastern Airlines Corp.
Ltd.-ADR(a) (Hong Kong) 40,000 1,245,000
- ----------------------------------------------------------------
Eagle USA Airfreight, Inc.(a) 22,400 448,000
- ----------------------------------------------------------------
2,390,500
- ----------------------------------------------------------------
APPLIANCES-0.12%
Service Experts, Inc.(a) 21,800 485,050
- ----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.36%
United Auto Group, Inc.(a) 90,000 1,496,250
- ----------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-1.07%
Aftermarket Technology Corp.(a) 134,300 2,484,550
- ----------------------------------------------------------------
Cross-Continent Auto Retailers,
Inc.(a) 38,500 572,687
- ----------------------------------------------------------------
Lithia Motors, Inc.-Class A(a) 100,000 1,125,000
- ----------------------------------------------------------------
Rush Enterprises, Inc.(a) 30,000 247,500
- ----------------------------------------------------------------
4,429,737
- ----------------------------------------------------------------
BANKING-0.84%
AmSouth Bancorporation 6,000 316,500
- ----------------------------------------------------------------
Banknorth Group, Inc. 16,000 680,000
- ----------------------------------------------------------------
Cullen/Frost Bankers, Inc. 8,000 280,000
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BANKING-(CONTINUED)
Hibernia Corp.-Class A 20,000 $ 257,500
- ----------------------------------------------------------------
Marshall & Ilsley Corp. 40,000 1,535,000
- ----------------------------------------------------------------
Southwest Bancorporation of Texas,
Inc.(a) 20,600 427,450
- ----------------------------------------------------------------
3,496,450
- ----------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.16%
Cerner Corp.(a) 40,000 645,000
- ----------------------------------------------------------------
BEVERAGES-0.06%
Diedrich Coffee, Inc.(a) 100,000 262,500
- ----------------------------------------------------------------
BIOTECHNOLOGY-0.28%
Genzyme Corp.(a) 50,000 1,156,250
- ----------------------------------------------------------------
BUILDING MATERIALS-0.29%
Juno Lighting, Inc. 50,000 775,000
- ----------------------------------------------------------------
Kevco, Inc.(a) 32,500 438,750
- ----------------------------------------------------------------
1,213,750
- ----------------------------------------------------------------
BUILDING MATERIALS (TOOLS)-0.14%
Regal-Beloit Corp. 24,200 574,750
- ----------------------------------------------------------------
BUSINESS SERVICES-3.45%
Abacus Direct Corp.(a) 55,000 1,361,250
- ----------------------------------------------------------------
Administaff, Inc.(a) 28,000 521,500
- ----------------------------------------------------------------
Claremont Technology Group, Inc.(a) 45,000 607,500
- ----------------------------------------------------------------
Cognizant Corp. 13,000 424,125
- ----------------------------------------------------------------
CUC International, Inc.(a) 65,000 1,373,125
- ----------------------------------------------------------------
First Aviation Services, Inc.(a) 78,500 667,250
- ----------------------------------------------------------------
HealthCare COMPARE Corp.(a) 20,000 867,500
- ----------------------------------------------------------------
HealthPlan Services Corp.(a) 55,000 907,500
- ----------------------------------------------------------------
Hertz Corp.-Class A(a) 27,800 806,200
- ----------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 30,300 689,324
- ----------------------------------------------------------------
International Telecommunication Data
Systems, Inc.(a) 45,000 540,000
- ----------------------------------------------------------------
Lason Holdings, Inc.(a) 66,400 1,128,800
- ----------------------------------------------------------------
MedQuist, Inc.(a) 20,000 505,000
- ----------------------------------------------------------------
MemberWorks, Inc.(a) 40,000 620,000
- ----------------------------------------------------------------
Metzler Group, Inc.(a) 75,000 1,912,500
- ----------------------------------------------------------------
OmniQuip International, Inc.(a) 50,000 650,000
- ----------------------------------------------------------------
On Assignment, Inc.(a) 5,000 155,000
- ----------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 25,000 575,000
- ----------------------------------------------------------------
14,311,574
- ----------------------------------------------------------------
COMPUTER MAINFRAMES-0.10%
Amdahl Corp.(a) 50,000 428,125
- ----------------------------------------------------------------
COMPUTER MINI/PCS-0.27%
Gateway 2000, Inc.(a) 14,200 779,225
- ----------------------------------------------------------------
Rational Software Corp.(a) 25,000 345,312
- ----------------------------------------------------------------
1,124,537
- ----------------------------------------------------------------
</TABLE>
FS-132
<PAGE> 234
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-2.32%
ACT Networks, Inc.(a) 20,000 $ 270,000
- ----------------------------------------------------------------
Ascend Communications, Inc.(a) 56,500 2,584,875
- ----------------------------------------------------------------
Auspex Systems, Inc.(a) 28,600 228,800
- ----------------------------------------------------------------
Bay Networks, Inc.(a) 30,000 532,500
- ----------------------------------------------------------------
Black Box Corp.(a) 20,000 472,500
- ----------------------------------------------------------------
Cabletron Systems, Inc.(a) 42,000 1,449,000
- ----------------------------------------------------------------
Cidco, Inc.(a) 45,000 573,750
- ----------------------------------------------------------------
Coherent Communications Systems
Corp.(a) 80,000 1,310,000
- ----------------------------------------------------------------
DSP Communications, Inc.(a) 105,000 833,437
- ----------------------------------------------------------------
FORE Systems, Inc.(a) 40,000 610,000
- ----------------------------------------------------------------
Harmonic Lightwaves, Inc.(a) 35,000 577,500
- ----------------------------------------------------------------
InterVoice, Inc.(a) 20,000 190,000
- ----------------------------------------------------------------
9,632,362
- ----------------------------------------------------------------
COMPUTER PERIPHERALS-1.56%
Cognex Corp.(a) 50,000 1,231,250
- ----------------------------------------------------------------
NeoMagic Corp.(a) 25,000 292,188
- ----------------------------------------------------------------
Oak Technology, Inc.(a) 45,000 362,812
- ----------------------------------------------------------------
Printronix, Inc.(a) 145,000 1,830,625
- ----------------------------------------------------------------
Quantum Corp.(a) 12,500 521,094
- ----------------------------------------------------------------
Raster Graphics, Inc.(a) 50,000 306,250
- ----------------------------------------------------------------
Read-Rite Corp.(a) 39,000 1,009,125
- ----------------------------------------------------------------
Trident Microsystems, Inc.(a) 70,000 945,000
- ----------------------------------------------------------------
6,498,344
- ----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-12.35%
Adobe Systems, Inc. 35,000 1,369,375
- ----------------------------------------------------------------
American Software, Inc.-Class A(a) 50,000 287,500
- ----------------------------------------------------------------
ANSYS, Inc.(a) 80,000 550,000
- ----------------------------------------------------------------
BDM International Inc.(a) 36,000 837,000
- ----------------------------------------------------------------
Bell & Howell Co.(a) 80,000 1,890,000
- ----------------------------------------------------------------
BISYS Group, Inc. (The)(a) 45,000 1,440,000
- ----------------------------------------------------------------
BMC Software, Inc.(a) 40,000 1,730,000
- ----------------------------------------------------------------
Broderbund Software, Inc.(a) 30,000 562,500
- ----------------------------------------------------------------
Business Objects S.A.-ADR(a)
(France) 85,000 765,000
- ----------------------------------------------------------------
C/NET, Inc.(a) 25,000 506,250
- ----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 5,200 166,400
- ----------------------------------------------------------------
CCC Information Services Group(a) 165,000 1,938,750
- ----------------------------------------------------------------
CFI Proservices, Inc.(a) 10,000 150,000
- ----------------------------------------------------------------
Check Point Software Technologies
Ltd.(a) (Israel) 25,000 590,625
- ----------------------------------------------------------------
Computer Learning Centers, Inc.(a) 3,150 83,868
- ----------------------------------------------------------------
Compuware Corp.(a) 30,000 1,132,500
- ----------------------------------------------------------------
Cooper & Chyan Technology, Inc.(a) 1,200 29,100
- ----------------------------------------------------------------
CyberMedia, Inc.(a) 23,400 292,500
- ----------------------------------------------------------------
Dassault Systemes S.A.-ADR(a)
(France) 15,000 924,375
- ----------------------------------------------------------------
DataWorks Corp.(a) 2,700 39,150
- ----------------------------------------------------------------
Dendrite International, Inc.(a) 35,000 293,125
- ----------------------------------------------------------------
Digital Lightwave, Inc.(a) 50,000 262,500
- ----------------------------------------------------------------
Document Sciences Corp.(a) 70,000 236,250
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Dr. Solomon's Group PLC-ADR(a)
(United Kingdom) 35,000 $ 809,375
- ----------------------------------------------------------------
DST Systems, Inc.(a) 34,000 964,750
- ----------------------------------------------------------------
Electronic Arts, Inc.(a) 30,000 723,750
- ----------------------------------------------------------------
FactSet Research Systems, Inc.(a) 9,600 194,400
- ----------------------------------------------------------------
Forrester Research, Inc.(a) 11,800 215,350
- ----------------------------------------------------------------
Geoworks(a) 60,000 435,000
- ----------------------------------------------------------------
HBO & Co. 40,000 2,140,000
- ----------------------------------------------------------------
HPR, Inc.(a) 90,000 1,271,250
- ----------------------------------------------------------------
Hyperion Software Corp.(a) 96,500 1,568,125
- ----------------------------------------------------------------
Infinity Financial Technology,
Inc.(a) 30,000 378,750
- ----------------------------------------------------------------
Information Resources, Inc.(a) 10,400 137,800
- ----------------------------------------------------------------
Intuit, Inc.(a) 20,000 442,500
- ----------------------------------------------------------------
JDA Software Group, Inc.(a) 30,000 757,500
- ----------------------------------------------------------------
Macromedia, Inc.(a) 10,000 76,250
- ----------------------------------------------------------------
Mastech Corp.(a) 100,000 1,150,000
- ----------------------------------------------------------------
May & Speh, Inc.(a) 10,000 73,750
- ----------------------------------------------------------------
Memco Software Ltd.(a) (Israel) 67,700 846,250
- ----------------------------------------------------------------
Mercury Interactive Corp.(a) 85,000 1,041,250
- ----------------------------------------------------------------
Metromail Corp.(a) 90,000 1,766,250
- ----------------------------------------------------------------
Midway Games Inc.(a) 65,000 1,170,000
- ----------------------------------------------------------------
National Instruments Corp.(a) 10,000 302,500
- ----------------------------------------------------------------
Network General Corp.(a) 50,000 687,500
- ----------------------------------------------------------------
Object Design, Inc.(a) 20,000 102,500
- ----------------------------------------------------------------
Parametric Technology Co.(a) 7,000 316,750
- ----------------------------------------------------------------
PHAMIS, Inc.(a) 20,000 355,000
- ----------------------------------------------------------------
Physician Computer Network, Inc.(a) 20,000 106,250
- ----------------------------------------------------------------
Platinum Technology, Inc.(a) 150,000 1,800,000
- ----------------------------------------------------------------
Puma Technology, Inc.(a) 56,000 427,000
- ----------------------------------------------------------------
Pure Atria Corp.(a) 10,000 97,500
- ----------------------------------------------------------------
Qualix Group, Inc.(a) 50,000 312,500
- ----------------------------------------------------------------
Saville Systems Ireland PLC-ADR(a) 29,000 1,192,625
- ----------------------------------------------------------------
Security Dynamics Technologies,
Inc.(a) 5,000 126,250
- ----------------------------------------------------------------
SEI Corp. 100,000 2,100,000
- ----------------------------------------------------------------
SELECT Software Tools-ADR(a) (United
Kingdom) 60,000 795,000
- ----------------------------------------------------------------
Shared Medical Systems Corp. 8,000 337,000
- ----------------------------------------------------------------
Siebel Systems, Inc.(a) 42,000 761,250
- ----------------------------------------------------------------
Simulation Sciences, Inc.(a) 30,000 305,625
- ----------------------------------------------------------------
Spectrum Holobyte, Inc.(a) 7,500 45,938
- ----------------------------------------------------------------
Sterling Commerce, Inc.(a) 37,500 970,313
- ----------------------------------------------------------------
SunGard Data Systems Inc.(a) 112,000 4,970,000
- ----------------------------------------------------------------
Symantec Corp.(a) 5,100 73,313
- ----------------------------------------------------------------
Systemsoft Corp.(a) 35,000 266,875
- ----------------------------------------------------------------
Technology Modeling Associates,
Inc.(a) 53,500 535,000
- ----------------------------------------------------------------
Template Software, Inc.(a) 30,800 257,950
- ----------------------------------------------------------------
Transaction Systems Architects,
Inc.-Class A(a) 5,000 150,000
- ----------------------------------------------------------------
Trusted Information Systems, Inc.(a) 75,000 675,000
- ----------------------------------------------------------------
USCS International, Inc.(a) 15,000 247,500
- ----------------------------------------------------------------
Vantive Corp.(a) 10,000 198,750
- ----------------------------------------------------------------
</TABLE>
FS-133
<PAGE> 235
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Viewlogic Systems, Inc.(a) 20,000 $ 280,000
- ----------------------------------------------------------------
Wallace Computer Services, Inc. 10,000 267,500
- ----------------------------------------------------------------
51,302,457
- ----------------------------------------------------------------
CONGLOMERATES-0.22%
Amway Asia Pacific Ltd. (Hong Kong) 13,900 583,800
- ----------------------------------------------------------------
Sotheby's Holdings, Inc.-Class A 20,000 317,500
- ----------------------------------------------------------------
901,300
- ----------------------------------------------------------------
CONSUMER NON-DURABLES-0.53%
Central Garden and Pet Co.(a) 20,000 398,750
- ----------------------------------------------------------------
TAG Heuer International S.A.-ADR(a)
(Luxembourg) 20,000 280,000
- ----------------------------------------------------------------
The First Years, Inc. 100,000 1,525,000
- ----------------------------------------------------------------
2,203,750
- ----------------------------------------------------------------
CONTAINERS-0.85%
PalEx, Inc.(a) 25,000 231,250
- ----------------------------------------------------------------
Silgan Holdings, Inc.(a) 125,000 3,312,500
- ----------------------------------------------------------------
3,543,750
- ----------------------------------------------------------------
COSMETICS & TOILETRIES-2.90%
Carson, Inc.(a) 68,600 514,500
- ----------------------------------------------------------------
Dial Corp. 105,000 1,627,500
- ----------------------------------------------------------------
Estee Lauder Cos.-Class A 14,500 663,375
- ----------------------------------------------------------------
French Fragrances, Inc.(a) 75,000 543,750
- ----------------------------------------------------------------
General Nutrition Companies, Inc.(a) 140,000 3,010,000
- ----------------------------------------------------------------
Helen of Troy Ltd.(a) 10,000 232,500
- ----------------------------------------------------------------
McKesson Corp. 28,000 2,026,500
- ----------------------------------------------------------------
Nu Skin Asia Pacific Inc.-Class A(a) 105,000 2,730,000
- ----------------------------------------------------------------
Rexall Sundown, Inc.(a) 35,000 695,625
- ----------------------------------------------------------------
12,043,750
- ----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.59%
Checkpoint Systems, Inc.(a) 67,000 921,250
- ----------------------------------------------------------------
Harman International Industries,
Inc. 5,000 191,250
- ----------------------------------------------------------------
Micron Electronics, Inc.(a) 50,000 1,018,750
- ----------------------------------------------------------------
PRI Automation, Inc.(a) 17,500 896,875
- ----------------------------------------------------------------
Sawtek Inc.(a) 5,000 148,125
- ----------------------------------------------------------------
SBS Technologies, Inc.(a) 75,000 1,125,000
- ----------------------------------------------------------------
Speedfam International, Inc.(a) 75,000 1,818,750
- ----------------------------------------------------------------
SRS Labs, Inc.(a) 50,000 462,500
- ----------------------------------------------------------------
6,582,500
- ----------------------------------------------------------------
ELECTRONIC/DEFENSE-0.07%
Stanford Telecommunications, Inc.(a) 20,000 295,000
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.33%
Alliance Capital Management 3,000 81,375
- ----------------------------------------------------------------
Edwards (A.G.), Inc. 5,000 175,000
- ----------------------------------------------------------------
Hambrecht & Quist Group(a) 20,000 332,500
- ----------------------------------------------------------------
Investors Financial Services Corp. 10,000 350,000
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT)-(CONTINUED)
Lehman Brothers Holdings, Inc. 10,000 $ 338,750
- ----------------------------------------------------------------
T. Rowe Price Associates 1,800 83,250
- ----------------------------------------------------------------
1,360,875
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.96%
Advanta Corp.-Class B 10,000 222,500
- ----------------------------------------------------------------
BA Merchant Services, Inc.-Class
A(a) 205,000 2,870,000
- ----------------------------------------------------------------
CMAC Investment Corp. 13,000 494,000
- ----------------------------------------------------------------
Concord EFS, Inc.(a) 5,000 98,750
- ----------------------------------------------------------------
Medaphis Corp.(a) 10,000 51,875
- ----------------------------------------------------------------
SunAmerica, Inc. 5,600 257,600
- ----------------------------------------------------------------
3,994,725
- ----------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.39%
Hamilton Bancorp, Inc.(a) 85,000 1,636,250
- ----------------------------------------------------------------
FOOD/PROCESSING-1.45%
Delta & Pine Land Co. 71,666 1,791,650
- ----------------------------------------------------------------
Lancaster Colony Corp. 20,000 822,500
- ----------------------------------------------------------------
ProSource, Inc.(a) 115,000 1,056,562
- ----------------------------------------------------------------
Rykoff-Sexton, Inc. 130,000 2,356,250
- ----------------------------------------------------------------
6,026,962
- ----------------------------------------------------------------
FUNERAL SERVICES-0.54%
Carriage Services, Inc.(a) 25,100 426,700
- ----------------------------------------------------------------
Equity Corp. International(a) 85,000 1,827,500
- ----------------------------------------------------------------
2,254,200
- ----------------------------------------------------------------
FURNITURE-0.26%
Kimball International, Inc.-Class B 30,000 1,057,500
- ----------------------------------------------------------------
GAMING-1.20%
GTECH Holdings Corp.(a) 25,000 768,750
- ----------------------------------------------------------------
International Game Technology 115,000 1,825,625
- ----------------------------------------------------------------
Sodak Gaming, Inc.(a) 200,000 2,350,000
- ----------------------------------------------------------------
WHG Resorts & Casinos Inc.(a) 6,250 58,593
- ----------------------------------------------------------------
5,002,968
- ----------------------------------------------------------------
HOTELS/MOTELS-0.31%
Choice Hotels International, Inc.(a) 6,000 84,000
- ----------------------------------------------------------------
Four Seasons Hotels, Inc. (Canada) 36,000 801,000
- ----------------------------------------------------------------
U.S. Franchise Systems, Inc.(a) 20,000 140,000
- ----------------------------------------------------------------
Wyndham Hotel Corp.(a) 10,000 276,250
- ----------------------------------------------------------------
1,301,250
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.34%
First Commonwealth, Inc.(a) 15,000 183,750
- ----------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A(a) 130,000 3,445,000
- ----------------------------------------------------------------
UNUM Corp. 5,200 400,400
- ----------------------------------------------------------------
Western National Corp. 60,000 1,545,000
- ----------------------------------------------------------------
5,574,150
- ----------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-3.53%
Ace, Ltd. 4,000 240,000
- ----------------------------------------------------------------
AMBAC, Inc. 2,900 187,775
- ----------------------------------------------------------------
Amerin Corp.(a) 170,000 3,315,000
- ----------------------------------------------------------------
</TABLE>
FS-134
<PAGE> 236
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(CONTINUED)
AmerUs Life Holdings, Inc.-Class A 42,400 $ 975,200
- ----------------------------------------------------------------
Arthur J. Gallagher & Co. 3,000 93,750
- ----------------------------------------------------------------
Capital Re Corp. 10,000 396,250
- ----------------------------------------------------------------
CapMAC Holdings, Inc. 20,000 520,000
- ----------------------------------------------------------------
Everest Re Holdings, Inc. 51,000 1,466,250
- ----------------------------------------------------------------
Exel Ltd. 11,200 436,800
- ----------------------------------------------------------------
HCC Insurance Holdings, Inc. 17,500 439,687
- ----------------------------------------------------------------
Horace Mann Educators Corp. 8,000 375,000
- ----------------------------------------------------------------
MBIA, Inc. 2,100 204,488
- ----------------------------------------------------------------
Mercury General Corp. 2,400 148,800
- ----------------------------------------------------------------
MGIC Investment Corp. 11,400 926,250
- ----------------------------------------------------------------
Mutual Risk Management Ltd. 15,000 551,250
- ----------------------------------------------------------------
NAC Re Corp. 8,000 310,000
- ----------------------------------------------------------------
Progressive Corp. 30,000 2,283,750
- ----------------------------------------------------------------
TIG Holdings, Inc. 20,000 555,000
- ----------------------------------------------------------------
Transatlantic Holdings, Inc. 3,000 248,250
- ----------------------------------------------------------------
UnionAmerica Holdings PLC-ADR
(United Kingdom) 27,000 452,250
- ----------------------------------------------------------------
Vesta Insurance Group, Inc. 5,000 208,750
- ----------------------------------------------------------------
W. R. Berkley Corp. 7,000 344,750
- ----------------------------------------------------------------
14,679,250
- ----------------------------------------------------------------
LEISURE & RECREATION-3.17%
Coleman Co., Inc.(a) 10,000 155,000
- ----------------------------------------------------------------
Galoob Toys, Inc.(a) 155,000 2,615,625
- ----------------------------------------------------------------
Harley-Davidson, Inc. 26,400 1,042,800
- ----------------------------------------------------------------
Hasbro, Inc. 15,000 375,000
- ----------------------------------------------------------------
K2, Inc. 18,000 470,250
- ----------------------------------------------------------------
Samsonite Corp.(a) 32,500 1,348,750
- ----------------------------------------------------------------
Steinway Musical Instruments(a) 20,000 342,500
- ----------------------------------------------------------------
The North Face, Inc.(a) 130,000 1,836,250
- ----------------------------------------------------------------
Toy Biz, Inc.(a) 170,000 1,657,500
- ----------------------------------------------------------------
Travis Boats & Motors, Inc.(a) 30,000 322,500
- ----------------------------------------------------------------
Vail Resorts Inc.(a) 125,000 2,546,875
- ----------------------------------------------------------------
WMS Industries, Inc.(a) 25,000 446,875
- ----------------------------------------------------------------
13,159,925
- ----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.23%
American Residential Services,
Inc.(a) 80,800 1,525,100
- ----------------------------------------------------------------
Pall Corp. 70,000 1,618,750
- ----------------------------------------------------------------
Pfeiffer Vacuum Technology
A.G.-ADR(a) (Germany) 20,000 465,000
- ----------------------------------------------------------------
Prime Service, Inc.(a) 7,700 172,287
- ----------------------------------------------------------------
U.S. Rentals, Inc.(a) 70,000 1,330,000
- ----------------------------------------------------------------
5,111,137
- ----------------------------------------------------------------
MEDICAL (DRUGS)-3.82%
Algos Pharmaceutical Corp.(a) 5,000 76,875
- ----------------------------------------------------------------
Allergan, Inc. 5,000 133,750
- ----------------------------------------------------------------
AmeriSource Health Corp.(a) 25,000 1,115,625
- ----------------------------------------------------------------
Applied Analytical Industries,
Inc.(a) 44,300 586,975
- ----------------------------------------------------------------
Aronex Pharmaceuticals, Inc.(a) 25,000 125,000
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (DRUGS)-(CONTINUED)
BioChem Pharma, Inc.(a)(Canada) 39,000 $ 701,391
- ----------------------------------------------------------------
Cambridge NeuroScience, Inc.(a) 25,000 209,375
- ----------------------------------------------------------------
Cephalon, Inc.(a) 10,000 167,500
- ----------------------------------------------------------------
Collagenex Pharmaceuticals, Inc.(a) 20,000 230,000
- ----------------------------------------------------------------
Covance, Inc.(a) 40,000 590,000
- ----------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 66,000 1,914,000
- ----------------------------------------------------------------
Elan Corp. PLC-ADR(a) (Ireland) 8,000 272,000
- ----------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 13,000 477,750
- ----------------------------------------------------------------
Gilead Sciences, Inc.(a) 8,000 177,000
- ----------------------------------------------------------------
Guilford Pharmaceuticals, Inc.(a) 10,000 231,250
- ----------------------------------------------------------------
Immunex Corp.(a) 3,000 83,625
- ----------------------------------------------------------------
Incyte Pharmaceuticals, Inc.(a) 3,000 127,500
- ----------------------------------------------------------------
Interneuron Pharmaceuticals, Inc.(a) 15,000 196,875
- ----------------------------------------------------------------
Jones Medical Industries, Inc. 25,000 881,250
- ----------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a) 25,000 562,500
- ----------------------------------------------------------------
Liposome Company, Inc.(a) 60,000 1,331,250
- ----------------------------------------------------------------
Martek Biosciences Corp.(a) 20,000 292,500
- ----------------------------------------------------------------
Micro Therapeutics, Inc.(a) 50,000 275,000
- ----------------------------------------------------------------
NABI Inc.(a) 145,000 870,000
- ----------------------------------------------------------------
North American Vaccine, Inc.(a) 50,000 1,043,750
- ----------------------------------------------------------------
Perrigo Co.(a) 65,000 763,750
- ----------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Israel) 33,000 1,674,750
- ----------------------------------------------------------------
Texas Biotechnology Corp.(a) 15,000 60,000
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 19,000 679,250
- ----------------------------------------------------------------
15,850,491
- ----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.69%
ADAC Laboratories 20,000 462,500
- ----------------------------------------------------------------
Advance ParadigM, Inc.(a) 95,000 1,080,625
- ----------------------------------------------------------------
Alternative Living Services, Inc.(a) 85,000 1,402,500
- ----------------------------------------------------------------
American Medserve Corp.(a) 45,000 489,375
- ----------------------------------------------------------------
American Oncology Resources, Inc.(a) 25,000 221,875
- ----------------------------------------------------------------
ClinTrials Research Inc.(a) 50,000 387,500
- ----------------------------------------------------------------
FPA Medical Management, Inc.(a) 32,000 520,000
- ----------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 15,000 401,250
- ----------------------------------------------------------------
HealthCor Holdings, Inc.(a) 100,000 837,500
- ----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 2,400 47,400
- ----------------------------------------------------------------
Horizon Mental Health Management,
Inc.(a) 25,500 417,563
- ----------------------------------------------------------------
Horizon/CMS Healthcare Corp.(a) 25,000 396,875
- ----------------------------------------------------------------
Integrated Health Services, Inc. 30,000 963,750
- ----------------------------------------------------------------
Intensiva Healthcare Corp.(a) 70,000 542,500
- ----------------------------------------------------------------
Manor Care, Inc. 6,000 140,250
- ----------------------------------------------------------------
Marquette Medical Systems-Class A(a) 60,000 1,207,500
- ----------------------------------------------------------------
Maxicare Health Plans, Inc.(a) 5,000 116,250
- ----------------------------------------------------------------
Medical Resources, Inc.(a) 75,000 956,250
- ----------------------------------------------------------------
MedPartners, Inc.(a) 55,715 1,016,799
- ----------------------------------------------------------------
National Surgery Centers, Inc.(a) 5,000 150,000
- ----------------------------------------------------------------
NovaCare, Inc.(a) 20,000 227,500
- ----------------------------------------------------------------
OccuSystems, Inc.(a) 40,000 825,000
- ----------------------------------------------------------------
</TABLE>
FS-135
<PAGE> 237
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Oxford Health Plans, Inc.(a) 13,500 $ 889,313
- ----------------------------------------------------------------
PacifiCare Health Systems,
Inc.-Class B(a) 5,000 401,250
- ----------------------------------------------------------------
Premier Research Worldwide, Ltd.(a) 17,400 167,475
- ----------------------------------------------------------------
Prime Medical Services, Inc.(a) 10,000 92,500
- ----------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 35,000 844,375
- ----------------------------------------------------------------
Vencor, Inc.(a) 3,000 124,875
- ----------------------------------------------------------------
15,330,550
- ----------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-6.13%
Alza Corp.(a) 5,000 146,250
- ----------------------------------------------------------------
Bard (C.R.), Inc. 45,000 1,428,750
- ----------------------------------------------------------------
Biomet, Inc. 65,000 987,188
- ----------------------------------------------------------------
Cohr, Inc.(a) 85,000 1,891,250
- ----------------------------------------------------------------
Dentsply International, Inc. 35,000 1,732,500
- ----------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 11,000 156,750
- ----------------------------------------------------------------
Haemonetics Corp.(a) 15,000 249,375
- ----------------------------------------------------------------
Heartstream, Inc.(a) 110,000 921,250
- ----------------------------------------------------------------
Human Genome Sciences, Inc.(a) 15,000 470,625
- ----------------------------------------------------------------
Maxxim Medical, Inc.(a) 15,000 195,000
- ----------------------------------------------------------------
Medical Manager Corp.(a) 355,000 3,150,625
- ----------------------------------------------------------------
MiniMed, Inc.(a) 45,000 1,113,750
- ----------------------------------------------------------------
Nitinol Medical Technologies,
Inc.(a) 90,000 765,000
- ----------------------------------------------------------------
Owens & Minor, Inc. Holding Co. 30,000 390,000
- ----------------------------------------------------------------
SangStat Medical Corp.(a) 15,000 256,875
- ----------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 40,000 1,560,000
- ----------------------------------------------------------------
Steris Corp.(a) 70,000 2,292,500
- ----------------------------------------------------------------
Stryker Corp.(a) 19,000 624,625
- ----------------------------------------------------------------
Suburban Ostomy Supply Co., Inc.(a) 125,000 1,125,000
- ----------------------------------------------------------------
Sullivan Dental Products, Inc. 10,000 147,500
- ----------------------------------------------------------------
Sybron International Corp.(a) 85,000 2,826,250
- ----------------------------------------------------------------
TECNOL Medical Products, Inc.(a) 115,000 2,026,875
- ----------------------------------------------------------------
Trex Medical Corp.(a) 25,000 309,375
- ----------------------------------------------------------------
Ventana Medical Systems, Inc.(a) 70,000 691,250
- ----------------------------------------------------------------
25,458,563
- ----------------------------------------------------------------
METALS-0.57%
Potash Corp. of Saskatchewan Inc.
(Canada) 24,928 1,916,340
- ----------------------------------------------------------------
Rental Service Corp.(a) 24,200 447,700
- ----------------------------------------------------------------
2,364,040
- ----------------------------------------------------------------
NATURAL GAS PIPELINE-0.28%
NGC Corp. 65,000 1,145,625
- ----------------------------------------------------------------
OFFICE AUTOMATION-0.22%
Danka Business Systems PLC-ADR
(United Kingdom) 30,000 916,875
- ----------------------------------------------------------------
OFFICE PRODUCTS-0.98%
Daisytek International Corp.(a) 87,000 2,370,750
- ----------------------------------------------------------------
Deluxe Corp. 40,000 1,225,000
- ----------------------------------------------------------------
OfficeMax, Inc.(a) 40,000 495,000
- ----------------------------------------------------------------
4,090,750
- ----------------------------------------------------------------
OIL & GAS (DRILLING)-0.88%
Atwood Oceanics, Inc.(a) 43,000 2,633,750
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING)-(CONTINUED)
Precision Drilling Corp.(a) (Canada) 10,000 $ 347,500
- ----------------------------------------------------------------
Reading & Bates Corp.(a) 31,000 693,625
- ----------------------------------------------------------------
3,674,875
- ----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-1.79%
Anadarko Petroleum Corp. 4,000 219,500
- ----------------------------------------------------------------
Apache Corp. 5,000 170,000
- ----------------------------------------------------------------
Burlington Resources, Inc. 15,000 635,625
- ----------------------------------------------------------------
Cabot Oil and Gas Corp.-Class A 70,000 1,172,500
- ----------------------------------------------------------------
Cross Timbers Oil Co. 12,000 186,000
- ----------------------------------------------------------------
Devon Energy Corp. 8,000 264,000
- ----------------------------------------------------------------
Houston Exploration Co. (The)(a) 80,000 1,000,000
- ----------------------------------------------------------------
Newfield Exploration Co.(a) 5,000 95,625
- ----------------------------------------------------------------
Noble Affiliates, Inc. 4,000 143,000
- ----------------------------------------------------------------
Nuevo Energy Co.(a) 16,000 550,000
- ----------------------------------------------------------------
Petsec Energy Ltd.-ADR(a)
(Australia) 15,000 322,500
- ----------------------------------------------------------------
Pogo Producing Co. 18,000 659,250
- ----------------------------------------------------------------
Rutherford-Moran Oil Corp.(a) 30,000 555,000
- ----------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 8,400 118,650
- ----------------------------------------------------------------
Titan Exploration, Inc.(a) 80,000 600,000
- ----------------------------------------------------------------
Transocean Offshore Inc. 12,000 727,500
- ----------------------------------------------------------------
7,419,150
- ----------------------------------------------------------------
OIL & GAS (SERVICES)-1.53%
Camco International, Inc. 8,000 355,000
- ----------------------------------------------------------------
Energy Ventures, Inc.(a) 25,000 1,671,875
- ----------------------------------------------------------------
Enron Oil & Gas Co. 20,000 372,500
- ----------------------------------------------------------------
Louisiana Land & Exploration Co. 10,000 500,000
- ----------------------------------------------------------------
Oceaneering International, Inc.(a) 20,000 290,000
- ----------------------------------------------------------------
Petroleum Geo-Services ASA-ADR(a)
(Norway) 18,300 704,550
- ----------------------------------------------------------------
SEACOR Holdings Inc.(a) 12,000 516,000
- ----------------------------------------------------------------
Stolt Comex Seaway, S.A.(a) (Norway) 86,000 1,580,250
- ----------------------------------------------------------------
Veritas DGC, Inc.(a) 19,000 365,750
- ----------------------------------------------------------------
6,355,925
- ----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-4.32%
Baker Hughes, Inc. 16,500 569,250
- ----------------------------------------------------------------
BJ Services Co.(a) 20,000 942,500
- ----------------------------------------------------------------
Cooper Cameron Corp.(a) 10,500 748,125
- ----------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 20,000 1,287,500
- ----------------------------------------------------------------
ENSCO International, Inc.(a) 50,000 2,375,000
- ----------------------------------------------------------------
Falcon Drilling Company, Inc.(a) 28,000 1,071,000
- ----------------------------------------------------------------
GulfMark International, Inc.(a) 26,000 1,852,500
- ----------------------------------------------------------------
National-Oilwell, Inc.(a) 43,000 1,671,625
- ----------------------------------------------------------------
Noble Drilling Corp.(a) 95,000 1,650,625
- ----------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 39,000 672,750
- ----------------------------------------------------------------
Rowan Companies, Inc.(a) 10,000 180,000
- ----------------------------------------------------------------
Smith International, Inc.(a) 20,000 947,500
- ----------------------------------------------------------------
Tidewater, Inc. 6,000 240,750
- ----------------------------------------------------------------
Tuboscope Vetco International
Corp.(a) 130,000 1,820,000
- ----------------------------------------------------------------
Weatherford Enterra, Inc.(a) 60,000 1,905,000
- ----------------------------------------------------------------
17,934,125
- ----------------------------------------------------------------
</TABLE>
FS-136
<PAGE> 238
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-0.90%
American Pad & Paper Co.(a) 215,000 $ 3,198,125
- ----------------------------------------------------------------
Thermo Fibergen Inc.(a) 45,000 393,750
- ----------------------------------------------------------------
Thermo Fibergen Inc. Rights(a) 45,000 151,875
- ----------------------------------------------------------------
3,743,750
- ----------------------------------------------------------------
POLLUTION CONTROL-0.38%
Philip Environmental, Inc.(a)
(Canada) 45,000 708,750
- ----------------------------------------------------------------
Tetra Technologies, Inc.(a) 2,400 55,800
- ----------------------------------------------------------------
USA Waste Services, Inc.(a) 25,000 818,750
- ----------------------------------------------------------------
1,583,300
- ----------------------------------------------------------------
REAL ESTATE-0.33%
Insignia Financial Group, Inc.-Class
A(a) 30,000 525,000
- ----------------------------------------------------------------
Kilroy Realty Corp.(a) 35,800 841,300
- ----------------------------------------------------------------
1,366,300
- ----------------------------------------------------------------
RESTAURANTS-1.82%
Apple South, Inc. 30,000 390,000
- ----------------------------------------------------------------
Boston Chicken, Inc.(a) 18,000 429,750
- ----------------------------------------------------------------
Brinker International, Inc.(a) 50,000 581,250
- ----------------------------------------------------------------
Chart House Enterprises Inc.(a) 25,000 137,500
- ----------------------------------------------------------------
Cracker Barrel Old Country Store,
Inc. 8,000 214,000
- ----------------------------------------------------------------
IHOP Corp.(a) 5,000 131,250
- ----------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(a) 20,000 280,937
- ----------------------------------------------------------------
Logan's Roadhouse, Inc.(a) 25,000 400,000
- ----------------------------------------------------------------
Lone Star Steakhouse & Saloon,
Inc.(a) 15,000 296,250
- ----------------------------------------------------------------
New York Bagel Enterprises(a) 80,000 330,000
- ----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 10,000 196,250
- ----------------------------------------------------------------
Rare Hospitality International
Inc.(a) 10,000 116,250
- ----------------------------------------------------------------
Ryan's Family Steak Houses, Inc.(a) 65,000 576,875
- ----------------------------------------------------------------
Shoney's, Inc.(a) 100,000 462,500
- ----------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 45,000 866,250
- ----------------------------------------------------------------
Starbucks Corp.(a) 30,000 896,250
- ----------------------------------------------------------------
Wendy's International, Inc. 60,000 1,237,500
- ----------------------------------------------------------------
7,542,812
- ----------------------------------------------------------------
RETAIL (FOOD & DRUG)-2.12%
Casey's General Stores, Inc. 50,000 943,750
- ----------------------------------------------------------------
Dominick's Supermarkets, Inc.()(a) 45,000 922,500
- ----------------------------------------------------------------
Einstein/Noah Bagel Corp.(a) 20,100 370,594
- ----------------------------------------------------------------
Revco D.S., Inc.(a) 25,000 1,087,500
- ----------------------------------------------------------------
Rite Aid Corp. 20,000 920,000
- ----------------------------------------------------------------
Twinlab Corp.(a) 140,000 1,855,000
- ----------------------------------------------------------------
Wild Oats Markets Inc.(a) 170,000 2,720,000
- ----------------------------------------------------------------
8,819,344
- ----------------------------------------------------------------
RETAIL (STORES)-9.68%
Abercrombie & Fitch Co.-Class A(a) 95,000 1,389,375
- ----------------------------------------------------------------
American Eagle Outfitters, Inc.(a) 20,000 237,500
- ----------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 13,000 355,875
- ----------------------------------------------------------------
Blyth Industries, Inc.(a) 10,000 395,000
- ----------------------------------------------------------------
Boise Cascade Office Products
Corp.(a) 20,000 352,500
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Borders Group, Inc.(a) 2,400 $ 51,000
- ----------------------------------------------------------------
Brookstone, Inc.(a) 35,000 280,000
- ----------------------------------------------------------------
Circuit City Stores, Inc. -- CarMax
Group(a) 21,100 316,500
- ----------------------------------------------------------------
Coldwater Creek Inc.(a) 40,000 560,000
- ----------------------------------------------------------------
CompUSA, Inc.(a) 33,000 635,250
- ----------------------------------------------------------------
Consolidated Stores Corp.(a) 1,125 45,000
- ----------------------------------------------------------------
Corporate Express, Inc.(a) 75,000 750,000
- ----------------------------------------------------------------
Costco Companies, Inc.(a) 10,000 288,750
- ----------------------------------------------------------------
CVS Corp. 20,000 992,500
- ----------------------------------------------------------------
Damark International, Inc.-Class
A(a) 50,000 462,500
- ----------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 13,000 513,500
- ----------------------------------------------------------------
Duty Free International, Inc. 8,900 125,713
- ----------------------------------------------------------------
Eagle Hardware & Garden, Inc.(a) 20,000 375,000
- ----------------------------------------------------------------
Family Dollar Stores, Inc. 115,000 3,004,375
- ----------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 79,000 814,688
- ----------------------------------------------------------------
Friedman's, Inc.-Class A(a) 25,000 421,875
- ----------------------------------------------------------------
Gadzooks, Inc.(a) 24,000 669,000
- ----------------------------------------------------------------
Gargoyles, Inc.(a) 50,000 375,000
- ----------------------------------------------------------------
Guitar Center Inc.(a) 39,000 550,875
- ----------------------------------------------------------------
Gymboree Corp.(a) 20,000 553,750
- ----------------------------------------------------------------
Hibbett Sporting Goods, Inc.(a) 35,000 560,000
- ----------------------------------------------------------------
Hot Topic, Inc.(a) 65,000 1,673,750
- ----------------------------------------------------------------
Just for Feet, Inc.(a) 32,500 515,937
- ----------------------------------------------------------------
Kohl's Corp.(a) 3,000 146,625
- ----------------------------------------------------------------
Linens 'N Things, Inc.(a) 145,000 3,081,250
- ----------------------------------------------------------------
Little Switzerland, Inc.(a) 70,000 345,625
- ----------------------------------------------------------------
Mac Frugals Bargains Close-Outs,
Inc.(a) 60,000 1,755,000
- ----------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 55,000 1,368,125
- ----------------------------------------------------------------
Neiman Marcus Group, Inc. (The)(a) 34,000 892,500
- ----------------------------------------------------------------
Nordstrom, Inc. 8,000 314,000
- ----------------------------------------------------------------
Oakley, Inc.(a) 75,000 768,750
- ----------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 1,200 39,150
- ----------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 22,000 470,250
- ----------------------------------------------------------------
Pier 1 Imports, Inc. 75,000 1,481,250
- ----------------------------------------------------------------
Proffitt's, Inc.(a) 4,200 156,975
- ----------------------------------------------------------------
RDO Equipment Co.-Class A(a) 37,500 618,750
- ----------------------------------------------------------------
Sports Authority, Inc. (The)(a) 75,000 1,331,250
- ----------------------------------------------------------------
Stage Stores, Inc.(a) 134,700 2,795,025
- ----------------------------------------------------------------
Staples, Inc.(a) 10,000 180,000
- ----------------------------------------------------------------
Sunglass Hut International, Inc.(a) 125,000 906,250
- ----------------------------------------------------------------
Talbots, Inc. 13,700 369,900
- ----------------------------------------------------------------
Tech Data Corp.(a) 10,000 245,000
- ----------------------------------------------------------------
Tiffany & Co. 35,000 1,386,875
- ----------------------------------------------------------------
U.S. Office Products Co.(a) 70,000 1,785,000
- ----------------------------------------------------------------
Viking Office Products, Inc.(a) 35,000 476,875
- ----------------------------------------------------------------
Whole Foods Market, Inc.(a) 60,000 1,380,000
- ----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 5,000 155,000
- ----------------------------------------------------------------
Zale Corp.(a) 25,000 462,500
- ----------------------------------------------------------------
40,177,138
- ----------------------------------------------------------------
</TABLE>
FS-137
<PAGE> 239
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SCHOOLS-0.07%
Children's Comprehensive Services,
Inc.(a) 20,000 $ 235,000
- ----------------------------------------------------------------
Sylvan Learning Systems, Inc.(a) 1,800 54,225
- ----------------------------------------------------------------
289,225
- ----------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.75%
Dynatech Corp.(a) 45,000 1,563,750
- ----------------------------------------------------------------
Fisher Scientific International 30,000 1,271,250
- ----------------------------------------------------------------
Input/Output, Inc.(a) 20,000 280,000
- ----------------------------------------------------------------
3,115,000
- ----------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.72%
O'Gara Co. (The)(a) 25,000 267,188
- ----------------------------------------------------------------
Pittston Brink's Group 9,000 285,750
- ----------------------------------------------------------------
Protection One, Inc.(a) 170,000 1,721,250
- ----------------------------------------------------------------
Safety 1st, Inc.(a) 35,000 236,250
- ----------------------------------------------------------------
Vivid Technologies, Inc.(a) 36,500 492,750
- ----------------------------------------------------------------
3,003,188
- ----------------------------------------------------------------
SEMICONDUCTORS-0.62%
Analog Devices, Inc.(a) 9,067 242,533
- ----------------------------------------------------------------
DuPont Photomasks, Inc.(a) 10,000 478,750
- ----------------------------------------------------------------
ESS Technology, Inc.(a) 35,000 481,250
- ----------------------------------------------------------------
Fusion Systems Corp.(a) 10,000 263,750
- ----------------------------------------------------------------
Integrated Process Equipment
Corp.(a) 54,000 735,750
- ----------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 2,400 126,900
- ----------------------------------------------------------------
SDL, Inc.(a) 20,000 260,000
- ----------------------------------------------------------------
2,588,933
- ----------------------------------------------------------------
SHOES & RELATED APPAREL-0.07%
Genesco Inc.(a) 20,000 232,500
- ----------------------------------------------------------------
Kenneth Cole Productions, Inc.(a) 4,500 74,813
- ----------------------------------------------------------------
307,313
- ----------------------------------------------------------------
TELECOMMUNICATIONS-3.57%
ADC Telecommunications, Inc.(a) 5,000 130,625
- ----------------------------------------------------------------
Advanced Fibre Communications,
Inc.(a) 25,000 996,875
- ----------------------------------------------------------------
Aerial Communications Inc.(a) 60,000 292,500
- ----------------------------------------------------------------
Andrew Corp.(a) 700 17,325
- ----------------------------------------------------------------
Billing Information Concepts(a) 15,000 358,125
- ----------------------------------------------------------------
Brooks Fiber Properties, Inc.(a) 60,000 1,305,000
- ----------------------------------------------------------------
DSC Communications Corp.(a) 75,000 1,528,125
- ----------------------------------------------------------------
General Instrument Corp.(a) 33,000 771,375
- ----------------------------------------------------------------
GeoTel Communications Corp.(a) 14,700 154,350
- ----------------------------------------------------------------
LCC International, Inc. Class A(a) 160,000 1,640,000
- ----------------------------------------------------------------
McLeod, Inc. Class A(a) 6,500 119,438
- ----------------------------------------------------------------
NACT Telecommunications, Inc.(a) 50,000 343,750
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
</TABLE>
TELECOMMUNICATIONS-(CONTINUED)
Octel Communications Corp.(a) 30,000 $ 487,500
- ----------------------------------------------------------------
Omnipoint Corp.(a) 5,000 38,750
- ----------------------------------------------------------------
P-COM, Inc.(a) 43,000 1,230,875
- ----------------------------------------------------------------
PairGain Technologies, Inc.(a) 5,000 130,000
- ----------------------------------------------------------------
Premiere Technologies, Inc.(a) 12,500 298,438
- ----------------------------------------------------------------
Scientific-Atlanta, Inc. 40,000 640,000
- ----------------------------------------------------------------
SmarTalk Teleservices Inc.(a) 25,000 268,750
- ----------------------------------------------------------------
Tekelec(a) 10,000 230,000
- ----------------------------------------------------------------
Tellabs, Inc.(a) 26,000 1,036,750
- ----------------------------------------------------------------
Teltrend, Inc.(a) 20,000 370,000
- ----------------------------------------------------------------
360 Communications Co.(a) 3,000 52,125
- ----------------------------------------------------------------
Tollgrade Communications, Inc.(a) 50,000 987,500
- ----------------------------------------------------------------
Transaction Network Services,
Inc.(a) 30,000 337,500
- ----------------------------------------------------------------
TTI Team Telecom International
Ltd.(a) (Israel) 49,900 246,381
- ----------------------------------------------------------------
U.S. Long Distance Corp.(a) 15,000 181,875
- ----------------------------------------------------------------
West TeleServices Corp.(a) 40,500 531,562
- ----------------------------------------------------------------
Yurie Systems, Inc.(a) 10,450 100,581
- ----------------------------------------------------------------
14,826,075
- ----------------------------------------------------------------
TEXTILES-0.36%
Ashworth, Inc.(a) 35,000 264,688
- ----------------------------------------------------------------
G & K Services, Inc.-Class A 28,500 826,500
- ----------------------------------------------------------------
Tommy Hilfiger Corp.(a) 10,000 397,500
- ----------------------------------------------------------------
1,488,688
- ----------------------------------------------------------------
TOBACCO-0.42%
Consolidated Cigar Holdings, Inc.(a) 27,000 621,000
- ----------------------------------------------------------------
General Cigar Holdings, Inc.(a) 50,000 1,181,250
- ----------------------------------------------------------------
1,802,250
- ----------------------------------------------------------------
TRANSPORTATION-1.52%
AirNet Systems, Inc.(a) 50,000 775,000
- ----------------------------------------------------------------
Hvide Marine, Inc.-Class A(a) 170,000 2,932,500
- ----------------------------------------------------------------
Kitty Hawk, Inc.(a) 55,000 756,250
- ----------------------------------------------------------------
Trico Marine Services, Inc.(a) 52,000 1,846,000
- ----------------------------------------------------------------
6,309,750
- ----------------------------------------------------------------
Total Common Stocks 402,768,625
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-3.03%(b)
HSBC Securities, Inc., 5.49%,
05/01/97(c) $12,573,588 12,573,588
- ----------------------------------------------------------------
TOTAL INVESTMENTS-99.99% 415,342,213
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.01% 52,477
- ----------------------------------------------------------------
NET ASSETS-100.00% $415,394,690
- ----------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$200,030,500. Collateralized by $116,271,000 U.S. Treasury obligations,
5.875% to 7.875% due 06/30/01 to 08/15/05 and $85,760,000 U.S. Government
obligations, 0% to 7.15% due 07/18/97 to 02/14/06 with an aggregate market
value at 04/30/97 of $204,003,650.
See Notes to Financial Statements.
FS-138
<PAGE> 240
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$409,037,704) $415,342,213
- -----------------------------------------------------------
Receivables for:
Investments sold 80,335
- -----------------------------------------------------------
Capital stock sold 2,700,615
- -----------------------------------------------------------
Dividends and interest 47,130
- -----------------------------------------------------------
Investment for deferred compensation plan 2,415
- -----------------------------------------------------------
Other assets 112,021
- -----------------------------------------------------------
Total assets 418,284,729
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,195,575
- -----------------------------------------------------------
Capital stock reacquired 1,134,364
- -----------------------------------------------------------
Deferred compensation 2,415
- -----------------------------------------------------------
Accrued advisory fees 238,847
- -----------------------------------------------------------
Accrued administrative service fees 6,215
- -----------------------------------------------------------
Accrued directors' fees 2,297
- -----------------------------------------------------------
Accrued distribution fees 217,656
- -----------------------------------------------------------
Accrued transfer agent fees 60,658
- -----------------------------------------------------------
Accrued operating expenses 32,012
- -----------------------------------------------------------
Total liabilities 2,890,039
- -----------------------------------------------------------
Net assets applicable to shares outstanding $415,394,690
===========================================================
NET ASSETS:
Class A $310,035,927
===========================================================
Class B $105,358,763
===========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- -----------------------------------------------------------
Outstanding 30,372,240
===========================================================
Class B:
Authorized 750,000,000
- -----------------------------------------------------------
Outstanding 10,360,230
===========================================================
CLASS A:
Net asset value and redemption price per
share $ 10.21
===========================================================
Offering price per share:
(Net assets value of $10.21
divided by 94.50%) $ 10.80
===========================================================
CLASS B:
Net asset value and offering price per
share $ 10.17
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $2,499 foreign withholding
tax) $ 393,163
- -----------------------------------------------------------
Interest 679,054
- -----------------------------------------------------------
Total investment income 1,072,217
- -----------------------------------------------------------
EXPENSES:
Advisory fees 1,538,850
- -----------------------------------------------------------
Administrative service fees 37,898
- -----------------------------------------------------------
Custodian fees 23,287
- -----------------------------------------------------------
Directors' fees 3,645
- -----------------------------------------------------------
Distribution fees-Class A 536,414
- -----------------------------------------------------------
Distribution fees-Class B 375,468
- -----------------------------------------------------------
Transfer agent fees-Class A 334,356
- -----------------------------------------------------------
Transfer agent fees-Class B 118,321
- -----------------------------------------------------------
Other 76,153
- -----------------------------------------------------------
Total expenses 3,044,392
- -----------------------------------------------------------
Less: Advisory fees waived (224,977)
- -----------------------------------------------------------
Expenses paid indirectly (2,995)
- -----------------------------------------------------------
Net expenses 2,816,420
- -----------------------------------------------------------
Net investment income (loss) (1,744,203)
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (10,251,214)
- -----------------------------------------------------------
Net realized gain (loss) on securities sold
short (3,783)
- -----------------------------------------------------------
Net realized gain (loss) on investment
securities (10,254,997)
- -----------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (27,115,796)
- -----------------------------------------------------------
Net gain (loss) on investment securities (37,370,793)
- -----------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(39,114,996)
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-139
<PAGE> 241
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND THE PERIOD JUNE 17, 1996 (DATE
OPERATIONS COMMENCED) THROUGH OCTOBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,744,203) $ (167,630)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on investment securities (10,254,997) (5,381,138)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (27,115,796) 33,420,305
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (39,114,996) 27,871,537
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 87,083,460 222,946,738
- ------------------------------------------------------------------------------------------
Class B 93,738,617 22,869,334
- ------------------------------------------------------------------------------------------
Net increase in net assets 141,707,081 273,687,609
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 273,687,609 --
- ------------------------------------------------------------------------------------------
End of period $415,394,690 $273,687,609
- ------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $426,472,043 $245,649,966
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (1,745,727) (1,524)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on investment
securities (15,636,135) (5,381,138)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 6,304,509 33,420,305
- ------------------------------------------------------------------------------------------
$415,394,690 $273,687,609
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Capital Development 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 Capital Development Fund, AIM Aggressive Growth Fund, AIM Blue
Chip Fund, AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund. The
Fund currently offers two different classes of shares: the Class A shares and
the Class B shares. Class A shares commenced operations on June 17, 1996 and
Class B shares commenced sales on October 1, 1996. Class A shares are sold with
a front-end sales charge. Class B shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The 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 long-term 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 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.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a
FS-140
<PAGE> 242
trade date basis. Realized gains or losses on sales are computed on the
specific identification of the securities sold. Interest income is recorded
as earned from settlement date and is recorded on the accrual basis. Dividend
income, dividend expense on short sales and distributions to shareholders are
recorded on the ex-dividend date.
C. Accounting for Securities Sold Short--When the Fund sells common stock short,
an amount equal to the proceeds of the sales is recorded as an asset. This
asset is offset by a liability (representing the borrowed security) recorded
on the books of the Fund at the market value of the common stock determined
each day in accordance with the procedures for security valuations discussed
in "A" above. The Fund's risk is that the value of the security will increase
rather than decline and thus an unrealized loss will be recorded. When the
Fund closes out a short position by delivering the stock sold short, the Fund
will realize a gain or loss and the liability related to such short position
will be eliminated. The Fund will attempt to hedge against market risk by
entering into short sales of securities that it currently owns or has the
right to acquire through the conversion or exchange of other securities that
it owns. Such short sales may protect the Fund against the risk of losses in
the value of its portfolio securities because any unrealized losses with
respect to such securities may be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in
such portfolio may be wholly or partially offset by a corresponding loss in
the short position.
D. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward of
$4,645,136 (which may be carried forward to offset future taxable gains, if
any) which expires, if not previously utilized, in the year 2004.
E. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. AIM has agreed to
waive advisory fees on the Fund to the extent necessary to keep the annual
expense ratio for Class A shares at 1.34% for two years commencing August 12,
1996. During the six months ended April 30, 1997, 1996, AIM waived fees of
$224,977.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $37,898 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the six months ended April 30, 1997, AFS was paid
$260,707 for such services.
The Fund received reductions in transfer agency fees of $2,995 from dividends
received on balances in cash management accounts. The effect of the above
arrangement resulted in a reduction of the Fund's total expenses of $2,995
during the six months ended April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Company has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at the annual rate of 0.35% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets of the Class B shares. Of this amount, the Fund
pays a service fee of 0.25% of the average daily net assets of the Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares of the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more assignees, its rights to all or a portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges payable to AIM Distributors
related to the Class B shares. During the six months ended April 30, 1997, the
Class A shares and the Class B shares paid AIM Distributors $536,414 and
$375,468, respectively, as compensation pursuant to the Plans.
AIM Distributors received commissions of $604,215 from Class A capital stock
transactions during the six months ended April 30, 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 capital stock. During the six months ended April
30, 1997, AIM Distributors received $5,583 in contingent deferred sales charges
imposed on redemptions of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Distributors and AFS.
During the six months ended April 30, 1997 the Fund paid legal fees of $2,780
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.
FS-141
<PAGE> 243
NOTE 3-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 4-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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997 was
$275,496,648 and $74,919,850, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 49,302,694
- -------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (43,288,268)
- -------------------------------------------------------
Net unrealized appreciation of
investment securities $ 6,014,426
=======================================================
</TABLE>
Cost of investments for tax purposes is $409,327,787.
NOTE 6-CAPITAL STOCK
Changes in the capital stock outstanding during the six months ended April 30,
1997 and the period June 17, 1996 (date operations commenced) through October
31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
--------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 14,534,714 $ 163,157,737 24,923,432 $ 246,810,746
- ------------------- ------------ ------------- ---------- ---------------
Class B* 9,175,182 102,943,426 2,026,599 22,898,153
- ------------------- ------------ ------------- ---------- ---------------
Reacquired:
Class A (6,822,253) (76,074,277) (2,263,653) (23,864,008)
- ------------------- ------------ ------------- ---------- ---------------
Class B* (838,975) (9,204,809) (2,576) (28,819)
- ------------------- ------------ ------------- ---------- ---------------
16,048,668 $ 180,822,077 24,683,802 $ 245,816,072
=================== ============ ============= ========== ===============
* Class B shares commenced sales on October 1, 1996.
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the six months ended April 30, 1997 and the period June 17,
1996 (date operations commenced) through October 31, 1996 and for a share of
Class B capital stock outstanding during the six months ended April 30, 1997 and
the period October 1, 1996 (date sales commenced) through October 31, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------- --------------------------
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1997 1996 1997 1996
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 11.09 $ 10.00 $ 11.08 $ 11.26
- ---------------------------- -------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss) (0.04) (0.01)(a) (0.05) (0.01)(a)
- ---------------------------- -------- -------- -------- --------
Net gains (losses) on
securities (both
realized and
unrealized) (0.84) 1.10 (0.86) (0.17)
- ---------------------------- -------- -------- -------- --------
Total from investment
operations (0.88) 1.09 (0.91) (0.18)
- ---------------------------- -------- -------- -------- --------
Net asset value, end of
period $ 10.21 $ 11.09 $ 10.17 $ 11.08
============================ ======== ======== ======== ========
Total return(b) (7.94)% 10.90% (8.21)% (1.60)%
============================ ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $310,036 $251,253 $105,359 $ 22,435
============================ ======== ======== ======== ========
Ratio of expenses to average
net assets(c) 1.34%(d)(e) 1.35%(f) 2.04%(d)(e) 1.89%(f)
============================ ======== ======== ======== ========
Ratio of net investment
income (loss) to average
net assets(g) (0.78)%(d) (0.29)%(f) (1.47)%(d) (0.83)%(f)
============================ ======== ======== ======== ========
Portfolio turnover rate 21% 13% 21% 13%
============================ ======== ======== ======== ========
Average broker commission
rate $ 0.0533 $ 0.0550 $ 0.0533 $ 0.0550
============================ ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers. Annualized ratios of expenses to average net assets prior
to fee waivers for the periods 1997 and 1996 are 1.46% and 1.60% for Class A
shares and 2.15% and 2.28% for Class B shares.
(d) Ratios are annualized and based on average net assets of $309,062,782 for
the Class A shares and $75,715,935 for the Class B shares.
(e) Excluding indirectly paid expenses, the ratios of expenses to average net
assets would have been the same for the Class A and Class B shares.
(f) Annualized.
(g) After fee waivers. Annualized ratios of net investment income (loss) prior
to fee waivers for the periods 1997 and 1996 are (0.89)% and (0.54)% for
Class A shares are (1.59)% and (1.22)% for Class B shares.
FS-142
<PAGE> 244
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
Capital Development Fund (the "Fund") and A I M Advisors, Inc.
(3) To approve the elimination of the fundamental investment policy prohibiting
the Fund from investing in other investment companies.
(4) 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............ 15,997,633 226,397 615,219
(3) Elimination of policy prohibiting investments in other
investment companies........................................ 12,434,128 708,699 648,163
(4) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
FS-143
<PAGE> 245
PART C
OTHER INFORMATION
Item 24(a) Financial Statements:
1. AIM Aggressive Growth Fund - Retail Class (Class A)
In Part A:
None
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
2. AIM Blue Chip Fund - Retail Classes (Class A and Class B)
In Part A:
None
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited),
September 30, 1996 (audited), and April 30, 1997 (unaudited)
In Part C:
None
3. AIM Capital Development Fund - Retail Classes (Class A
and Class B)
In Part A:
None
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
4. AIM Charter Fund - Retail Classes (Class A and Class B)
In Part A:
Financial Highlights
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
C-1
<PAGE> 246
5. AIM Charter Fund - Institutional Class
In Part A:
None
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
6. AIM Weingarten Fund - Retail Classes (Class A and Class B)
In Part A:
Financial Highlights
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
7. AIM Weingarten Fund - Institutional Class
In Part A:
Financial Highlights
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
8. AIM Constellation Fund - Retail Class (Class A)
In Part A:
Financial Highlights
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996 (audited), and
April 30, 1997 (unaudited)
In Part C:
None
9. AIM Constellation Fund - Institutional Class
In Part A:
None
C-2
<PAGE> 247
In Part B:
(1) Independent Auditors' Report
(2) Financial Statements as of October 31, 1996
(audited), and April 30, 1997 (unaudited)
In Part C:
None
(b) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(1) (a) - Articles Supplementary, as filed with the State of Maryland
on October 1, 1997, are filed herewith electronically.
(b) - Articles Supplementary, as filed with the State of Maryland on
October 1, 1997, are filed herewith electronically.
(c) - Articles Supplementary, as filed with the State of Maryland
on June 26, 1996, were filed electronically as an Exhibit to
Post-Effective Amendment No. 50 on July 24, 1996, and are
hereby incorporated by reference.
(d) - Articles Supplementary, as filed with the State of Maryland
on December 19, 1995, were filed electronically as an Exhibit
to Post-Effective Amendment No. 47 on December 29, 1995, and
are hereby incorporated by reference.
(e) - Articles Supplementary, as filed with the State of Maryland
on June 5, 1995, were filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and are
hereby incorporated by reference.
(f) - Articles of Amendment, as filed with the State of Maryland
on June 5, 1995, were filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and are
hereby incorporated by reference.
(g) - Articles Supplementary, as filed with the State of Maryland
on October 8, 1993, were filed as an Exhibit to
Post-Effective Amendment No. 43 on February 28, 1994, and
were filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and are hereby
incorporated by reference.
(h) - Articles Supplementary, as filed with the State of Maryland
on December 23, 1991, were filed as an Exhibit to
Post-Effective Amendment No. 40 on February 26, 1992, and
were filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and are hereby
incorporated by reference.
(i) - Articles Supplementary, as filed with the State of Maryland
on March 27, 1991, were filed as an Exhibit to Post-Effective
Amendment No. 40 on February 26, 1992, and were filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995, and are hereby incorporated by
reference.
(j) - Articles of Incorporation of Registrant, as filed with the
State of Maryland on May 20, 1988, were filed as an Exhibit
to Post-Effective Amendment No. 34 on June 13, 1988, and were
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and are hereby
incorporated by reference.
(2) (a) - Amended and Restated Bylaws, dated effective December 11,
1996, were filed electronically as an Exhibit to
Post-Effective Amendment No. 51 on January 15, 1997, and are
hereby incorporated by reference.
</TABLE>
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<PAGE> 248
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(b) - Second Amendment, dated September 28, 1994, to Amended and
Restated By-Laws was filed as an Exhibit to Post-Effective
Amendment No. 44 on February 24, 1995.
(c) - First Amendment, dated April 22, 1991, to Amended and Restated
By-Laws was filed as an Exhibit to Post-Effective Amendment
No. 40 on February 26, 1992.
(d) Amended and Restated By-Laws of Registrant were filed as an
Exhibit to Post-Effective Amendment No. 37 on February 28,
1990.
(e) - By-Laws of Registrant were filed as an Exhibit to
Post-Effective Amendment No. 34 on June 13, 1988.
(3) - None.
(4) (a) - Form of specimen certificate of shares of Registrant's AIM
Blue Chip Fund was filed electronically as an Exhibit to
Registrant's AIM Blue Chip Fund registration statement on
Form N-14 on December 29, 1995, and is hereby incorporated
by reference.
(b) - Form of specimen certificate of shares of Registrant's AIM
Capital Development Fund was filed electronically as an
Exhibit to Registrant's AIM Capital Development Fund
registration statement on Form N-14 on December 29, 1995, and
is hereby incorporated by reference.
(c) - Forms of specimen certificates for shares of common stock
of Registrant's AIM Aggressive Growth Fund and the Retail
Classes were filed as an Exhibit to Post-Effective Amendment
No. 44 on February 24, 1995, and are hereby incorporated by
reference.
(d) - Form of specimen certificate for shares of common stock of
Registrant's AIM Aggressive Growth Fund was filed as an
Exhibit to Post-Effective Amendment No. 42 on August 16,
1993.
(e) - Forms of specimen certificates for shares of common stock
of Registrant's Institutional Classes were filed as an
Exhibit to Post-Effective Amendment No. 39 on March 1, 1991,
and are hereby incorporated by reference.
(f) - Forms of specimen certificates for shares of common stock of
Registrant's Retail Classes were filed as an Exhibit to
Post-Effective Amendment No. 34 on June 13, 1988.
(5) (a) - (1) Master Investment Advisory Agreement, dated February 28,
1997, between Registrant and A I M Advisors, Inc. is filed
herewith electronically.
(2) Amendment No. 2, dated March 12, 1996, to the Master
Investment Advisory Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment No.
49 on May 31, 1996.
- (3) Amendment No. 1, dated November 14, 1994, to the Master
Investment Advisory Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed as an
Exhibit to Post-Effective Amendment No. 44 on February 24,
1995, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (4) Master Investment Advisory Agreement, dated October 18,
1993, between Registrant and A I M Advisors, Inc., was filed
as an Exhibit to Post-Effective Amendment No. 43 on February
28, 1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and is
hereby incorporated by reference.
</TABLE>
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<PAGE> 249
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
- (5) Investment Advisory Agreement, dated August 6, 1993,
between Registrant's AIM Aggressive Growth Fund and A I M
Advisors, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994.
- (6) Investment Advisory Agreement, dated September 30, 1988,
between Registrant and A I M Advisors, Inc., was filed as an
Exhibit to Post-Effective Amendment No. 38 on February 28,
1991.
(b) - (1) Master Sub-Advisory Agreement, dated February 28, 1997,
between Registrant A I M Advisors, Inc. and A I M Capital
Management, Inc. is filed herewith electronically.
- (2) Master Sub-Advisory Agreement, dated October 18, 1993,
between Registrant, A I M Advisors, Inc. and A I M Capital
Management, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994, and was filed
electronically as an Exhibit to Post-Effective Amendment No.
51 on January 15, 1997.
- (3) Sub-Advisory Agreement, dated September 30, 1988, between
Registrant, A I M Advisors, Inc. and A I M Capital
Management, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 38 on February 28, 1991.
(6) (a) - (1) Form of Amendment No. 1 to the Master Distribution
Agreement, dated February 28, 1997, between Registrant (on
behalf of the Class B shares of AIM Constellation Fund) and
A I M Distributors, Inc., is filed herewith electronically.
- (2) Master Distribution Agreement, dated February 28, 1997,
between Registrant (on behalf of Registrant's Class B shares)
and A I M Distributors, Inc., is filed herewith
electronically.
- (3) Amendment No. 1, dated June 11, 1996, to Master
Distribution Agreement, dated June 14, 1995, between
Registrant (on behalf of the portfolio's Class B shares) and
A I M Distributors, Inc., was filed electronically as an
Exhibit to Post-Effective Amendment No. 50 on July 24, 1996,
and is herewith electronically.
- (4) Master Distribution Agreement, dated June 14, 1995,
between Registrant (on behalf of the portfolio's Class B
shares) and A I M Distributors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995.
- (5) Master Distribution Agreement, dated August 4, 1997,
between Registrant (on behalf of the portfolio's Class A and
Class C shares) and A I M Distributors, Inc. is filed herewith
electronically.
- (6) Master Distribution Agreement dated February 28,1997,
between Registrant (on behalf of Registrant's Class A shares)
and A I M Distributors, Inc. is filed herewith electronically.
- (7) Amendment No. 1, dated December 4, 1995, to Master
Distribution Agreement, dated October 18, 1993, between
Registrant (on behalf of the portfolio's Class A shares) and
A I M Distributors, Inc., was filed electronically as an
Exhibit to Post-Effective Amendment No. 49 on May 31, 1996.
- (8) Master Distribution Agreement, dated October 18, 1993,
between Registrant (on behalf of the portfolio's Class A
shares) and A I M Distributors, Inc., was filed as an Exhibit
to Post-Effective Amendment No. 43 on February 28, 1994, and
was filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (9) Master Distribution Agreement, dated October 18, 1993,
between Registrant and Fund Management Company, was filed as
an Exhibit to Post-Effective Amendment No. 43 on February 28,
1994.
- (10) Distribution Agreement, dated August 6, 1993, between
Registrant's AIM Aggressive Growth Fund and A I M
Distributors, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994.
- (11) Master Distribution Agreement dated February 28, 1997,
between Registrant and Fund Management Company, is filed
herewith electronically.
- (12) Distribution Agreement, dated March 15, 1991, between
Registrant and Fund Management Company, was filed as an
Exhibit to Post-Effective Amendment No. 39 on March 1, 1991.
</TABLE>
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<PAGE> 250
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
- (13) Distribution Agreement, dated May 24, 1988, between
Registrant and A I M Distributors, Inc., was filed as an
Exhibit to Post-Effective Amendment No. 38 on February 28,
1991.
(b) - Form of Selected Dealer Agreement between A I M Distributors,
Inc. and selected dealers was filed electronically as an
Exhibit to Post-Effective Amendment No. 52 on June 9, 1997,
and is hereby incorporated by reference.
(c) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed electronically as an
Exhibit to Post-Effective Amendment No. 52 on June 9, 1997,
and is hereby incorporated by reference.
(7) (a) - Retirement Plan for Registrant's Non-Affiliated Directors,
effective as of March 8, 1994, as restated September 18,
1995, was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and
is hereby incorporated by reference.
(b) - Retirement Plan for Registrant's Non-Affiliated Directors was
filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995.
(c) - Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors, as approved December 5, 1995, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and is hereby
incorporated by reference.
(d) - Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995.
(8) (a) - (1) Amendment No. 3, dated December 4, 1995, to the Custodian
Contract, dated October 1, 1992, between Registrant and
State Street Bank and Trust Company, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 49 on May 31, 1996, and is hereby incorporated by
reference.
- (2) Amendment No. 2, dated September 19, 1995, to the
Custodian Contract, dated October 1, 1992, between Registrant
and State Street Bank and Trust Company, was filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995, and is hereby incorporated by
reference.
- (3) Amendment No. 1, dated October 15, 1993, to the Custodian
Contract, dated October 1, 1992, between Registrant and State
Street Bank and Trust Company, was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995, and is hereby incorporated by reference.
- (4) Custodian Contract, dated October 1, 1992, between
Registrant and State Street Bank and Trust Company, was filed
as an Exhibit to Post-Effective Amendment No. 41 on February
26, 1993, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and is
hereby incorporated by reference.
(b) - Subcustodian Agreement, dated September 9, 1994, between
Registrant, Texas Commerce Bank National Association, State
Street Bank and Trust Company and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995, and is hereby incorporated by reference.
(9) (a) - (1) Amendment No. 1, dated August 4, 1997, to the Transfer
Agency and Service Agreement dated November 1, 1994, between
Registrant and A I M Fund Services, Inc. is filed herewith
electronically.
</TABLE>
C-6
<PAGE> 251
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
- (2) Transfer Agency and Service Agreement, dated November 1,
1994, between Registrant and A I M Fund Services, Inc., was
filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995, and is hereby incorporated by reference.
- (3) Amendment No. 2, dated July 1, 1997, to the Transfer
Agency and Service Agreement dated July 1, 1995, between
Registrant and A I M Institutional Fund Services, Inc. is
filed herewith electronically.
- (4) Amendment No. 1, dated July 1, 1996, to the Transfer
Agency and Service Agreement dated July 1, 1995, between
Registrant and A I M Institutional Fund Services, Inc. is
filed herewith electronically.
- (5) Transfer Agency and Service Agreement, dated July 1,
1995, between Registrant and A I M Institutional Fund
Services, Inc., was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and is
hereby incorporated by reference.
- (6) Amendment No. 3, dated April 1, 1994, to the Transfer
Agency and Registrar Agreement, dated May 15, 1992, as
amended, between Registrant and The Shareholder Services
Group, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 44 on February 24, 1995.
- (7) Amendment No. 2, dated October 15, 1993, to the Transfer
Agency and Registrar Agreement, dated May 15, 1992, as
amended, between Registrant and The Shareholder Services
Group, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 44 on February 24, 1995.
- (8) Transfer Agency and Service Agreement, dated July 6,
1992, between State Street Bank and Trust Company and
Registrant, with respect to the Institutional Classes, was
filed as an Exhibit to Post-Effective Amendment No. 41 on
February 26, 1993.
- (9) Transfer Agency and Registrar Agreement, dated May 15,
1992, as amended May 15, 1992, between The Shareholder
Services Group, Inc. and Registrant, with respect to the
Retail Classes, was filed as an Exhibit to Post-Effective
Amendment No. 41 on February 26, 1993.
- (10) Transfer Agency Agreement, dated May 15, 1989, between
Registrant and TAC Shareholder Services, Inc., was filed as
an Exhibit to Post-Effective Amendment No. 37 on February 28,
1990.
(b) - (1) Amendment No. 3, dated February 1, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group, Inc.) is
filed herewith electronically.
(2) Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group (formerly The Shareholder Services Group, Inc.), was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and is hereby
incorporated by reference.
- (3) Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement dated December 23,
1994, between Registrant and First Data Investor Services
Group (formerly The Shareholder Services Group, Inc.), was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and is hereby
incorporated by reference.
- (4) Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data Investor
Services Group (formerly The Shareholder Services Group,
Inc.), was filed as an Exhibit to Post-Effective Amendment
No. 44 on February 24, 1995, and was filed electronically as
an Exhibit to Post-Effective Amendment No. 47 on December 29,
1995, and is hereby incorporated by reference.
- (5) Shareholder Sub-Accounting Services Agreement between
Registrant, First Data Investor Services Group (formerly The
Shareholder Services Group, Inc.), Financial Data Services
Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc., dated
July 1, 1990, was filed as an Exhibit to Post-Effective
Amendment No. 40 on February 26, 1992, and is hereby
incorporated by reference.
(c) - (1) Agreement and Plan of Reorganization between Registrant
and Baird Blue Chip Fund, Inc., dated December 20, 1995, was
filed electronically as an Appendix to Part A of
</TABLE>
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<PAGE> 252
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Registrant's AIM Blue Chip Fund registration statement on
Form N-14 on December 29, 1995.
- (2) Amendment, dated May 23, 1996, to Agreement and Plan of
Reorganization between Registrant and Baird Capital
Development Fund, Inc., dated December 20, 1995, was filed
electronically as an Exhibit to Post-Effective Amendment No.
49 on May 31, 1996.
- (3) Agreement and Plan of Reorganization between Registrant
and Baird Capital Development Fund, Inc., dated December 20,
1995, was filed electronically as an Appendix to Part A of
Registrant's AIM Capital Development Fund registration
statement on Form N-14 on December 29, 1995.
- (4) Agreement and Plan of Merger, dated September 30, 1988,
was filed as an Exhibit to Post-Effective Amendment No. 35 on
September 30, 1988.
- (5) Articles of Merger, dated September 30, 1988, was filed
as an Exhibit to Post-Effective Amendment No. 35 on
September 30, 1988.
(d) - (1) Master Administrative Service Agreement, dated February
28, 1997 between Registrant and A I M Advisors, Inc. is filed
electronically herewith.
(2) Amendment No. 2, dated June 11, 1996, to the Master
Administrative Services Agreement dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment No.
50 on July 24, 1996.
- (3) Amendment No. 1, dated December 4, 1995, to the Master
Administrative Services Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment No.
49 on May 31, 1996.
- (4) Master Administrative Services Agreement, dated October
18, 1993, between Registrant and A I M Advisors, Inc., was
filed as an Exhibit to Post-Effective Amendment No. 43 on
February 28, 1994, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 47 on December 29, 1995.
- (5) Amendment No. 4, dated November 1, 1994, to the
Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (6) Amendment No. 3, dated September 16, 1994, to the
Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 47 on December 29, 1995.
- (7) Amendment No. 2, dated July 1, 1994, to the
Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995 and was filed electronically as an Exhibit
to Post-Effective Amendment No. 47 on December 29, 1995.
</TABLE>
C-8
<PAGE> 253
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
- (8) Amendment No. 1, dated May 11, 1994, to the
Administrative Services Agreement dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 47 on December 29, 1995.
- (9) Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc. and A I M Fund Services,
Inc., on behalf of the Retail Classes, was filed as an
Exhibit to Post-Effective Amendment No. 43 on February 28,
1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (10) Administrative Services Agreement, dated September 16,
1994, between A I M Advisors, Inc. and A I M Institutional
Fund Services, Inc., on behalf of the Institutional Classes,
was filed as an Exhibit to Post-Effective Amendment No. 44 on
February 24, 1995.
- (11) Administrative Services Agreement, dated August 6, 1993,
between Registrant's AIM Aggressive Growth Fund and A I M
Advisors, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994.
- (12) Administrative Services Agreement, dated June 11, 1989,
between Registrant and A I M Advisors, Inc., was filed as
an Exhibit to Post-Effective Amendment No. 37 on February
28, 1990.
(10) (a) - Opinion of Ballard Spahr Andrews & Ingersoll as filed
herewith electronically.
(b) - Opinion of Ballard Spahr Andrews & Ingersoll was filed as an
Exhibit to Registrant's Rule 24f-2 Notice for the fiscal
year ending September 30, 1996 on November 27, 1996 (for
AIM Blue Chip Fund).
(c) - Opinion of Ballard Spahr Andrews & Ingersoll was filed as
an Exhibit to Registrant's Rule 24f-2 Notice for the fiscal
year ending October 31, 1996 on December 20, 1996.
(11) (a) - Consent of KPMG Peat Marwick LLP is filed herewith
electronically.
(b) - Consent of Tait, Weller & Baker is filed herewith
electronically.
(c) - Consent of Price Waterhouse LLP are filed herewith
electronically.
(12) - Schedule of Affiliated Company Transactions for the fiscal
year ended October 31, 1996 for AIM Constellation Fund and
AIM Aggressive Growth Fund was filed herewith
electronically as an Exhibit to Post-Effective Amendment
No. 51 on January 15, 1997, and is hereby incorporated by
reference.
(13) - None.
(14) (a) - Revised Form of Registrant's IRA Documents was filed as an
Exhibit to Post-Effective Amendment No. 42 on August 16,
1993, and is hereby incorporated by reference.
(b) - Revised Form of Registrant's Simplified Employee
Pension - Individual Retirement Accounts Contribution
Agreement was filed as an Exhibit to Post-Effective
Amendment No. 42 on August 16, 1993, and is hereby
incorporated by reference.
</TABLE>
C-9
<PAGE> 254
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(c) - Form of Registrant's Combination Profit Sharing-Money Purchase
Plan and Trust was filed as an Exhibit to Post-Effective
Amendment No. 38 on February 28, 1991, and is hereby
incorporated by reference.
(d) - Revised Form of Registrant's 403(b) Plan was filed
electronically as an Exhibit to Post-Effective Amendment No.
52 on June 9, 1997, and is hereby incorporated by reference.
(15) (a) - (1) Form of Amendment No. 1 to Registrant's Amended and
Restated Master Distribution Plan for the Class B shares of
AIM Constellation Fund is filed herewith electronically.
- (2) Registrant's Amended and Restated Master Distribution
Plan, dated June 30, 1997, for the Class B shares is filed
herewith electronically.
- (3) Amendment No. 1, dated June 11, 1996, to Registrant's
Master Distribution Plan for the Class B shares of AIM
Charter Fund, AIM Weingarten Fund, AIM Blue Chip Fund
and AIM Capital Development Fund, dated June 14, 1995, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 50 on July 24, 1996.
- (4) Registrant's Master Distribution Plan for the Class B
shares of AIM Charter Fund and AIM Weingarten Fund, dated
June 14, 1995, was filed electronically as an Exhibit to
Post- Effective Amendment No. 47 on December 29, 1995.
- (5) Registrant's Third Amended and Restated Master
Distribution Plan, dated August 4, 1997, for the Class A and
Class C shares is filed herewith electronically.
- (6) Registrant's Second Amended and Restated Master
Distribution Plan, dated June 30, 1997, for the Class A
shares is filed herewith electronically.
- (7) Registrant's Amended and Restated Master Distribution
Plan for the Class A shares, effective as of June 15, 1995
(effective as of December 4, 1995, with respect to the AIM
Blue Chip Fund and AIM Capital Development Fund), was filed
electronically as an Exhibit to Post-Effective Amendment No.
49 on May 31, 1996.
- (8) Amendment No. 1, dated December 4, 1995, to the Amended
Master Distribution Plan for the Retail Classes, dated
September 27, 1993, as amended, was filed electronically as
an Exhibit to Post-Effective Amendment No. 49 on May 31, 1996.
- (9) Registrant's Amended Master Distribution Plan for the
Retail Classes, dated September 27, 1993, as amended March 8,
1994 and September 10, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995, and was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (10) Registrant's Amended Master Distribution Plan for the
Retail Classes and AIM Aggressive Growth Fund, dated
September 27, 1993, as amended March 8, 1994, was filed as an
Exhibit to Post-Effective Amendment No. 44 on February 24,
1995.
- (11) Registrant's Master Distribution Plan for the Retail
Classes and AIM Aggressive Growth Fund, dated September 27,
1993, was filed as an Exhibit to Post-Effective Amendment No.
43 on February 28, 1994.
- (12) Registrant's Amended Distribution Plan for AIM Aggressive
Growth Fund, dated August 6, 1993, was filed as an Exhibit to
Post-Effective Amendment No. 43 on February 28, 1994.
- (13) Registrant's Amended Distribution Plans for the Retail
Classes, dated September 5, 1991, were filed as an Exhibit to
Post-Effective Amendment No. 40 on February 26, 1992.
(b) - (1) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 51 on January 15, 1997, as is hereby
incorporated by reference.
</TABLE>
C-10
<PAGE> 255
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
- (2) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 49 on May 31, 1996.
- (3) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (4) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 42 on
August 16, 1993.
- (5) Form of Shareholder Service Agreement to be used in
connection with Registrant's AIM Aggressive Growth Fund's
Distribution Plan was filed as an Exhibit to Post-Effective
Amendment No. 42 on August 16, 1993.
- (6) Form of Dealer Assistance Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 34 on
June 13, 1988.
(c) - (1) Form of Bank Shareholder Service Agreement to be used
in connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 51 on January 15, 1997, and is hereby
incorporated by reference.
- (2) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 49 on May 31, 1996.
- (3) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (4) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 42 on
August 16, 1993.
- (5) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's AIM Aggressive Growth Fund's
Master Distribution Plan was filed as an Exhibit to
Post-Effective Amendment No. 42 on August 16, 1993.
- (6) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 34 on
June 13, 1988.
(d) - (1) Form of Variable Group Annuity Contract holder Service
Agreements to be used in connection with Registrant's Master
Distribution Plan was filed as an Exhibit to Post-Effective
Amendment No. 42 on August 16, 1993, and was filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995, and is hereby incorporated by
reference.
- (2) Form of Variable Group Annuity Contract holder Service
Agreement to be used in connection with Registrant's Master
Distribution Plan was filed as an Exhibit to Post-Effective
Amendment No. 40 on February 26, 1992.
</TABLE>
C-11
<PAGE> 256
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(e) - (1) Form of Agency Pricing Agreement (for Class A shares)
to be used in connection with Registrant's Master
Distribution Plan was filed electronically as an Exhibit to
Post-Effective Amendment No. 51 on January 15, 1997, and is
hereby incorporated by reference.
- (2) Form of Service Agreement for Certain Retirement Plans
(for the Retail Classes) to be used in connection with
Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Registrant's AIM Blue Chip
Fund registration statement on Form N-14 on December 29,
1995, and is hereby incorporated by reference.
- (3) Form of Service Agreement for Certain Retirement Plans
(for the Institutional Classes) to be used in connection with
Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995, and is hereby incorporated by
reference.
- (4) Form of Service Agreement for Certain Retirement Plans
(for the Retail Classes) to be used in connection with
Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995, and is hereby incorporated by
reference.
(f) - (1) Forms of Bank Trust Departments and Brokers of Bank
Trust Departments Agreements to be used in connection with
Registrant's Master Distribution Plan were filed
electronically as an Exhibit to Post-Effective Amendment No.
51 on January 15, 1997, and are hereby incorporated by
reference.
- (2) Forms of Bank Trust Departments and Brokers of Bank Trust
Departments Agreements to be used in connection with
Registrant's Master Distribution Plan were filed
electronically as an Exhibit to Registrant's AIM Blue Chip
Fund registration statement on Form N-14 on December 29,
1995, and are hereby incorporated by reference.
- (3) Forms of Bank Trust Departments and Brokers of Bank Trust
Departments Agreements to be used in connection with
Registrant's Master Distribution Plan were filed
electronically as an Exhibit to Post-Effective Amendment No.
47 on December 29, 1995.
(16) - Schedule of Performance Quotations was filed as an Exhibit
to Post-Effective Amendment No. 35 on September 30, 1988,
and is hereby incorporated by reference.
(18) (a) - Second Amended and Restated Multiple Class Plan (Rule 18f-3)
(effective September 1, 1997) is filed herewith electronically.
(b) - Amended and Restated Multiple Class Plan (Rule 18f-3)
(effective July 1, 1997) is filed herewith electronically.
(c) - Multiple Class Plan (Rule 18f-3) (effective September 27,
1996) was filed as an Exhibit to Post-Effective Amendment
No. 51 on January 15, 1997.
(d) - Amendment No. 1, dated June 11, 1996, to the Multiple Class
Plan (Rule 18f-3), dated December 4, 1995 was filed
electronically as an Exhibit to Post-Effective Amendment
No. 50 on July 24, 1996.
(e) - Amended Multiple Class Plan (Rule 18f-3), as amended
December 4, 1995, was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
(f) - Multiple Class Plan (Rule 18f-3) was filed electronically
as an Exhibit to Post-Effective Amendment No. 46 on June 6,
1995.
(27) - Financial Data Schedule - None.
</TABLE>
C-12
<PAGE> 257
Item 25. Persons Controlled by or under Common Control With Registrant
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities
owned or other basis of control by the person, if any, immediately controlling
it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders
of each class of securities of the Registrant.
<TABLE>
<CAPTION>
Title of Class Number of Record Holders as of October 1, 1997
-------------- ------------------------------------------------
<S> <C> <C> <C>
Retail Class: Class A Class B Class C*
AIM Blue Chip Fund 29,479 21,274 184
AIM Capital Development Fund 36,470 21,373 366
AIM Charter Fund 139,578 68,746 172
AIM Weingarten Fund 272,629 38,751 92
AIM Constellation Fund 750,986 N/A 927
AIM Aggressive Growth Fund 187,727 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of October 1, 1997
-------------- ------------------------
<S> <C>
Institutional Class:
AIM Charter Fund 11
AIM Weingarten Fund 11
AIM Constellation Fund 17
</TABLE>
Item 27. Indemnification
State the general effect of any contract, arrangement or statute under
which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified in any manner against any
liability which may be incurred in such capacity, other than insurance
provided by any director, officer, affiliated person or underwriter
for their own protection.
Under the terms of the Maryland General Corporation Law and the
Registrant's Charter and By-Laws, the Registrant may indemnify any
person who was or is a director, officer or employee of the Registrant
to the maximum extent permitted by the Maryland General Corporation
Law; provided, however, that any such indemnification (unless ordered
by a court) shall be made by the Registrant only as authorized in the
specific case upon a determination that indemnification of such person
is proper in the circumstances. Such determination shall be made (i)
by the Board of Directors, by a majority vote of a quorum which
consists of directors who are neither "interested persons" of the
Registrant as defined in Section 2(a)(19) of the 1940 Act, nor parties
to the proceeding, or (ii) if the required quorum is not
C-13
<PAGE> 258
obtainable or, if a quorum of such directors so directs, by
independent legal counsel in a written opinion. No indemnification
will be provided by the Registrant to any director or officer of the
Registrant for any liability to the Registrant or shareholders to
which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the 1940 Act and is, therefore
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1940 Act and will be
governed by the final adjudication of such issue. Insurance coverage
is provided under a joint Mutual Fund & Investment Advisory
Professional and Directors & Officers Liability Policy, issued by ICI
Mutual Insurance Company, with a $25,000,000 limit of liability.
Item 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant,
and each director, officer or partner of any such investment advisor,
is or has been, at any time during the past two fiscal years, engaged
for his own account or in the capacity of director, officer, employee,
partner, or trustee.
The only employment of a substantial nature of the Advisor's directors
and officers is with the Advisor and its affiliated companies.
Reference is also made to the caption "Management--Investment Advisor"
of the Prospectus which comprises Part A of the Registration
Statement, and to the caption "Management" of the Statement of
Additional Information which comprises Part B of the Registration
Statement, and to Item 29(b) of this Part C.
Item 29. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal
underwriter of its Retail Classes, also acts as a principal
underwriter to the following investment companies:
AIM Advisor Funds, Inc.
AIM Funds Group
AIM International Funds, Inc.
AIM Investment Securities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
Fund Management Company, the Registrant's principal
underwriter of its Institutional Classes, also acts as a
principal underwriter to the following investment companies:
C-14
<PAGE> 259
AIM Investment Securities Funds
(Limited Maturity Treasury Portfolio-Institutional Shares)
Short-Term Investments Co.
Short-Term Investments Trust
Tax-Free Investments Co.
(b) The following table sets forth information with respect to
each director, officer or partner of A I M Distributors,
Inc.:
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
- ----------------- ------------------------- --------------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman of the Board
of Directors
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Director
W. Gary Littlepage Senior Vice President & Director None
James L. Salners Senior Vice President & Director None
John Caldwell Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
Marilyn M. Miller First Vice President None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
John J. Arthur Vice President & Treasurer Senior Vice President &
Treasurer
Mary K. Coleman Vice President None
Melville B. Cox Vice President & Chief Compliance Vice President
Officer
Charles R. Dewey Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
William H. Kleh Vice President None
Carol F. Relihan Vice President Senior Vice President &
Secretary
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
B.J. Thompson Vice President None
Robert D. Van Sant, Jr. Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
Luke Beausoleil Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
Kathleen M. Douglas Assistant Vice President None
Terri L. Fiedler Assistant Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Mary E. Gentempo Assistant Vice President None
</TABLE>
- -----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-15
<PAGE> 260
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
- ----------------- ------------------------- --------------------
<S> <C> <C>
Jeffrey L. Horne Assistant Vice President None
Melissa E. Hudson Assistant Vice President None
Jodie L. Johnson Assistant Vice President None
Kim T. Lankford Assistant Vice President None
Wayne W. LaPlante Assistant Vice President None
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Terri L. Ransdell Assistant Vice President None
Patricia M. Shyman Assistant Vice President None
Christopher T. Simutis Assistant Vice President None
Gary K. Wendler Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
</TABLE>
The following table sets forth information with respect to each
director, officer or partner of Fund Management Company:
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
- ----------------- ------------------------- --------------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Chairman of the Board
Directors of Directors
J. Abbott Sprague President & Director None
Robert H. Graham Senior Vice President & Director President & Director
William H. Kleh Director None
Mark D. Santero Senior Vice President None
John J. Arthur Vice President & Treasurer Senior Vice President
& Treasurer
Carol F. Relihan Vice President & General Senior Vice President &
Counsel Secretary
Jesse H. Cole Vice President None
Melville B. Cox Vice President & Chief Compliance Vice President
Officer
Stephen I. Winer Vice President, Assistant Assistant Secretary
General Counsel & Assistant
Secretary
Kathleen J. Pflueger Secretary Assistant Secretary
Nancy A. Beck Assistant Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Jeffrey L. Horne Assistant Vice President None
Dana R. Sutton Assistant Vice President & Vice President &
Assistant Treasurer Assistant Treasurer
Robert W. Morris, Jr. Assistant Vice President None
</TABLE>
- -----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-16
<PAGE> 261
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
- ----------------- ------------------------- --------------------
<S> <C> <C>
Ann M. Srubar Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Ofelia M. Mayo Assistant General Counsel Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
</TABLE>
- ------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR
270.31a-1 to 31a-3) promulgated thereunder, furnish the name and
address of each person maintaining physical possession of each such
account, book or other document.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, will maintain physical possession of each such account,
book or other document of the Registrant at its principal executive
offices, except for those maintained by the Registrant's Custodian,
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, and the Registrant's Transfer Agent and Dividend
Paying Agent, A I M Institutional Fund Services, Inc. for the
institutional classes and A I M Fund Services, Inc., P. O. Box 4739,
Houston, Texas 77210-4739, for the retail classes.
Item 31. Management Services
Furnish a summary of the substantive provisions of any management
related service contract not discussed in Part I of this Form (because
the contract was not believed to be material to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars
paid and by whom, for the last three fiscal years.
None.
Item 32. Undertakings
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered, a copy of the applicable Fund's latest
annual report to shareholders, upon request and without charge.
C-17
<PAGE> 262
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 9th day of
October, 1997.
REGISTRANT: AIM EQUITY FUNDS, INC.
By: /s/ Robert H. Graham
---------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/Charles T.Bauer Chairman & Director October 9, 1997
- ----------------------------
(Charles T. Bauer)
/s/Robert H. Graham Director & President October 9, 1997
- ---------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/Bruce L. Crockett Director October 9, 1997
- ----------------------------
(Bruce L. Crockett)
/s/Owen Daly II Director October 9, 1997
- ----------------------------
(Owen Daly II)
/s/Jack Fields Director October 9, 1997
- ----------------------------
(Jack Fields)
/s/Carl Frischling Director October 9, 1997
- ----------------------------
(Carl Frischling)
/s/John F. Kroeger Director October 9, 1997
- ----------------------------
(John F. Kroeger)
/s/Lewis F. Pennock Director October 9, 1997
- ----------------------------
(Lewis F. Pennock)
/s/Ian W. Robinson Director October 9, 1997
- ----------------------------
(Ian W. Robinson)
/s/Louis S. Sklar Director October 9, 1997
- ----------------------------
(Louis S. Sklar)
Senior Vice President &
/s/John J. Arthur Treasurer (Principal Financial October 9, 1997
- ---------------------------- and Accounting Officer)
(John J. Arthur)
</TABLE>
<PAGE> 263
INDEX TO EXHIBITS
AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
1(a) Articles Supplementary, as filed with the State of Maryland on October 1, 1997
1(b) Articles Supplementary, as filed with the State of Maryland on June 24, 1997
5(a)(1) Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors,
Inc.
5(b)(1) Master Sub-Advisory Agreement, dated February 28, 1997, between Registrant, A I M Advisors, Inc. and
A I M Capital Management, Inc.
6(a)(1) Form of Amendment No. 1 to the Master Distribution Agreement, dated February 28, 1997, between
Registrant (on behalf of the Class B shares of AIM Constellation Fund) and A I M Distributors, Inc.
6(a)(2) Master Distribution Agreement, dated February 28, 1997, between Registrant (on behalf of Registrant's
Class B shares) and A I M Distributors, Inc.
6(a)(3) Amendment No. 1, dated June 11, 1996, to Master Distribution Agreement, dated June 14, 1995, between
Registrant (on behalf of the portfolio's Class B shares) and A I M Distributors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment No. 50 on July 24, 1996
6(a)(5) Master Distribution Agreement, dated August 4, 1997, between Registrant (on behalf of the portfolio's
Class A and Class C shares) and A I M Distributors, Inc.
6(a)(6) Master Distribution Agreement, dated February 28, 1997, between Registrant (on behalf of Registrant's
Class A shares) and A I M Distributors, Inc.
6(a)(11) Master Distribution Agreement, dated February 28, 1997, between Registrant and Fund Management Company
9(a)(1) Amendment No. 1, dated August 4, 1997, to the Transfer Agency and Service Agreement dated November 1,
1994, between Registrant and A I M Fund Services, Inc.
9(a)(3) Amendment No. 2, dated July 1, 1997, to the Transfer Agency and Service Agreement dated July 1, 1995,
between Registrant and A I M Institutional Fund Services, Inc.
9(a)(4) Amendment No. 1, dated July 1, 1996, to the Transfer Agency and Service Agreement dated July 1, 1995,
between Registrant and A I M Institutional Fund Services, Inc.
9(b)(1) Amendment No. 3, dated February 1, 1997, to the Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.)
9(d)(1) Master Administrative Services Agreement, dated February 28, 1997, between Registrant and A I M
Advisors, Inc.
</TABLE>
<PAGE> 264
<TABLE>
<S> <C>
10(a) Opinion of Ballard Spahr Andrews & Ingersoll
11(a) Consent of KPMG Peat Marwick LLP
11(b) Consent of Tait, Weller & Baker
11(c) Consent of Price Waterhouse LLP
15(a)(1) Form of Amendment No. 1 to Registrant's Amended and Restated Master Distribution Plan for the Class B
shares of AIM Constellation Fund
15(a)(2) Registrant's Amended and Restated Master Distribution Plan, dated June 30, 1997, for the Class B shares
15(a)(5) Registrant's Third Amended and Restated Master Distribution Plan, dated August 4, 1997, for the Class A
and Class C shares
15(a)(6) Registrant's Second Amended and Restated Master Distribution Plan, dated June 30, 1997, for the Class A
shares
18(a) Second Amended and Restated Multiple Class Plan (Rule 18f-3) (effective September 1, 1997)
18(b) Amended and Restated Multiple Class Plan (Rule 18f-3) (effective July 1, 1997)
</TABLE>
<PAGE> 1
EXHIBIT 1(a)
AIM EQUITY FUNDS, INC.
ARTICLES SUPPLEMENTARY
AIM EQUITY FUNDS, INC., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to Section 2-105(c) of the Maryland General
Corporation Law, the Board of Directors of the Corporation hereby increases the
aggregate number of shares of common stock which the Corporation shall have the
authority to issue from 12,500,000,000 to 13,500,000,000 shares with a par
value of $.001 each.
SECOND: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue 12,500,000,000 shares
with a par value of $.001 each. Of these shares:
(a) 750,000,000 shares have been classified as AIM
Charter Fund - Class A Shares, 750,000,000 shares have been classified as AIM
Weingarten Fund - Class A Shares, 750,000,000 shares have been classified as
AIM Constellation Fund - Class A Shares, 750,000,000 shares have been
classified as AIM Aggressive Growth Fund - Class A Shares, 750,000,000 shares
have been classified as AIM Blue Chip Fund - Class A Shares, and 750,000,000
shares have been classified as AIM Capital Development Fund - Class A Shares;
<PAGE> 2
(b) 750,000,000 shares have been classified as AIM
Charter Fund - Class B Shares, 750,000,000 shares have been classified as AIM
Weingarten Fund - Class B Shares, 750,000,000 shares have been classified as
AIM Blue Chip Fund - Class B Shares and 750,000,000 have been classified as AIM
Capital Development Fund - Class B Shares;
(c) 200,000,000 shares have been classified as AIM
Charter Fund - Institutional Class Shares, 200,000,000 shares have been
classified as AIM Weingarten Fund - Institutional Class Shares and 200,000,000
shares have been classified as AIM Constellation Fund - Institutional Class
Shares; and
(d) 400,000,000 shares were unclassified.
THIRD: All of the shares of common stock of the Corporation, both
classified and unclassified, collectively had an aggregate par value of
$12,500,000.
FOURTH: As of the filing of these Article Supplementary, the
Corporation shall have authority to issue 13,500,000,000 shares with a par
value of $.001 each. Of the 13,500,000,000 shares:
(a) 750,000,000 shares are classified as AIM Charter Fund
- - Class A Shares, 750,000,000 shares are classified as AIM Weingarten Fund -
Class A Shares, 1,000,000,000 shares are classified as AIM Constellation Fund
- - Class A Shares, 750,000,000 shares are classified as AIM Aggressive Growth
Fund - Class A Shares, 750,000,000 shares are classified as AIM Blue Chip Fund
- - Class A Shares, and 750,000,000 shares are classified as AIM Capital
2
<PAGE> 3
Development Fund - Class A Shares (which classified shares shall be referred to
herein collectively as "Class A Shares," and holders of such Class A Shares
shall be referred to herein as "Class A Shareholders");
(b) 750,000,000 shares are classified as AIM Charter Fund
- - Class B Shares, 750,000,000 shares are classified as AIM Weingarten Fund -
Class B Shares, 750,000,000 shares are classified as AIM Blue Chip Fund -
Class B Shares, 750,000,000 are classified as AIM Capital Development Fund -
Class B Shares and 1,000,000,000 shares are classified as AIM Constellation
Fund - Class B Shares (which classified shares shall be referred to herein
collectively as "Class B Shares," and holders of such Class B Shares shall be
referred to herein as "Class B Shareholders");
(c) 750,000,000 shares are classified as AIM Charter Fund
- - Class C Shares, 750,000,000 shares are classified as AIM Weingarten Fund -
Class C Shares, 750,000,000 shares are classified as AIM Constellation Fund -
Class C Shares, 750,000,000 shares are classified as AIM Blue Chip Fund - Class
C Shares and 750,000,000 shares are classified as AIM Capital Development Fund
- - Class C Shares (which classified shares shall be referred to herein
collectively as "Class C Shares," and holders of such Class C Shares shall be
referred to herein as "Class C Shareholders");
(d) 200,000,000 shares are classified as AIM Charter Fund
- - Institutional Class Shares, 200,000,000 shares are classified as AIM
Weingarten Fund - Institutional Class Shares and 200,000,000 shares are
classified as AIM Constellation Fund - Institutional Class Shares (which
classified shares shall be referred to herein collectively as "Institutional
Class
3
<PAGE> 4
Shares," and holders of such Institutional Class Shares shall be referred to
herein as "Institutional Class Shareholders"); and
(e) 400,000,000 shares are unclassified.
FIFTH: Unissued shares of common stock (both classified and
unclassified) may be classified and reclassified by the Board of Directors.
SIXTH: All the shares of common stock of the Corporation, both
classified and unclassified, collectively have an aggregate par value of
$13,500,000.
SEVENTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class A Shares as set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally, remain unchanged.
EIGHTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class B Shares as set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter and in the provisions of the
Charter relating to stock of the Corporation generally and in ARTICLE SIXTH of
the Corporation's Articles Supplementary as filed with the State Department of
Assessments and Taxation of Maryland on June 5, 1995, remain unchanged.
4
<PAGE> 5
NINTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class C Shares are set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally.
TENTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Institutional Shares as set forth in ARTICLE
FIFTH, paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally, remain unchanged.
ELEVENTH: The Board of Directors of the Corporation has authorized
the additional shares and classified the AIM Constellation Fund - Class A
Shares, AIM Charter Fund - Class C Shares, the AIM Weingarten Fund - Class C
Shares, the AIM Constellation Fund - Class C Shares, the AIM Blue Chip Fund -
Class C Shares and the AIM Capital Development Fund - Class C Shares, under
authority contained in the Charter of the Corporation.
The undersigned President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
5
<PAGE> 6
IN WITNESS WHEREOF, AIM EQUITY FUNDS, INC. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on September 29, 1997.
AIM EQUITY FUNDS, INC.
Witness:
/s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
- --------------------------- --------------------------------
Assistant Secretary President
6
<PAGE> 1
EXHIBIT 1(b)
AIM EQUITY FUNDS, INC.
ARTICLES SUPPLEMENTARY
AIM EQUITY FUNDS, INC., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to Section 2-105(c) of the Maryland General
Corporation Law, the Board of Directors of the Corporation hereby increases the
aggregate number of shares of common stock which the Corporation shall have the
authority to issue from 8,500,000,000 to 12,500,000,000 shares with a par value
of $.001 each.
SECOND: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue 8,500,000,000 shares with
a par value of $.001 each. Of these shares:
(a) 750,000,000 shares have been classified as AIM Charter
Fund - Class A Shares, 750,000,000 shares have been classified as AIM
Weingarten Fund - Class A Shares, 750,000,000 shares have been classified as
AIM Constellation Fund - Class A Shares, 750,000,000 shares have been
classified as AIM Aggressive Growth Fund - Class A Shares, 750,000,000 shares
have been classified as AIM Blue Chip Fund - Class A Shares, and 750,000,000
shares have been classified as AIM Capital Development Fund - Class A Shares;
<PAGE> 2
(b) 750,000,000 shares have classified as AIM Charter Fund -
Class B Shares, 750,000,000 shares have been classified as AIM Weingarten Fund
- - Class B Shares, 750,000,000 shares have been classified as AIM Blue Chip Fund
- - Class B Shares and 750,000,000 have been classified as AIM Capital
Development Fund - Class B Shares;
(c) 200,000,000 shares have been classified as AIM Charter
Fund Institutional Class Shares, 200,000,000 shares have been classified as AIM
Weingarten Fund Institutional Class Shares and 200,000,000 shares have been
classified as AIM Constellation Fund - Institutional Class Shares; and
(d) 400,000,000 shares were unclassified.
THIRD: All of the shares of common stock of the Corporation, both
classified and unclassified, collectively had an aggregate par value of
$8,500,000.
FOURTH: As of the filing of these Article Supplementary, the
Corporation shall have authority to issue 12,500,000,000 shares with a par
value of $.001 each. Of the 12,500,000,000 shares:
(a) 750,000,000 shares are classified as AIM Charter Fund -
Class A Shares, 750,000,000 shares are classified as AIM Weingarten Fund -
Class A Shares, 1,000,000,000 shares are classified as AIM Constellation Fund -
Class A Shares, 750,000,000 shares are classified as AIM Aggressive Growth Fund
- - Class A Shares, 750,000,000 shares are classified as AIM Blue Chip Fund -
Class A Shares, and 750,000,000 shares are classified as AIM Capital
<PAGE> 3
Development Fund - Class A Shares (which classified shares shall be referred to
herein collectively as "Class A Shares," and holders of such Class A Shares
shall be referred to herein as "Class A Shareholders");
(b) 750,000,000 shares are classified as AIM Charter Fund -
Class B Shares, 750,000,000 shares are classified as AIM Weingarten Fund -
Class B Shares, 750,000,000 shares are classified as AIM Blue Chip Fund - Class
B Shares and 750,000,000 are classified as AIM Capital Development Fund - Class
B Shares (which classified shares shall be referred to herein collectively as
"Class B Shares," and holders of such Class B Shares shall be referred to
herein as "Class B Shareholders");
(c) 750,000,000 shares are classified as AIM Charter Fund -
Class C Shares, 750,000,000 shares are classified as AIM Weingarten Fund -
Class C Shares, 750,000,000 shares are classified as AIM Constellation Fund -
Class C Shares, 750,000,000 shares are classified as AIM Blue Chip Fund - Class
C Shares and 750,000,000 shares are classified as AIM Capital Development Fund
- - Class C Shares (which classified shares shall be referred to herein
collectively as "Class C Shares," and holders of such Class C Shares shall be
referred to herein as "Class C Shareholders");
(d) 200,000,000 shares are classified as AIM Charter Fund -
Institutional Class Shares, 200,000,000 shares are classified as AIM Weingarten
Fund - Institutional Class Shares and 200,000,000 shares are classified as AIM
Constellation Fund - Institutional Class Shares (which classified shares shall
be referred to herein collectively as "Institutional Class
<PAGE> 4
Shares," and holders of such Institutional Class Shares shall be referred to
herein as "Institutional Class Shareholders"); and
(e) 400,000,000 shares are unclassified.
FIFTH: Unissued shares of common stock (both classified and
unclassified) may be classified and reclassified by the Board of Directors.
SIXTH: All the shares of common stock of the Corporation, both
classified and unclassified, collectively have an aggregate par value of
$12,500,000.
SEVENTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class A Shares as set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally, remain unchanged.
EIGHTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class B Shares as set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter and in the provisions of the Charter
relating to stock of the Corporation generally and in ARTICLE SIXTH of the
Corporation's Articles Supplementary as filed with the State Department of
Assessments and Taxation of Maryland on June 5, 1995, remain unchanged.
<PAGE> 5
NINTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class C Shares are set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally.
TENTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Institutional Shares as set forth in ARTICLE
FIFTH, paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally, remain unchanged.
ELEVENTH: The Board of Directors of the Corporation has authorized the
additional shares and classified the AIM Constellation Fund - Class A Shares,
AIM Charter Fund - Class C Shares, the AIM Weingarten Fund - Class C Shares,
the AIM Constellation Fund - Class C Shares, the AIM Blue Chip Fund - Class C
Shares and the AIM Capital Development Fund Class C Shares, under authority
contained in the Charter of the Corporation.
The undersigned President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
<PAGE> 6
IN WITNESS WHEREOF, AIM EQUITY FUNDS, INC. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President
and witnessed by its Assistant Secretary on June 12, 1997.
AIM EQUITY FUNDS, INC.
Witness:
/s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------------ --------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT 5(a)(1)
AIM EQUITY FUNDS, INC.
MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997, by and between
AIM Equity Funds, Inc., a Maryland corporation (the "Company"), with respect to
its series of shares shown on the Appendix A attached hereto, as the same may
be amended from time to time, and A I M Advisors, Inc., a Delaware corporation
(the "Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), as an investment advisor and engages
in the business of acting as an investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of
the Company to classify or reclassify authorized but unissued shares of the
Company, and as of the date of this Agreement, the Company's Board of Directors
has authorized the issuance of six series of shares representing interests in
six investment portfolios (such portfolios and any other portfolios hereafter
added to the Company being referred to individually herein as a "Fund,"
collectively as the "Funds"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement
to provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor
for the Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Company's Board of Directors. The Advisor shall
give the Company and the Funds the benefit of its best judgment, efforts and
facilities in rendering its services as investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy
generally or the Funds, and whether concerning the individual issuers
whose securities are included in the assets of the Funds or the
activities in which such issuers
<PAGE> 2
engage, or with respect to securities which the Advisor considers
desirable for inclusion in the Funds' assets;
(c) determine which issuers and securities shall be
represented in the Funds' investment portfolios and regularly report
thereon to the Company's Board of Directors; and
(d) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Company's Board of Directors;
and take, on behalf of the Company and the Funds, all actions which appear to
the Company and the Funds necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including but not limited to
the placing of orders for the purchase and sale of securities for the Funds.
3. Delegation of Responsibilities. Subject to the approval of the
Board of Directors and the shareholders of the Funds, the Advisor may delegate
to a sub-advisor certain of its duties enumerated in Section 2 hereof, provided
that the Advisor shall continue to supervise the performance of any such
sub-advisor.
4. Control by Board of Directors. Any investment program undertaken
by the Advisor pursuant to this Agreement, as well as any other activities
undertaken by the Advisor on behalf of the Funds, shall at all times be subject
to any directives of the Board of Directors of the Company.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the
Advisers Act and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the
Company, as the same may be amended from time to time under the
Securities Act of 1933 and the 1940 Act;
(c) the provisions of the corporate charter of the Company,
as the same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same
may be amended from time to time; and
(e) any other applicable provisions of state, federal or
foreign law.
6. Broker-Dealer Relationships. The Advisor is responsible for
decisions to buy and sell securities for the Funds, broker-dealer selection,
and negotiation of brokerage commission rates. The Advisor's primary
consideration in effecting a security transaction will be to obtain execution
at the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Advisor will take the following into consideration:
the best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in executing the
order; and the value of the expected contribution of the broker-dealer to the
investment performance of the Funds on a continuing basis. Accordingly, the
price to the Funds in any transaction may be less favorable than that available
from another broker-dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered. Subject to such policies
as the Board of
2
<PAGE> 3
Directors may from time to time determine, the Advisor shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Funds to pay a broker or
dealer that provides brokerage and research services to the Advisor an amount
of commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Advisor's overall responsibilities with
respect to a particular Fund, other Funds of the Company, and to other clients
of the Advisor as to which the Advisor exercises investment discretion. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Funds to such brokers and dealers who also provide research or statistical
material, or other services to the Funds, to the Advisor, or to any
sub-advisor. Such allocation shall be in such amounts and proportions as the
Advisor shall determine and the Advisor will report on said allocations
regularly to the Board of Directors of the Company indicating the brokers to
whom such allocations have been made and the basis therefor. In making
decisions regarding broker-dealer relationships, the Advisor may take into
consideration the recommendations of any sub-advisor appointed to provide
investment research or advisory services in connection with the Funds, and may
take into consideration any research services provided to such sub-advisor by
broker-dealers.
7. Compensation. The Company shall pay the Advisor as compensation
for services rendered to a Fund hereunder an annual fee, payable monthly, based
upon the average daily net assets of such Fund as the same is set forth in
Appendix A attached hereto. Such compensation shall be paid solely from the
assets of such Fund. The average daily net asset value of the Funds shall be
determined in the manner set forth in the corporate charter and registration
statement of the Company, as amended from time to time.
8. Additional Services. Upon the request of the Company's Board of
Directors, the Advisor may perform certain accounting, shareholder servicing or
other administrative services on behalf of the Funds which are not required by
this Agreement. Such services will be performed on behalf of the Funds and the
Advisor may receive from the Funds such reimbursement for costs or reasonable
compensation for such services as may be agreed upon between the Advisor and
the Company's Board of Directors based on a finding by the Board of Directors
that the provision of such services by the Advisor is in the best interests of
the Company and its shareholders. Payment or assumption by the Advisor of any
Fund expense that the Advisor is not otherwise required to pay or assume under
this Agreement shall not relieve the Advisor of any of its obligations to the
Funds nor obligate the Advisor to pay or assume any similar Fund expense on any
subsequent occasions. Such services may include, but are not limited to:
(a) the services of a principal financial officer of the
Company (including applicable office space, facilities and equipment)
whose normal duties consist of maintaining the financial accounts and
books and records of the Company and the Funds, including the review
and calculation of daily net asset value and the preparation of tax
returns; and the services (including applicable office space,
facilities and equipment) of any of the personnel operating under the
direction of such principal financial officer;
(b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts; providing assistance to
shareholders in exchanges among the mutual funds managed or advised by
the Advisor; changing account designations or changing addresses;
assisting in the purchase or redemption of shares; supervising the
operations of the
3
<PAGE> 4
custodian, transfer agent(s) or dividend disbursing agent(s) for the
Funds; or otherwise providing services to shareholders of the Funds;
and
(c) such other administrative services as may be furnished
from time to time by the Advisor to the Company or the Funds at the
request of the Company's Board of Directors.
9. Expenses of the Funds. All of the ordinary business expenses
incurred in the operations of the Funds and the offering of their shares shall
be borne by the Funds unless specifically provided otherwise in this Agreement.
These expenses borne by the Funds include, but are not limited to, brokerage
commissions, taxes, legal, accounting, auditing, or governmental fees, the cost
of preparing share certificates, custodian, transfer and shareholder service
agent costs, expenses of issue, sale, redemption and repurchase of shares,
expenses of registering and qualifying shares for sale, expenses relating to
directors and shareholder meetings, the cost of preparing and distributing
reports and notices to shareholders, the fees and other expenses incurred by
the Company on behalf of the Funds in connection with membership in investment
company organizations and the cost of printing copies of prospectuses and
statements of additional information distributed to the Funds' shareholders.
10. Expense Limitation. If, for any fiscal year of the Company, the
total of all ordinary business expenses of the Funds, including all investment
advisory fees, but excluding brokerage commissions and fees, taxes, interest
and extraordinary expenses, such as litigation costs, would exceed the
applicable expense limitations imposed by state securities regulations in any
state in which the Funds' shares are qualified for sale, as such limitations
may be raised or lowered from time to time, the aggregate of all such
investment advisory fees shall be reduced by the amount of such excess. The
amount of any such reduction to be borne by the Advisor shall be deducted from
the monthly investment advisory fee otherwise payable to the Advisor during
such fiscal year. If required pursuant to such state securities regulations,
the Advisor will, not later than the last day of the first month of the next
succeeding fiscal year, reimburse the Funds for any such annual operating
expenses (after reduction of all investment advisory fees in excess of such
limitation). For the purposes of this paragraph, the term "fiscal year" shall
exclude the portion of the current fiscal year which shall have elapsed prior
to the date hereof and shall include the portion of the then current fiscal
year which shall have elapsed at the date of termination of this Agreement.
The application of expense limitations shall be applied to each Fund of the
Company separately unless the laws or regulations of any state shall require
that the expense limitations be imposed with respect to the Company as a whole.
11. Non-Exclusivity. The services of the Advisor to the Company and
the Funds are not to be deemed to be exclusive, and the Advisor shall be free
to render investment advisory and administrative or other services to others
(including other investment companies) and to engage in other activities. It
is understood and agreed that officers or directors of the Advisor may serve as
officers or directors of the Company, and that officers or directors of the
Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
12. Term and Approval. This Agreement shall become effective with
respect to a Fund if approved by the shareholders of such Fund, and if so
approved, this Agreement shall thereafter continue in force and effect until
February 28, 1999, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually;
4
<PAGE> 5
(a) (i) by the Company's Board of Directors or (ii) by the
vote of "a majority of the outstanding voting securities" of such Fund
(as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the directors
who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of a party to this Agreement (other than as
Company directors), by votes cast in person at a meeting specifically
called for such purpose.
13. Termination. This Agreement may be terminated as to the Company
or as to any one or more of the Funds at any time, without the payment of any
penalty, by vote of the Company's Board of Directors or by vote of a majority
of the outstanding voting securities of the applicable Fund or by the Advisor,
on sixty (60) days' written notice to the other party. The notice provided for
herein may be waived by the party entitled to receipt thereof. This Agreement
shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the 1940 Act.
14. Liability of Advisor and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Advisor or any of its
officers, directors or employees, the Advisor shall not be subject to liability
to the Company or to the Funds or to any shareholder of the Funds for any act
or omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of any
security.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company shall be and that of the Advisor shall be
Eleven Greenway Plaza, Suite 1919, Houston, Texas 77046.
16. Questions of Interpretation. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the Advisers Act shall be
resolved by reference to such term or provision of the 1940 Act or the Advisers
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued pursuant
to said Acts. In addition, where the effect of a requirement of the 1940 Act
or the Advisers Act reflected in any provision of the Agreement is revised by
rule, regulation or order of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
17. License Agreement. The Company shall have the non-exclusive
right to use the name "AIM" to designate any current or future series of shares
only so long as A I M Advisors, Inc. serves as investment manager or advisor to
the Company with respect to such series of shares.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year first
written above.
AIM EQUITY FUNDS, INC.
(a Maryland corporation)
Attest:
/s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
- ----------------------------------- ------------------------------------
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest:
/s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
- ----------------------------------- ------------------------------------
Assistant Secretary President
(SEAL)
6
<PAGE> 7
APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
AIM EQUITY FUNDS, INC.
The Company shall pay the Advisor, out of the assets of a Fund, as
full compensation for all services rendered and all facilities furnished
hereunder, a management fee for such Fund set forth below. Such fee shall be
calculated by applying the following annual rates to the average daily net
assets of such Fund for the calendar year computed in the manner used for the
determination of the net asset value of shares of such Fund.
AIM AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
Over $150 million. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
</TABLE>
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $350 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Over $350 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
</TABLE>
AIM CHARTER FUND
AIM CONSTELLATION FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $30 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Over $30 million to and including $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Over $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
</TABLE>
AIM WEINGARTEN FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $30 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Over $30 million to and including $350 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Over $350 million. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
</TABLE>
7
<PAGE> 1
EXHIBIT 5(b)(1)
AIM EQUITY FUNDS, INC.
(AIM Charter Fund)
(AIM Constellation Fund)
(AIM Weingarten Fund)
MASTER SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 28th day of February, 1997, by and
between A I M Advisors, Inc., a Delaware corporation (the "Advisor") and A I M
Capital Management, Inc., a Texas corporation (the "Sub-Advisor").
RECITALS
WHEREAS, AIM Equity Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end,
diversified management investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940 (the "Advisers Act"), as amended, as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Sub-Advisor is registered under the Advisers Act, as
amended, as an investment advisor and engages in the business of acting as an
investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of the
Company to classify or reclassify authorized but unissued shares of the
Company, and as of the date of this Agreement, the Company's Board of Directors
has authorized the issuance of six series of shares representing interests in
six investment portfolios: AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM
Capital Development Fund, AIM Charter Fund, AIM Constellation Fund and AIM
Weingarten Fund (such series, together with any future series, are collectively
referred to herein as the "Portfolios");
WHEREAS, the Advisor has entered into a Master Investment Advisory
Agreement of even date herewith with the Company (the "Investment Advisory
Agreement"), pursuant to which the Advisor shall act as investment advisor with
respect to the Portfolios; and
WHEREAS, pursuant to Section 3 ("Delegation of Responsibilities") of
the Investment Advisory Agreement, the Advisor wishes to retain the Sub-Advisor
for purposes of rendering advisory services to the Advisor in connection with
the AIM Constellation Fund, AIM Weingarten Fund, and AIM Charter Fund (the
"Funds"), upon the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Advisor. The Advisor hereby appoints the
Sub-Advisor to render investment research and advisory services to the Advisor
with respect to the Funds, under the supervision of the Advisor and subject to
the approval and direction of the Company's Board of
<PAGE> 2
Directors, and the Sub-Advisor hereby accepts such appointment, all subject to
the terms and conditions contained herein.
2. Investment Analysis. The duties of the Sub-Advisor shall include:
(a) obtaining and evaluating pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Funds, and whether concerning the individual issuers whose
securities are included in the Funds or the activities in which such
issuers engage, or with respect to securities which the Sub-Advisor
considers desirable for inclusion in the Funds' investment portfolios;
(b) determining which issuers and securities shall be
represented in the Funds' investment portfolios and regularly reporting
thereon to the Advisor and, at the request of the Advisor, to the
Company's Board of Directors; and
(c) formulating and implementing continuing programs for the
purchases and sales of the securities of such issuers and regularly
reporting thereon to the Advisor and, at the request of the Advisor, to
the Company's Board of Directors.
3. Control by Board of Directors. Any investment program undertaken
by the Sub-Advisor pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Advisor with respect to the Funds, shall at all times be
subject to any directives of the Board of Directors of the Company.
4. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Sub-Advisor shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and the Advisers
Act and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the
Company, as the same may be amended from time to time, under the
Securities Act of 1933 and the 1940 Act;
(c) the provisions of the corporate charter of the Company, as
the same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same
may be amended from time to time; and
(e) any other applicable provisions of state or federal law.
5. Compensation. The Advisor shall pay to the Sub-Advisor, as
compensation for services rendered hereunder to a Fund, an annual fee, payable
monthly, equal to 50% of the fee received by the Advisor from the Company with
respect to such Fund pursuant to the Investment Advisory Agreement.
6. Expenses of the Funds. All of the ordinary business expenses
incurred in the operations of the Funds and the offering of its shares shall be
borne by the Funds unless specifically provided otherwise in this Agreement.
These expenses borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, auditing, or governmental fees, the cost of
preparing share
2
<PAGE> 3
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption and repurchase of shares, expenses of registering
and qualifying shares for sale, expenses relating to directors and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Company on behalf of
the Funds in connection with membership in investment company organizations and
the cost of printing copies of the prospectuses and statements of additional
information distributed to the Funds' shareholders.
7. Non-Exclusivity. The services of the Sub-Advisor to the Advisor
with respect to the Company and the Funds are not deemed to be exclusive, and
the Sub-Advisor shall be free to render investment advisory and administrative
or other services to others (including other investment companies) and to
engage in other activities. It is understood and agreed that officers and
directors of the Sub-Advisor may serve as officers or directors of the Advisor
or of the Company, and that officers or directors of the Advisor or of the
Company may serve as officers or directors of the Sub-Advisor to the extent
permitted by law; and that the officers and directors of the Sub-Advisor are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
8. Term and Approval. This Agreement shall become effective with
respect to a Fund if approved by the shareholders of such Fund, and if so
approved, this Agreement shall thereafter continue in force and effect until
February 28, 1999, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually:
(a)(i) by the Company's Board of Directors or (ii) by the vote
of "a majority of the outstanding voting securities" of such Fund (as
defined under Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of a party to this Agreement (other than as Company
directors), by votes cast in person at a meeting specifically called
for such purpose.
9. Termination. This Agreement may be terminated as to any Fund at
any time, without the payment of any penalty, by vote of the Company's Board of
Directors or by vote of a majority of such Fund's outstanding voting
securities, or by the Advisor, or by the Sub-Advisor on sixty (60) days'
written notice to the other party and to the Company. The notice provided for
herein may be waived by either party. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
10. Liability of Sub-Advisor and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Advisor or any of its
officers, directors or employees, the Sub-Advisor shall not be subject to
liability to the Advisor for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security.
11. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to such address as may be
designated for the receipt of such notice, with a copy to the Company. Until
further notice, it is agreed that the address of the Company, that of
3
<PAGE> 4
the Advisor and that of the Sub-Advisor shall be Eleven Greenway Plaza, Suite
1919, Houston, Texas 77046.
12. Questions of Interpretation. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the Advisers Act shall be
resolved by reference to such term or provision of the 1940 Act or the Advisers
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued pursuant
to said Acts. In addition, where the effect of a requirement of the 1940 Act
or the Advisers Act reflected in any provision of this Agreement is revised by
rule, regulation or order of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective duly authorized officers as of the
day and year first written above.
A I M ADVISORS, INC.
Attest:
/s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
- ---------------------------------- ----------------------------------
Assistant Secretary President
(SEAL)
A I M CAPITAL MANAGEMENT, INC.
Attest:
/s/ OFELIA M. MAYO By: /s/ GARY T. CRUM
- ---------------------------------- ----------------------------------
Assistant Secretary President
(SEAL)
4
<PAGE> 1
EXHIBIT 6(a)(1)
AMENDMENT NO. 1
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated February
28, 1997, by and between AIM Equity Funds, Inc., a Maryland corporation, and
A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"SCHEDULE A
CLASS B SHARES
- --------------
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Weingarten Fund "
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: , 1997
-------------------
AIM EQUITY FUNDS, INC.
Attest: By:
----------------------------- ---------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: By:
----------------------------- ---------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT 6(a)(2)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM EQUITY FUNDS, INC.
(CLASS B SHARES)
AND
A I M DISTRIBUTORS, INC.
THIS AGREEMENT made as of this 28th day of February, 1997, by and
between AIM Equity Funds, Inc., a Maryland corporation (the "Company"), with
respect to each of the Class B shares (the "Shares") of each series of shares
of common stock set forth on Schedule A to this agreement (the "Portfolios"),
and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive
agent for the sale of the Shares to the public directly and through investment
dealers in the United States and throughout the world. If subsequent to the
termination of the Distributor's services to the Company pursuant to this
Agreement, the Company retains the services of another distributor, the
distribution agreement with such distributor shall contain provisions
comparable to Clauses FOURTH and SEVENTH hereof and Exhibit A hereto, and
without limiting the generality of the foregoing, will require such distributor
to maintain and make available to the Distributor records regarding sales,
redemptions and reinvestments of Shares necessary to implement the terms of
Clauses FOURTH, SEVENTH and EIGHTH hereof.
SECOND: The Company shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however:
(A) the Company may issue Shares to any other investment company
or personal holding company, or to the shareholders thereof, in exchange for
all or a majority of the shares or assets of any such company;
(B) the Company may issue Shares at their net asset value in
connection with certain classes of transactions or to certain classes of
persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such class is specified in
the then current prospectus of the applicable Shares; and
(C) the Company shall have the right to specify minimum amounts
for initial and subsequent orders for the purchase of Shares.
1
<PAGE> 2
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Shares and agrees that it will use its best efforts to sell
such Shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on
behalf of the Shares shall, suspend its efforts to effectuate such sales at any
time when, in the opinion of the Distributor or of the Company, no sales should
be made because of market or other economic considerations or abnormal
circumstances of any kind;
(B) the Company may withdraw the offering of the Shares (i) at any
time with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or regulation
of any governmental body having jurisdiction; and
(C) the Distributor, as agent, does not undertake to sell any
specific amount of the Shares.
FOURTH:
(A) The public offering price of the Shares shall be the net asset
value per share of the applicable Shares. Net asset value per share shall be
determined in accordance with the provisions of the then current prospectus and
statement of additional information of the applicable Portfolio. The
Distributor may establish a schedule of contingent deferred sales charges to be
imposed at the time of redemption of the Shares, and such schedule shall be
disclosed in the current prospectus of each Portfolio. Such schedule of
contingent deferred sales charges may reflect variations in or waivers of such
charges on redemptions of Shares, either generally to the public or to any
specified class of shareholders and/or in connection with any specified class
of transactions, in accordance with applicable rules and regulations and
exemptive relief granted by the Securities and Exchange Commission, and as set
forth in the Portfolios' current prospectus(es). The Distributor and the
Company shall apply any then applicable scheduled variation in or waiver of
contingent deferred sales charges uniformly to all shareholders and/or all
transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other
financial institutions through whom Shares are sold, such sales commission as
the Distributor may specify from time to time. Payment of any such sales
commissions shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
pursuant to Rule 12b-1 under the 1940 Act.
(D) The Company shall redeem the Shares from shareholders in
accordance with the terms set forth from time to time in the current prospectus
and statement of additional information of each Portfolio. The price to be
paid to a shareholder to redeem the Shares shall be equal to the net asset
value of the Shares being redeemed ("gross redemption proceeds"), less any
applicable contingent deferred sales charge, calculated pursuant to the then
applicable schedule of contingent deferred sales charges ("net redemption
proceeds"). The Distributor shall be entitled to receive the amount of the
contingent deferred sales charge that has been subtracted from gross redemption
proceeds (the "CDSC"), provided that the Shares being redeemed were (i) issued
by a Portfolio during the term of this Agreement and any predecessor Agreement
between the Company and the Distributor or (ii) issued by a Portfolio during or
after the term of this Agreement or any predecessor
2
<PAGE> 3
Agreement between the Company and the Distributor in one or a series of free
exchanges of Shares for class B shares of another portfolio, which can be
traced to Shares or class B shares of another portfolio initially issued by a
Portfolio or such other portfolio during the term of this Agreement, any
predecessor Agreement or any other distribution agreement with the Distributor
with respect to such other portfolio (the "Distributor's Earned CDSC"). The
Company shall pay or cause the Company's transfer agent to pay the
Distributor's Earned CDSC to the Distributor on the date net redemption
proceeds are payable to the redeeming shareholder.
(E) The Distributor shall maintain adequate books and records to
identify Shares (i) issued by a Portfolio during the term of this Agreement and
any predecessor Agreement between the Company and the Distributor or (ii)
issued by a Portfolio during or after the term of this Agreement or any
predecessor Agreement between the Company and the Distributor in one or a
series of free exchanges of Shares for class B shares of another portfolio,
which can be traced to Shares or class B shares of another portfolio initially
issued by a Portfolio or such other portfolio during the term of this
Agreement, any predecessor Agreement or any other distribution agreement with
the Distributor with respect to such other portfolio and shall calculate the
Distributor's Earned CDSC, if any, with respect to such Shares, upon their
redemption. The Company shall be entitled to rely on Distributor's books,
records and calculations with respect to Distributor's Earned CDSC.
FIFTH: The Distributor shall act as an agent of the Company in
connection with the sale and redemption of Shares. Except with respect to such
sales and redemptions, the Distributor shall act as principal in all matters
relating to the promotion of the sale of Shares and shall enter into all of its
own engagements, agreements and contracts as principal on its own account. The
Distributor shall enter into agreements with investment dealers and financial
institutions selected by the Distributor, authorizing such investment dealers
and financial institutions to offer and sell the Shares to the public upon the
terms and conditions set forth therein, which shall not be inconsistent with
the provisions of this Agreement. Each agreement shall provide that the
investment dealer or financial institution shall act as a principal, and not as
an agent, of the Company.
SIXTH: The Shares shall bear:
(A) the expenses of qualification of Shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor, and of continuing the qualification therein until the Distributor
notifies the Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the
final proof and distributing the prospectuses and statements of additional
information for the Shares (including supplements thereto) relating to public
offerings made by the Company pursuant to such prospectuses (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to existing shareholders of the Shares),
and any other promotional or sales literature used by the Distributor or
furnished by the Distributor to dealers in connection with such public
offerings, and expenses of advertising in connection with such public
offerings.
3
<PAGE> 4
(B) Subject to the limitations, if any, of applicable law
including the NASD Conduct Rules (formerly, the NASD Rules of Fair Practice)
regarding asset-based sales charges, the Company shall pay to the Distributor
as a reimbursement for all or a portion of such expenses, or as reasonable
compensation for distribution of the Shares, an asset-based sales charge in an
amount equal to 0.75% per annum of the average daily net asset value of the
Shares of each Portfolio from time to time (the "Distributor's 12b-1 Share"),
such sales charge to be payable pursuant to the distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). The Distributor's
12b-1 Share shall be a percentage, which shall be recomputed periodically (but
not less than monthly) in accordance with Exhibit A to this Agreement. The
Distributor's 12b-1 Share shall accrue daily and be paid to the Distributor as
soon as practicable after the end of each calendar month within which it
accrues but in any event within 10 business days after the end of each such
calendar month (unless the Distributor shall specify a later date in written
instructions to the Company) provided, however, that any notices and
calculation required by Section EIGHTH: (B) and (C) have been received by the
Company.
(C) The Distributor shall maintain adequate books and records to
permit calculations periodically (but not less than monthly) of, and shall
calculate on a monthly basis, the Distributor's 12b-1 Share to be paid to the
Distributor. The Company shall be entitled to rely on Distributor's books,
records and calculations relating to Distributor's 12b-1 Share.
EIGHTH:
(A) The Distributor may, from time to time, assign, transfer or
pledge ("Transfer") to one or more designees (each an "Assignee"), its rights
to all or a designated portion of (i) the Distributor's 12b-1 Share (but not
the Distributor's duties and obligations pursuant hereto or pursuant to the
Plan), and (ii) the Distributor's Earned CDSC, free and clear of any offsets or
claims the Company may have against the Distributor. Each such Assignee's
ownership interest in a Transfer of a designated portion of a Distributor's
12b-1 Share and a Distributor's Earned CDSC is hereinafter referred to as an
"Assignee's 12b-1 Portion" and an "Assignee's CDSC Portion," respectively. A
Transfer pursuant to this Section EIGHTH: (A) shall not reduce or extinguish
any claim of the Company against the Distributor.
(B) The Distributor shall promptly notify the Company in writing
of each Transfer pursuant to Section EIGHTH: (A) by providing the Company with
the name and address of each such Assignee.
(C) The Distributor may direct the Company to pay directly to an
Assignee such Assignee's 12b-1 Portion and Assignee's CDSC Portion. In such
event, Distributor shall provide the Company with a monthly calculation of (i)
the Distributor's Earned CDSC and Distributor's 12b-1 Share and (ii) each
Assignee's 12b-1 Portion and Assignee's CDSC Portion, if any, for such month
(the "Monthly Calculation"). The Monthly Calculation shall be provided to the
Company by the Distributor promptly after the close of each month or such other
time as agreed to by the Company and the Distributor which allows timely
payment of the Distributor's 12b-1 Share and Distributor's Earned CDSC and/or
the Assignee's 12b-1 Portion and Assignee's CDSC Portion. The Company shall
not be liable for any interest on such payments occasioned by delayed delivery
of the Monthly Calculation by the Distributor. In such event following receipt
from the Distributor of (i) notice of Transfer referred to in Section EIGHTH:
(B) and (ii) each Monthly Calculation, the Company shall make all payments
directly to the Assignee or Assignees in accordance with the information
provided in such notice and Monthly Calculation, on the same terms and
conditions as if such
4
<PAGE> 5
payments were to be paid directly to the Distributor. The Company shall be
entitled to rely on Distributor's notices, and Monthly Calculations in respect
of amounts to be paid pursuant to this Section EIGHTH: (B).
(D) Alternatively, in connection with a Transfer the Distributor
may direct the Company to pay all of such Distributor's 12b-1 Share and
Distributor's Earned CDSC from time to time to a depository or collection agent
designated by any Assignee, which depository or collection agent may be
delegated the duty of dividing such Distributor's 12b-1 Share and Distributor's
Earned CDSC between the Assignee's 12b-1 Portion and Assignee's CDSC Portion
and the balance of the Distributor's 12b-1 Share (such balance, when
distributed to the Distributor by the depository or collection agent, the
"Distributor's 12b-1 Portion") and of the Distributor's Earned CDSC (such
balance, when distributed to the Distributor by the depository or collection
agent, the "Distributor's Earned CDSC Portion"), in which case only the
Distributor's 12b-1 Portion and Distributor's Earned CDSC Portion may be
subject to offsets or claims the Company may have against the Distributor.
(E) The Company shall not amend the Plan to reduce the amount payable
to the Distributor or any Assignee under Section SEVENTH: (B) hereof with
respect to the Shares for any Shares which have been issued prior to the date
of such amendment.
NINTH: The Distributor will accept orders for the purchase of Shares
only to the extent of purchase orders actually received and not in excess of
such orders, and it will not avail itself of any opportunity of making a profit
by expediting or withholding orders.
TENTH:
(A) Pursuant to the Plan and this Agreement, the Distributor, as
agent, shall enter into Shareholder Service Agreements with investment dealers,
financial institutions and certain 401(K) plan service providers (collectively
"Service Providers") selected by the Distributor for the provision of certain
continuing personal services to customers of such Service Providers who have
purchased Shares. Such agreements shall authorize Service Providers to provide
continuing personal shareholder services to their customers upon the terms and
conditions set forth therein, which shall not be inconsistent with the
provisions of this Agreement. Each Shareholder Service Agreement shall provide
that the Service Provider shall act as principal, and not as an agent of the
Company.
(B) Shareholder Service Agreements may provide that the Service
Providers may receive a service fee in the amount of .25% of the average daily
net assets of the Shares held by customers of such Service Providers provided
that such Service Providers furnish continuing personal shareholder services to
their customers in respect of such Shares. The continuing personal services to
be rendered by Service Providers under the Shareholder Service Agreements may
include, but shall not be limited to, some or all of the following:
distributing sales literature; answering routine customer inquiries concerning
the Company; assisting customers in changing dividend elections, options,
account designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of Shares; assisting
in the establishment and maintenance of or establishing and maintaining
customer accounts and records and the processing of purchase and redemption
transactions; performing subaccounting; investing dividends and any capital
gains distributions automatically in the Company's shares; providing periodic
statements showing a customer's account balance and the integration of such
statements with those of other transactions and balances in the customer's
account serviced by the Service Provider; forwarding applicable prospectus,
proxy statements, reports and notices to customers who
5
<PAGE> 6
hold Shares and providing such other information and services as the Company or
the customers may reasonably request.
(C) The Distributor may advance service fees payable to Service
Providers pursuant to the Plan or any other distribution plan adopted by the
Company with respect to Shares of one or more of the Portfolios pursuant to
Rule 12b-1 under the 1940 Act; and thereafter the Distributor may be reimbursed
for such advances through retention of service fee payments during the period
for which the service fees were advanced.
ELEVENTH: The Company and the Distributor shall each comply with all
applicable provisions of the 1940 Act, the Securities Act of 1933, as amended,
and of all other federal and state laws, rules and regulations governing the
issuance and sale of the Shares.
TWELFTH:
(A) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor, the Company shall indemnify the Distributor against any and
all claims, demands, liabilities and expenses which the Distributor may incur
under the Securities Act of 1933, or common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus of the Shares, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company and the Shares against any and all claims, demands,
liabilities and expenses which the Company or the Shares may incur arising out
of or based upon (i) any act or deed of the Distributor or its sales
representatives which has not been authorized by the Company in its prospectus
or in this Agreement and (ii) the Company's reliance on the Distributor's
books, records, calculations and notices in Sections FOURTH: (E), SEVENTH: (C),
EIGHTH: (B), EIGHTH: (C) and EIGHTH: (D).
(B) The Distributor shall indemnify the Company and the Shares
against any and all claims, demands, liabilities and expenses which the Company
or the Shares may incur under the Securities Act of 1933, as amended, or common
law or otherwise, arising out of or based upon any alleged untrue statement of
a material fact contained in any registration statement or prospectus of the
Shares, or any omission to state a material fact therein if such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company in connection therewith by or on behalf of the
Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the transfer agent(s) of the
Shares, or for any failure of any such transfer agent to perform its duties.
THIRTEENTH: Nothing herein contained shall require the Company to
take any action contrary to any provision of its Articles of Incorporation, as
amended, or to any applicable statute or regulation.
FOURTEENTH: This Agreement shall become effective with respect to the
Shares of each Portfolio upon its approval by the Board of Directors of the
Company and by vote of a majority of the Company's directors who are not
interested parties to this Agreement or "interested persons"
6
<PAGE> 7
(as defined in Section 2(a)(19) of the 1940 Act) of any party to this Agreement
cast in person at a meeting called for such purpose, shall continue in force
and effect until February 28, 1999, and from year to year thereafter,
provided, that such continuance is specifically approved with respect to the
Shares of each Portfolio at least annually (a)(i) by the Board of Directors of
the Company or (ii) by the vote of a majority of the outstanding Shares of such
class of such Portfolio, and (b) by vote of a majority of the Company's
directors who are not parties to this Agreement or "interested persons" (as
defined in Section 2(a)(19) of the 1940 Act) of any party to this Agreement
cast in person at a meeting called for such purpose.
FIFTEENTH:
(A) This Agreement may be terminated with respect to the Shares of
any Portfolio, at any time, without the payment of any penalty, by vote of the
Board of Directors of the Company or by vote of a majority of the outstanding
Shares of such Portfolio, or by the Distributor, on sixty (60) days' written
notice to the other party; and
(B) This Agreement shall also automatically terminate in the event
of its assignment, the term "assignment" having the meaning set forth in
Section 2(a)(4) of the 1940 Act; provided, that, subject to the provisions of
the following sentence, if this Agreement is terminated for any reason, the
obligations of the Company and the Distributor pursuant to Sections FOURTH:
(D), FOURTH: (E), SEVENTH: (B), SEVENTH: (C), EIGHTH: (A) through (E) and
TWELFTH: (A) of this Agreement will continue and survive any such termination.
Notwithstanding the foregoing, upon Complete Termination of the Plan (as such
term is defined in Section 8 of the Plan in effect at the date of this
Agreement), the obligations of the Company pursuant to the terms of Sections
SEVENTH: (B), EIGHTH: (A), EIGHTH: (C), EIGHTH: (D) and EIGHTH: (E) (with
respect to payments of Distributor's 12b-1 Share and Assignee's 12b-1 Portion)
of this Agreement shall terminate. A termination of the Plan with respect to
any or all Shares of any or all Portfolios shall not affect the obligations of
the Company pursuant to Sections FOURTH: (D), EIGHTH: (A), EIGHTH: (C), EIGHTH:
(D) and EIGHTH: (E) (with respect to payments of Distributor's Earned CDSC or
Assignee's CDSC Portion) hereof or of the obligations of the Distributor
pursuant to Section FOURTH: (E) or EIGHTH: (B) hereof.
(C) The Transfer of the Distributor's rights to Distributor's
12b-1 Share or Distributor's Earned CDSC shall not cause a termination of this
Agreement or be deemed to be an assignment for purposes of Section FIFTEENTH:
(B) above.
SIXTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, the addresses of both the Company and the
Distributor shall be 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173.
SEVENTEENTH: Notice is hereby given that, as provided by applicable
law, the obligations of or arising out of this Agreement are not binding upon
any of the shareholders of the Company or any Portfolio individually, but are
binding only upon the assets and property of the Company or such Portfolio and
that the shareholders shall be entitled, to the fullest extent permitted by
applicable law, to the same limitation on personal liability as stockholders of
private corporations for profit.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM EQUITY FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
-------------------------------
Name:Robert H. Graham
Title: President
Attest:
/s/ DAVID L. KITE
- ------------------------------------
Name: David L. Kite
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
By: /s/ MICHAEL J. CEMO
-------------------------------
Name: Michael J. Cemo
Title: President
Attest:
/s/ OFELIA M. MAYO
- --------------------------------
Name: OFELIA M. MAYO
Title: ASSISTANT SECRETARY
8
<PAGE> 9
SCHEDULE A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM EQUITY FUNDS, INC.
CLASS B SHARES
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Weingarten Fund
9
<PAGE> 10
EXHIBIT A
The Distributor's 12b-1 Share in respect of each Portfolio
shall be 100 percent until such time as the Distributor shall cease to serve as
exclusive distributor of the Shares of such Portfolio and thereafter shall be a
percentage, recomputed first on the date of any termination of the
Distributor's services as exclusive distributor of Shares of any Portfolio and
thereafter periodically (but not less than monthly), representing the
percentage of Shares of such Portfolio outstanding on each such computation
date allocated to the Distributor in accordance with the following rules:
1. DEFINITIONS. For purposes of this Exhibit A defined
terms used herein shall have the meaning assigned to such terms in the
Distribution Agreement and the following terms shall have the following
meanings:
"Commission Shares" shall mean shares of the
Portfolio or another portfolio the redemption of which would, in the absence of
the application of some standard waiver provision, give rise to the payment of
a CDSC and shall include Commission Shares which due to the expiration of the
CDSC period no longer bear a CDSC.
"Distributor" shall mean the Distributor.
"Other Distributor" shall mean each person appointed
as the exclusive distributor for the Shares of the Portfolio after the
Distributor ceases to serve in that capacity.
2. ALLOCATION RULES. In determining the Distributor's
12b-1 Share in respect of a particular Portfolio:
(a) There shall be allocated to the Distributor
and each Other Distributor all Commission Shares of such Portfolio which were
sold while such Distributor or such Other Distributor, as the case may be, was
the exclusive distributor for the Shares of the Portfolio, determined in
accordance with the transfer records maintained for such Portfolio.
(b) Reinvested Shares: On the date that any
Shares are issued by a Portfolio as a result of the reinvestment of dividends
or other distributions, whether ordinary income, capital gains or
exempt-interest dividend or distributions ("Reinvested Shares"), Reinvested
Shares shall be allocated to the Distributor and each Other Distributor in a
number obtained by multiplying the total number of Reinvested Shares issued on
such date by a fraction, the numerator of which is the total number of all
Shares outstanding in such Fund as of the opening of business on such date and
allocated to the Distributor or Other Distributor as of such date of
determination pursuant
A-1
<PAGE> 11
to these allocation procedures and the denominator is the total number of
Shares outstanding as of the opening of business on such date.
(c) Exchange Shares: There shall be allocated to
the Distributor and each Other Distributor, as the case may be, all Commission
Shares of such Portfolio which were issued during or after the period referred
to in (a) as a consequence of one or more free exchanges of Commission Shares
of the Portfolio or of another portfolio (other than Free Appreciation Shares)
(the "Exchange Shares"), which in accordance with the transfer records
maintained for such Portfolio can be traced to Commission Shares of the
Portfolio or another portfolio initially issued by the Company or such other
portfolio during the time the Distributor or such Other Distributor, as the
case may be, was the exclusive distributor for the Shares of the Portfolio or
such other portfolio.
(d) Free Appreciation Shares: Shares (other than
Exchange Shares) that were acquired by the holders of such Shares in a free
exchange of Shares of any other Portfolio, which represent the appreciated
value of the Shares of the exiting portfolio over the initial purchase price
paid for the Shares being redeemed and exchanged and for which the original
purchase date and the original purchase price are not identified on an on-going
basis, shall be allocated to the Distributor and each Other Distributor ("Free
Appreciation Shares") daily in a number obtained by multiplying the total
number of Free Appreciation Shares issued by the exiting portfolio on such date
by a fraction, the numerator of which is the total number of all Shares
outstanding as of the opening of business on such date allocated to the
Distributor or such Other Distributor as of such date of determination pursuant
to these allocation procedures and the denominator is the total number of
Shares outstanding as of the opening of business on such date.
(e) Redeemed Shares: Shares (other than
Reinvested Shares and Free Appreciation Shares) that are redeemed will be
allocated to the Distributor and each Other Distributor to the extent such
Share was previously allocated to the Distributor or such Other Distributor in
accordance with the rules set forth in 2(a) or (c) above. Reinvested Shares
and Free Appreciation Shares that are redeemed will be allocated to the
Distributor and each Other Distributor daily in an amount equal to the number
of Free Appreciation Shares and Reinvested Shares of such Portfolio being
redeemed on such date, which amount is obtained by multiplying the total number
of Free Appreciation Shares and Reinvested Shares being redeemed by such
Portfolio on such date by a fraction, the numerator of which is the total
number of all Free Appreciation Shares and Reinvested Shares of such Portfolio
outstanding as of the opening of business on such date and the denominator is
the total number of Free Appreciation Shares and Reinvested Shares of such
Portfolio outstanding as of the opening of business on such date.
The Fund shall use its best efforts to assure that the transfer agents
and sub-transfer agents for each Portfolio maintain the data necessary to
implement the foregoing rules. If, notwithstanding
A-2
<PAGE> 12
the foregoing, the transfer agents or sub-transfer agents for such Portfolio
are unable to maintain the data necessary to implement the foregoing rules as
written, and if the Distributor shall cease to serve as exclusive distributor
of the Shares of the Portfolio, the Distributor and the Portfolio agree to
negotiate in good faith with each other, with the transfer agents and
sub-transfer agents for such Portfolio and with any third party that has
obtained an interest in the Distributor's 12b-1 Share in respect of such
Portfolio with a view to arriving at mutually satisfactory modifications to the
foregoing rules designed to accomplish substantially identical results on the
basis of data which can be made available.
A-3
<PAGE> 1
EXHIBIT 6(a)(3)
AMENDMENT NO. 1
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated June 14,
1995, by and between AIM Equity Funds, Inc., a Maryland corporation, and A I M
Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"SCHEDULE A
CLASS B SHARES
- --------------
AIM Charter Fund
AIM Weingarten Fund
AIM Blue Chip Fund
AIM Capital Development Fund"
Exhibit A to the Agreement is hereby deleted in its entirety and
replaced with the Exhibit A attached hereto.
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: June 11, 1996
AIM EQUITY FUNDS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------- -------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ MICHAEL J. CEMO
------------------------- -------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT 6(a)(5)
MASTER DISTRIBUTION AGREEMENT
between
AIM EQUITY FUNDS, INC.
(CLASS A SHARES AND CLASS C SHARES)
and
A I M DISTRIBUTORS, INC.
THIS AGREEMENT is made this 4th day of August, 1997, by and between AIM
EQUITY FUNDS, INC., a Maryland corporation (the "Company"), and A I M
DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive
agent for the sale of shares set forth in Appendix A attached hereto
(collectively, the "Funds" and each separately a "Fund"), and any applicable
classes thereof, to the public directly and through investment dealers and
financial institutions in the United States and throughout the world in
accordance with the terms of the Company's current prospectus applicable to the
Funds.
SECOND: The Company shall not sell any shares of a Fund except through
the Distributor and under the terms and conditions set forth in paragraph
FOURTH below. Notwithstanding the provisions of the foregoing sentence,
however:
(A) the Company may issue shares of a Fund to any other investment
company or personal holding company, or to the shareholders thereof, in
exchange for all or a majority of the shares or assets of any such company; and
(B) the Company may issue shares of a Fund at their net asset value in
connection with certain classes of transactions or to certain categories of
persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such category is specified
in the then current prospectus of the Funds.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the shares of the Funds and agrees that it will use its best
efforts to sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf of
each Fund shall, suspend its efforts to effectuate such sales at any time when,
in the opinion of the Distributor or of the Company, no sales should be made
because of market or other economic considerations or abnormal circumstances of
any kind; and
(B) the Company may withdraw the offering of the shares of a Fund (i)
at any time with the consent of the Distributor, or (ii) without such consent
when so required by the provisions of any statute or of any order, rule or
regulation of any governmental body having jurisdiction. It is mutually
understood and agreed that the Distributor does not undertake to sell any
specific amount of the
-1-
<PAGE> 2
shares of a Fund. The Company shall have the right to specify minimum amounts
for initial and subsequent orders for the purchase of Fund shares.
FOURTH:
(A) The public offering price of the Class A shares of a Fund (the
"offering price") shall be the net asset value per share plus a sales charge,
if any. Net asset value per share shall be determined in accordance with the
provisions of the then current prospectus and statement of additional
information of the Funds. The sales charge shall be established by the
Distributor, may reflect scheduled variations in, or the elimination of, sales
charges on sales of a Fund's Class A shares either generally to the public, or
to any specified class of investors or in connection with any specified class
of transactions, in accordance with Rule 22d-1 and as set forth in the then
current prospectus and statement of additional information of the Funds. The
Distributor shall apply any scheduled variation in, or elimination of, the
selling commission uniformly to all offerees in the class specified.
The public offering price of the Class C shares shall be the net asset
value per share of the applicable Class C shares. Net asset value per share
shall be determined in accordance with the provisions of the then current
prospectus and statement of additional information of the applicable Fund.
The Distributor may establish a schedule of contingent deferred sales charges
to be imposed at the time of redemption of the Shares, and such schedule shall
be disclosed in the current prospectus of each Fund. Such schedule of
contingent deferred sales charges may reflect variations in or waivers of such
charges on redemptions of Class C shares, either generally to the public or to
any specified class of shareholders and/or in connection with any specified
class of transactions, in accordance with applicable rules and regulations and
exemptive relief granted by the Securities and Exchange Commission, and as set
forth in the Funds' current prospectus(es). The Distributor and the Company
shall apply any then applicable scheduled variation in or waiver of contingent
deferred sales charges uniformly to all shareholders and/or all transactions
belonging to a specified class.
(B) The Funds shall allow directly to investment dealers and other
financial institutions through whom Class A shares of each Fund are sold such
portion of the sales charge as may be payable to them and specified by the
Distributor up to but not exceeding the amount of the total sales charge. The
difference between any commissions so payable and the total sales charges
included in the offering price shall be paid to the Distributor.
The Distributor may pay to investment dealers and other financial
institutions through whom Class C shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales
commissions shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by a Fund to the Distributor or by a Fund or the Distributor to
investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
on behalf of each Fund pursuant to Rule 12b-1 under the 1940 Act.
FIFTH: The Distributor shall act as agent of the Company on behalf of
each Fund in connection with the sale and repurchase of shares of a Fund.
Except with respect to such sales and repurchases, the Distributor shall act as
principal in all matters relating to the promotion or the sale of shares of the
Funds and shall enter into all of its own engagements, agreements and contracts
as principal on its own account. The Distributor shall enter into agreements
with investment dealers
-2-
<PAGE> 3
and financial institutions selected by the Distributor, authorizing such
investment dealers and financial institutions to offer and sell shares of each
Fund to the public upon the terms and conditions set forth therein, which shall
not be inconsistent with the provisions of this Agreement. Each agreement
shall provide that the investment dealer and financial institution shall act as
a principal, and not as an agent, of the Company on behalf of the Funds.
SIXTH: The Funds shall bear:
(A) the expenses of qualification of shares of a Fund for sale in
connection with such public offerings in such states as shall be selected by
the Distributor, and of continuing the qualification therein until the
Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the final
proof and distributing the Funds' prospectuses and statements of additional
information (including supplements thereto) relating to public offerings made
by the Distributor pursuant to this Agreement (which shall not include those
prospectuses and statements of additional information, and supplements thereto,
to be distributed to shareholders of each Fund), and any other promotional or
sales literature used by the Distributor or furnished by the Distributor to
dealers in connection with such public offerings, and expenses of advertising
in connection with such public offerings.
(B) The Distributor may be reimbursed for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by a distribution plan adopted by the Company
on behalf of the Funds pursuant to Rule 12b-1 under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of shares
of each Fund only to the extent of purchase orders actually received and not in
excess of such orders, and it will not avail itself of any opportunity of
making a profit by expediting or withholding orders. It is mutually understood
and agreed that the Company may reject purchase orders where, in the judgment
of the Company, such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Funds, and the Distributor shall
each comply with all applicable provisions of the 1940 Act, the Securities Act
of 1933 and of all other federal and state laws, rules and regulations
governing the issuance and sale of shares of each Fund.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company on behalf of the Funds agrees to indemnify the
Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Funds, or any omission to state a material fact therein, the omission of which
makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or Fund in connection therewith by or on behalf of the
Distributor. The Distributor agrees
-3-
<PAGE> 4
to indemnify the Company and the Funds against any and all claims, demands,
liabilities and expenses which the Company or the Funds may incur arising out
of or based upon any act or deed of the Distributor or its sales
representatives which has not been authorized by the Company or the Funds in
its prospectus or in this Agreement.
(B) The Distributor agrees to indemnify the Company and the Funds
against any and all claims, demands, liabilities and expenses which the Company
or the Funds may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Funds, or any omission to state a material fact therein if such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or the Funds in connection therewith by or on behalf
of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Funds' transfer agent(s),
or for any failure of any such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Articles of Incorporation, or to
any applicable statute or regulation.
TWELFTH: This Agreement shall become effective as of the date hereof,
shall continue in force and effect until February 28, 1999, and shall continue
in force and effect from year to year thereafter, provided, that such
continuance is specifically approved at least annually (a)(i) by the Board of
Directors of the Company or (ii) by the vote of a majority of the Funds'
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
and (b) by vote of a majority of the Company's directors who are not parties to
this Agreement or "interested persons" (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement cast in person at a meeting called for
such purpose.
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Directors of the Company or by vote of
a majority of the outstanding voting securities of each Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be Eleven Greenway Plaza, Suite 100, Houston,
Texas 77046.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM EQUITY FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
-----------------------------------
Name: Robert H. Graham
Title: President
Attest:
/s/ DAVID L. KITE
- -------------------------------
Name: David L. Kite
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
By: /s/ MICHAEL J. CEMO
-----------------------------------
Name: Michael J. Cemo
Title: President
Attest:
/s/ STEPHEN I. WINER
- -------------------------------
Name: Stephen I. Winer
Title: Assistant Secretary
-5-
<PAGE> 6
APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM EQUITY FUNDS, INC.
CLASS A SHARES
AIM Aggressive Growth Fund
Class A Shares
AIM Blue Chip Fund
Class A Shares
AIM Capital Development Fund
Class A Shares
AIM Charter Fund
Class A Shares
AIM Constellation Fund
Class A Shares
AIM Weingarten Fund
Class A Shares
CLASS C SHARES
AIM Blue Chip Fund
Class C Shares
AIM Capital Development Fund
Class C Shares
AIM Charter Fund
Class C Shares
AIM Constellation Fund
Class C Shares
AIM Weingarten Fund
Class C Shares
-6-
<PAGE> 1
EXHIBIT 6(a)(6)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM EQUITY FUNDS, INC.
(CLASS A SHARES)
AND
A I M DISTRIBUTORS, INC.
THIS AGREEMENT is made this 28th day of February, 1997, by and between
AIM EQUITY FUNDS, INC., a Maryland corporation (the "Company"), and A I M
DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive
agent for the sale of shares set forth in Appendix A attached hereto
(collectively, the "Funds" and each separately a "Fund"), and any applicable
classes thereof, to the public directly and through investment dealers and
financial institutions in the United States and throughout the world in
accordance with the terms of the Company's current prospectus applicable to the
Funds.
SECOND: The Company shall not sell any shares of a Fund except through
the Distributor and under the terms and conditions set forth in paragraph
FOURTH below. Notwithstanding the provisions of the foregoing sentence,
however:
(A) the Company may issue shares of a Fund to any other investment
company or personal holding company, or to the shareholders thereof, in
exchange for all or a majority of the shares or assets of any such company; and
(B) the Company may issue shares of a Fund at their net asset value in
connection with certain classes of transactions or to certain categories of
persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such category is specified
in the then current prospectus of the Funds.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the shares of the Funds and agrees that it will use its best
efforts to sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf of
each Fund shall, suspend its efforts to effectuate such sales at any time when,
in the opinion of the Distributor or of the Company, no sales should be made
because of market or other economic considerations or abnormal circumstances of
any kind; and
(B) the Company may withdraw the offering of the shares of a Fund (i) at
any time with the consent of the Distributor, or (ii) without such consent when
so required by the provisions of any statute or of any order, rule or
regulation of any governmental body having jurisdiction. It is mutually
understood and agreed that the Distributor does not undertake to sell any
specific amount of the
-1-
<PAGE> 2
shares of a Fund. The Company shall have the right to specify minimum amounts
for initial and subsequent orders for the purchase of Fund shares.
FOURTH:
(A) The public offering price of shares of a Fund (the "offering
price") shall be the net asset value per share plus a sales charge, if any.
Net asset value per share shall be determined in accordance with the provisions
of the then current prospectus and statement of additional information of the
Funds. The sales charge shall be established by the Distributor, may reflect
scheduled variations in, or the elimination of, sales charges on sales of a
Fund's shares either generally to the public, or to any specified class of
investors or in connection with any specified class of transactions, in
accordance with Rule 22d-1 and as set forth in the then current prospectus and
statement of additional information of the Funds. The Distributor shall apply
any scheduled variation in, or elimination of, the selling commission uniformly
to all offerees in the class specified.
(B) The Funds shall allow directly to investment dealers and other
financial institutions through whom shares of each Fund are sold such portion
of the sales charge as may be payable to them and specified by the Distributor
up to but not exceeding the amount of the total sales charge. The difference
between any commissions so payable and the total sales charges included in the
offering price shall be paid to the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by a Fund to the Distributor or by a Fund or the Distributor to
investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
on behalf of each Fund pursuant to Rule 12b-1 under the 1940 Act.
FIFTH: The Distributor shall act as agent of the Company on behalf of
each Fund in connection with the sale and repurchase of shares of a Fund.
Except with respect to such sales and repurchases, the Distributor shall act as
principal in all matters relating to the promotion of the sale of shares of the
Funds and shall enter into all of its own engagements, agreements and contracts
as principal on its own account. The Distributor shall enter into agreements
with investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and
sell shares of each Fund to the public upon the terms and conditions set forth
therein, which shall not be inconsistent with the provisions of this Agreement.
Each agreement shall provide that the investment dealer and financial
institution shall act as a principal, and not as an agent, of the Company on
behalf of the Funds.
SIXTH: The Funds shall bear:
(A) the expenses of qualification of shares of a Fund for sale in
connection with such public offerings in such states as shall be selected by
the Distributor, and of continuing the qualification therein until the
Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the final
proof and distributing the Funds' prospectuses and statements of additional
information (including supplements thereto)
-2-
<PAGE> 3
relating to public offerings made by the Distributor pursuant to this Agreement
(which shall not include those prospectuses and statements of additional
information, and supplements thereto, to be distributed to shareholders of each
Fund), and any other promotional or sales literature used by the Distributor or
furnished by the Distributor to dealers in connection with such public
offerings, and expenses of advertising in connection with such public
offerings.
(B) The Distributor may be reimbursed for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by a distribution plan adopted by the Company
on behalf of the Funds pursuant to Rule 12b-1 under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of shares
of each Fund only to the extent of purchase orders actually received and not in
excess of such orders, and it will not avail itself of any opportunity of
making a profit by expediting or withholding orders. It is mutually understood
and agreed that the Company may reject purchase orders where, in the judgment
of the Company, such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Funds, and the Distributor shall
each comply with all applicable provisions of the 1940 Act, the Securities Act
of 1933 and of all other federal and state laws, rules and regulations
governing the issuance and sale of shares of each Fund.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company on behalf of the Funds agrees to indemnify the
Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Funds, or any omission to state a material fact therein, the omission of which
makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or Fund in connection therewith by or on behalf of the
Distributor. The Distributor agrees to indemnify the Company and the Funds
against any and all claims, demands, liabilities and expenses which the Company
or the Funds may incur arising out of or based upon any act or deed of the
Distributor or its sales representatives which has not been authorized by the
Company or the Funds in its prospectus or in this Agreement.
(B) The Distributor agrees to indemnify the Company and the Funds
against any and all claims, demands, liabilities and expenses which the Company
or the Funds may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Funds, or any omission to state a material fact therein if such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or the Funds in connection therewith by or on behalf
of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Funds' transfer agent(s),
or for any failure of any such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Articles of Incorporation, or to
any applicable statute or regulation.
-3-
<PAGE> 4
TWELFTH: This Agreement shall become effective as of the date hereof,
shall continue in force and effect until February 28, 1999, and shall continue
in force and effect from year to year thereafter, provided, that such
continuance is specifically approved at least annually (a)(i) by the Board of
Directors of the Company or (ii) by the vote of a majority of the Funds'
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
and (b) by vote of a majority of the Company's directors who are not parties to
this Agreement or "interested persons" (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement cast in person at a meeting called for
such purpose.
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Directors of the Company or by vote of
a majority of the outstanding voting securities of each Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be Eleven Greenway Plaza, Suite 1919,
Houston, Texas 77046.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM EQUITY FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
---------------------------------
Name: Robert H. Graham
Title: President
Attest:
/s/ DAVID L. KITE
- --------------------------------
Name: David L. Kite
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
By: /s/ MICHAEL J. CEMO
---------------------------------
Name: Michael J. Cemo
Title: President
Attest:
/s/ OFELIA M. MAYO
- --------------------------------
Name: OFELIA M. MAYO
Title: ASSISTANT SECRETARY
-5-
<PAGE> 6
APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM EQUITY FUNDS, INC.
CLASS A SHARES
AIM Aggressive Growth Fund
Class A Shares
AIM Blue Chip Fund
Class A Shares
AIM Capital Development Fund
Class A Shares
AIM Charter Fund
Class A Shares
AIM Constellation Fund
Class A Shares
AIM Weingarten Fund
Class A Shares
-6-
<PAGE> 1
EXHIBIT 6(a)(11)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM EQUITY FUNDS, INC.
(INSTITUTIONAL CLASSES)
AND
FUND MANAGEMENT COMPANY
THIS AGREEMENT is made this 28th day of February, 1997, by and between
AIM EQUITY FUNDS, INC., a Maryland corporation (hereinafter referred to as the
"Company"), and FUND MANAGEMENT COMPANY, a Texas corporation, (hereinafter
referred to as the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive
agent for the sale of the shares set forth in Appendix A attached hereto (the
"Shares") of the Company to the public directly and through investment dealers
and financial institutions in the United States and throughout the world in
accordance with the terms of the Company's current prospectus applicable to the
Shares.
SECOND: The Company shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however,
(A) the Company may issue Shares of one or more classes of its shares
of common stock to any other investment company or personal holding company, or
to the shareholders thereof, in exchange for all or a majority of the shares or
assets of any such company; and
(B) the Company may issue Shares at their net asset value in
connection with certain categories of transactions or to certain categories of
persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such category is specified
in the then current prospectuses of the Company.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Shares and agrees that it will use its best efforts to sell
such Shares; provided, however, that:
(A) the Distributor may, and when requested by the Company shall,
suspend its efforts to effectuate such sales at any time when, in the opinion
of the Distributor or of the Company, no sales should be made because of market
or other economic considerations or abnormal circumstance of any kind; and
(B) the Company may withdraw the offering of the Shares (i) at any
time with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or regulation
of any governmental body having jurisdiction. It is mutually understood and
agreed that the Distributor does not undertake to sell any specific amount of
the
-1-
<PAGE> 2
Shares. The Company shall have the right to specify minimum amounts for
initial and subsequent orders for the purchase of Shares.
FOURTH:
(A) The public offering price of Shares of the Company (the "offering
price") shall be the net asset value per Share. Net asset value per Share
shall be determined in accordance with the provisions of the then current
Shares' prospectus and statement of additional information.
(B) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers and financial institutions where such payments are made
under a distribution plan adopted by the Company, on behalf of the applicable
Shares, pursuant to Rule 12b-1 under the 1940 Act and approved by the Company's
directors and by the holders of the Shares in a manner consistent with such
rule.
FIFTH: The Distributor shall act as agent of the Company in
connection with the sale and repurchase of Shares of the Company. Except with
respect to such sales and repurchases, the Distributor shall act as principal
in all matters relating to the promotion of the sale of Shares of the Company
and shall enter into all of its own engagements, agreements and contracts as
principal on its own account. The Distributor shall enter into agreements with
investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and
sell Shares of the Company to the public upon the terms and conditions set
forth therein, which shall not be inconsistent with the provisions of this
Agreement. Each agreement shall provide that the investment dealer and
financial institution shall act as a principal, and not as an agent of the
Company.
SIXTH: The Company shall bear
(A) the expenses of qualification of the Shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor and of continuing the qualification therein until the Distributor
notifies the Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH: The Distributor shall bear
(A) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) of the Company relating to the Shares in connection with public
offerings made by the Distributor pursuant to this Agreement (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to shareholders by the Company), and any
other promotional or sales literature used by the Distributor or furnished by
the Distributor to dealers in connection with such public offerings; and
(B) expenses of advertising in connection with such public offerings;
-2-
<PAGE> 3
provided however, that the Distributor may be reimbursed for all or a portion
of the expenses described in sections (A) and (B) of this paragraph, or may
receive reasonable compensation for distribution related services, to the
extent permitted by a distribution plan adopted by the Company pursuant to Rule
12b-1 under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of Shares
only to the extent of purchase orders actually received and not in excess of
such orders, and it will not avail itself of any opportunity of making a
profit by expediting or withholding orders. It is mutually understood and
agreed that the Company may reject purchase orders where, in the judgment of
the Company, such rejection is in the best interest of the Company.
NINTH: The Company and the Distributor shall each comply with all
applicable provisions of the 1940 Act, the Securities Act of 1933 and of all
other federal and state laws, rules and regulations governing the issuance and
sale of the Shares.
TENTH:
(A) In absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company agrees to indemnify the Distributor against any and
all claims, demands, liabilities and expenses which the Distributor may incur
under the Securities Act of 1933, or common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectuses of the Company, or any omission to state
a material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor
agrees to indemnify the Company against any and all claims, demands,
liabilities and expenses which the Company may incur arising out of or based
upon any act or deed of the Distributor or its sales representatives which has
not been authorized by the Company in its prospectuses or in this Agreement.
(B) The Distributor agrees to indemnify the Company against any and
all claims, demands, liabilities and expenses which the Company may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in any
registration statement or prospectuses of the Company, or any omission to state
a material fact therein if such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Company's transfer agent
or for any failure of such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its charter or to any applicable
statute or regulation.
TWELFTH: This Agreement shall become effective as of the date hereof,
shall continue until February 28, 1999, and shall continue in force and effect
from year to year thereafter, provided, that such continuance is specifically
approved at least annually (a)(i) by the Board of
-3-
<PAGE> 4
Directors of the Company, or (ii) by the vote of a majority of the Company's
outstanding voting securities (as defined in Section 2(a)(42) of the Investment
Company Act), and (b) by vote of a majority of the Company's directors who are
not parties to this Agreement or "interested persons" (as defined in Section
2(a)(19) of the Investment Company Act) of any party to this Agreement cast in
person at a meeting called for such purpose.
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Directors of the Company or by vote of
a majority of the outstanding voting securities of the Company, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning as defined in Section
2(a)(4) of the Investment Company Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed, postage paid, to the other party at such
address as such other party may designate for the receipt of such notices.
Until further notice to the other party, it is agreed that the address of both
the Company and the Distributor shall be Eleven Greenway Plaza, Suite 1919,
Houston, Texas 77046.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate as of the day and year first above written.
AIM EQUITY FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
------------------------------
Name: Robert H. Graham
Title: President
Attest:
/s/ DAVID L. KITE
- ---------------------------
Name: David L. Kite
Title: Assistant Secretary
FUND MANAGEMENT COMPANY
By: /s/ J. ABBOTT SPRAGUE
------------------------------
Name: J. Abbott Sprague
Title: President
Attest:
/s/ OFELIA M. MAYO
- ---------------------------
Name: OFELIA M. MAYO
Title: ASSISTANT SECRETARY
-5-
<PAGE> 6
APPENDIX A TO
MASTER DISTRIBUTION AGREEMENT OF
AIM EQUITY FUNDS, INC.
(Institutional Classes)
AIM Charter Fund
AIM Constellation Fund
AIM Weingarten Fund
-6-
<PAGE> 1
EXHIBIT 9(a)(1)
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated
November 1, 1994, by and between AIM Equity Funds, Inc., a Maryland
corporation, and A I M Fund Services, Inc., a Delaware corporation, is hereby
amended as follows (terms used herein but not otherwise defined herein have the
meaning ascribed them in the Agreement):
1) Section 1. of the Fee Schedule to the Agreement is hereby deleted in
its entirety and replaced with the following:
"1. For performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees on behalf of each of the Portfolios
to pay the Transfer Agent an annualized fee for shareholder
accounts that are open during any monthly period as set forth
below, and an annualized fee of $.70 per shareholder account
that is closed during any monthly period. Both fees shall be
billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
<TABLE>
<CAPTION>
Per Account Fee
Fund Type Annualized
--------- ----------
<S> <C>
Class A Annual/Semi-Annual Dividends $15.15
Class A Quarterly & Monthly Dividend 17.15
Class A Daily Accrual 19.65
Class B 19.65
Class C 19.65"
</TABLE>
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: August 4, 1997
AIM EQUITY FUNDS, INC.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M FUND SERVICES, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ JOHN CALDWELL
----------------------------- -----------------------------
Assistant Secretary John Caldwell
President
(SEAL)
<PAGE> 1
EXHIBIT 9(a)(3)
AMENDMENT NO. 2
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated July
1, 1995 and as amended on July 1, 1996, by and between AIM Equity Funds, Inc.,
a Maryland corporation and A I M Institutional Fund Services, Inc., a Delaware
corporation, is hereby amended as follows (terms used herein but not otherwise
defined herein have the meaning ascribed them in the Agreement):
1) A new Section 2.03 to the Agreement is hereby added in its entirety as
follows: "In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances
incurred by the Transfer Agent for the reconcilement of demand deposit accounts
on behalf of each of the Portfolios. In addition, any other expenses incurred
by the Transfer Agent at the request or with the consent of the Fund, will be
reimbursed by the Fund on behalf of the applicable Shares."
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: July 1,1997
AIM EQUITY FUNDS, INC.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M INSTITUTIONAL FUND SERVICES, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ JOHN CALDWELL
----------------------------- -----------------------------
Assistant Secretary John Caldwell
President
(SEAL)
<PAGE> 1
EXHIBIT 9(a)(4)
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated July
1, 1995, by and between AIM Equity Funds, Inc., a Maryland corporation and
A I M Institutional Fund Services, Inc., a Delaware corporation, is hereby
amended as follows (terms used herein but not otherwise defined herein have the
meaning ascribed them in the Agreement):
1) Section 2.01 of the Agreement is hereby deleted in its entirety and
replaced with the following: "For performance by the Transfer Agent pursuant
to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay
the Transfer Agent an annual fee in the amount of .009% of average daily net
assets, payable monthly. Such fee may be changed from time to time subject to
mutual written agreements between the Fund and the Transfer Agent."
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: July 1, 1996
AIM EQUITY FUNDS, INC.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M INSTITUTIONAL FUND SERVICES, INC.
Attest: /s/ DAVID L. KITE By: /s/ J. ABBOTT SPRAGUE
----------------------------- -----------------------------
Assistant Secretary J. Abbott Sprague
President
(SEAL)
<PAGE> 1
EXHIBIT 9(b)(1)
AMENDMENT NUMBER 3 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of February 1, 1997 is made to the Remote
Access and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on the attached
Exhibit 1 hereof, (the "Fund") and The Shareholder Services Group, Inc., now
known as First Data Investor Services Group, Inc. ("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. All references to "THE SHAREHOLDER SERVICES GROUP, INC." are hereby
deleted and replaced with "FIRST DATA INVESTOR SERVICES GROUP, INC." and all
references to "TSSG" are hereby deleted and replaced with "FDISG".
2. Delete the second sentence from Section 3(c) and replace with the
following:
"The Fund will pay to FDISG the amount so billed by Federal Funds Wire
within fifteen (15) business days after the Fund's receipt of the
invoice."
3. Section 4(b) of the Agreement is hereby deleted in its entirety and
replaced with the following new Section 4(b):
"FDISG agrees to provide to the Fund at its facilities located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046, 12 Greenway Plaza,
Houston, Texas 77046, 301 Congress Street, Suite 1700, Austin, Texas
78701 and 12503 East Euclid Drive, Suite 250, Englewood, CO 80111 or
at such other locations as may be mutually agreed upon in writing by
FDISG and the Fund (the "Fund Facility") remote access to the use of
information processing capabilities of the FDISG System as it may be
modified from time to time by FDISG."
4. Section 12 of the Agreement is hereby amended by adding the following
new Sections 12(c), through 12(i):
"(c) FDISG shall retain title to and ownership of the FDISG System,
including any and all data bases, computer programs, screen
formats, report formats, interactive design techniques,
derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents,
copyrights, trade secrets, and
<PAGE> 2
other related legal rights utilized in connection with the
services provided by FDISG to the Fund hereunder other than
shareholder account and transaction information which shall
remain the exclusive property of the Fund.
(d) FDISG hereby grants to the Fund and the Fund accepts a limited
license to the FDISG System for the sole and limited purpose
of having FDISG provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or
interpreted otherwise and subject to Section 15 such license
shall immediately terminate with the termination of this
Agreement.
(e) The transmission of account inquiry and transaction
information, including but not limited to maintenances,
exchanges, purchases and redemptions, shall be limited to
direct entry to the FDISG System by means of on-line mainframe
terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of
information to the FDISG System is strictly prohibited without
the prior written consent of FDISG.
(f) FDISG warrants that the FDISG System shall include, at no
additional cost to the Fund, design and performance
capabilities so that prior to, during, and after the calendar
year 2000, the FDISG System will not malfunction, produce
invalid or incorrect results, or abnormally cease to function
due to the year 2000 date change. In connection with the
foregoing, FDISG agrees to provide the Fund with periodic
quarterly updates with respect to FDISG compliance with this
provision.
(g) Other than CPU Authorization Passwords, FDISG represents and
warrants to the Fund the software products provided by FDISG
hereunder (the "Products") do not contain any "back door" or
concealed access devices, any block or protection feature
which prevents the Fund from making additional copies of such
Products as permitted by this Agreement or any "self-help"
code, "Unauthorized Code", "software locks" or any other
similar devices which, upon the occurrence of a certain date
or event, the passage of a certain amount of time, or taking
of any action (or failure to take action) by or on behalf of
FDISG, will cause such Products or any software or system with
such Products are used to be destroyed, erased, damaged, or
otherwise made inoperable. "Unauthorized Code" shall mean any
virus, Trojan horse, worm, or other software routines designed
to permit unauthorized access: to disable, or otherwise harm
software, hardware, or data; or to perform any other such
actions.
(h) Provided the Fund gives FDISG reasonable written notice,
reasonable assistance, including assistance from the Fund's
employees, agents, affiliates and to the extent possible
independent contractors (collectively, "FUND'S AGENTS"), and
sole authority to defend or settle the action, then FDISG
shall do the following ("INFRINGEMENT INDEMNIFICATION"): (a)
defend or settle, at its expense, any action brought against
the Fund or the Fund's Agents to the extent the action is
based on a claim that the Fund's use of the FDISG System
infringes a duly issued United
<PAGE> 3
States' patent or copyright or violates a third party's
proprietary trade secrets or other similar intellectual
property rights ("INFRINGEMENT"); and (b) pay damages and
costs finally awarded against the Fund or the Fund's Agents
directly attributable to such claim. FDISG shall have no
Infringement Indemnification obligation if the alleged
Infringement is based upon the Fund's use of the FDISG System
with equipment or software not furnished or approved by FDISG
or if such claim arises from FDISG's compliance with the Fund's
designs, or from the Fund's modifications of the Software.
The Infringement Indemnification states FDISG's entire
liability for Infringement and shall be the Fund's sole and
exclusive remedy for such claims.
(i) Within sixty (60) days after the execution of this Amendment,
FDISG and the Fund shall enter into an escrow agreement
relating to the source code for (i) the FDISG proprietary
software used in connection with the FDISG System (as defined
in Section 1 of the Agreement: (ii) the "Software" (as that
term is defined in Schedule G), including the Third Party
Software set forth in Sections 2.1.1 and 2.1.2 of Exhibit 1 of
Schedule G; and (iii) the "FDISG Software" as that term is
defined in Schedule H (collectively, the "Source Code")
substantially in the form attached as Exhibit 2 of this
Amendment Number 3 ("Exhibit 2"). Promptly after signing the
escrow agreement, FDISG shall forward the agreement to the
escrow agent with a copy of the Source Code to be deposited
into escrow. FDISG agrees to update the Source Code held by
the escrow agent on a quarterly basis. The Fund shall be
responsible and pay for all fees of the escrow agent. The
Source Code may be released to the Fund only if (i) FDISG
ceases to do business, makes an assignment for the benefit of
creditors, becomes insolvent (as revealed by its books and
records or otherwise), is generally unable to pay its debts as
such debts become due, or commences, or has commenced against
it a case under any chapter of state or federal bankruptcy
laws; and FDISG fails to cure any such event within sixty (60)
days after receiving notice from the Fund; and (ii) the Fund
has paid all amounts due to FDISG under this Agreement. Upon
receipt of the Source Code from the escrow agent, the Fund
shall a have license to use the Software solely as set forth
herein for the remaining current term of the Agreement subject
to Section 15, which use shall be expanded to include the
right to modify the software solely in connection with support,
maintenance and operation of the software and not for any
other purpose or person."
5. Sections 14(a) and (b) of the Agreement are hereby deleted from the
Agreement and replaced with the following new Sections 14(a) and (b):
(a) This Agreement which became effective as of December 23, 1994
is hereby extended effective February 1, 1997 and shall
continue through January 31, 2000 (the "Initial Term"). Upon
the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year
("Renewal Terms") each, unless the Fund or FDISG provides
written notice to the other of its intent not to
<PAGE> 4
renew. Such notice must be received not less than one-hundred
and eighty (180) days prior to the expiration of the Initial
Term or the then current Renewal Term.
(b) Notwithstanding the foregoing Section 14(a), in the event the
Fund provides notice of its intent to terminate as set forth in
Section 14(a), the Fund may extend the term of the Agreement
for up to an additional one-hundred and eighty (180) days (the
"Extension Period") by providing FDISG with written notice of
its intent to do so. Such notice must be received no later
than one-hundred and eighty (180) days prior to the expiration
of the Initial Term. During the Extension Period, the Fund may
terminate this Agreement at any time on thirty (30) days
written notice.
6. Section 15 is hereby amended by adding the following sentence to the
end of the paragraph:
"FDISG agrees to provide reasonable, supervised system access until
the Fund's conversion to another provider is complete".
7. Section 23(a) is hereby amended by deleting the information regarding
notices and inserting the following
To: The AIM Family of Funds
c/o A I M Fund Services, Inc.
Eleven Greenway Plaza, Suite 100
Houston, Texas 77046
Attention: John Caldwell, President
with copy to:
Fund Legal Counsel at same address
Attention: Carol F. Relihan, Senior Vice President &
General Counsel
To: First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, MA 02109
Attention: President
with copy to : General Counsel (same address)
8. Section 23 is hereby amended by adding the following new sub-section
(k):
"(k) Notwithstanding the indemnity provided by the Fund in Section
8(g), FDISG agrees to use commercially reasonable efforts to
maintain a Disaster Recovery Plan, at no cost to the Fund,
designed to minimize the impact of any unforeseen business
interruption or outage that renders the FDISG System or FDISG
Facility inoperable, a summary of which is attached hereto as
Schedule I."
<PAGE> 5
9. Schedule C is hereby deleted in its entirety and replaced with the
attached revised Schedule C.
10. Exhibit 1 and Exhibit 2 of Schedule D are hereby deleted in their
entirety.
11. Schedule F is hereby deleted in its entirety and replaced with the
attached revised Schedule F.
12. Addendum Number 2 to the Agreement is hereby deleted in its entirety
and the new revised Schedule D - Out of Pocket Expenses as referenced in
Section 3(b) is hereby added to the Agreement.
13. In addition to the foregoing, FDISG shall provide the Fund with a
software license to FDISG's proprietary IMPRESS Plus software and system in
accordance with the terms of and as more fully described in IMPRESS Plus
Software and Support Terms annexed hereto as Schedule G and incorporated
herein.
14. In addition to the foregoing, FDISG shall provide the Fund with a
software license to FDISG's proprietary Accounting Control Environment +
("ACE +") software in accordance with the terms of and as more fully described
in the ACE + Software and Support Terms annexed hereto as Schedule H and
incorporated herein.
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties
with respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant or other agent of either
party is authorized to make any representation, warranty, or other promises not
expressly contained herein with respect to the subject matter hereof.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers, as of the day and year first
above written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 attached hereto as may be amended from time to time.
By: /s/ ROBERT H. GRAHAM
-------------------------------------
Title: President
----------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ GERALD G. KOKOS
-------------------------------------
Title: Executive Vice President
----------------------------------
<PAGE> 7
EXHIBIT 1
LIST OF FUNDS
<TABLE>
<S> <C>
AIM EQUITY FUNDS, INC.
Portfolios: Classes:
AIM Blue Chip Fund Class A and B Shares
AIM Capital Development Fund Class A and B Shares
AIM Charter Fund Class A and B Shares
AIM Weingarten Fund Class A and B Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares
AIM FUNDS GROUP
Portfolios: Classes:
AIM Balanced Fund Class A and Class B Shares
AIM Global Utilities Fund Class A and Class B Shares
AIM Growth Fund Class A and Class B Shares
AIM High Yield Fund Class A and Class B Shares
AIM Income Fund Class A and Class B Shares
AIM Intermediate Government Fund Class A and Class B Shares
AIM Municipal Bond Fund Class A and Class B Shares
AIM Value Fund Class A and Class B Shares
AIM Money Market Fund Class A, Class B, and
AIM Cash Reserve Shares
AIM INTERNATIONAL FUNDS, INC.
Portfolios: Classes:
AIM International Equity Fund Class A and Class B Shares
AIM Global Aggressive Growth Fund Class A and Class B Shares
AIM Global Growth Fund Class A and Class B Shares
AIM Global Income Fund Class A and Class B Shares
AIM INVESTMENT SECURITIES FUNDS
Portfolios: Classes:
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
AIM TAX-EXEMPT FUNDS, INC.
Portfolios: Classes:
AIM Tax-Exempt Cash Fund n/a
AIM Tax-Exempt Bond Fund of Connecticut n/a
Intermediate Portfolio AIM Tax-Free Intermediate Shares
</TABLE>
<PAGE> 8
EXHIBIT 2
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number __________
Recitals
This Preferred Registration Technology Escrow Agreement including any
Exhibits ("Agreement") is effective this ______ day of _____ 1997, by and among
Data Securities International, Inc. ("DSI"), a Delaware corporation, First Data
Investor Services Group, Inc. ("Depositor"), and each registered investment
company listed on the attached Schedule A hereof ("Preferred Registrant").
WHEREAS, Depositor has entered into a certain Remote Access and
Related Services Agreement dated December 23, 1994, as amended by Amendment
Number 3 dated as of February 1, 1997 (the "Remote Agreement") with the
Preferred Registrant which pursuant thereto certain proprietary software, as
described in Section 12(i) of the Remote Agreement, in object-code form and
other materials of Depositor have been licensed to Preferred Registrant (the
"Software");
WHEREAS, Depositor and Preferred Registrant desire the Agreement to be
supplementary to said contract pursuant to 11 United States Code Section
365(n);
WHEREAS, availability of or access to the source code and other
proprietary data related to the Software is critical to Preferred Registrant in
the conduct of its business;
WHEREAS, Depositor has deposited or will deposit with DSI such source
code and other proprietary data to provide for retention, administration and
controlled access for Preferred Registration under conditions specified herein;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the promises, mutual
covenants and conditions contained herein, the parties hereto agree as follows:
1. Deposit Account. Following the delivery of the executed Agreement, DSI
shall open a deposit account ("Deposit Account") for Depositor. The
opening of the Deposit Account means that DSI shall establish an account
ledger in the name of Depositor, assign a deposit account number
("Deposit Account Number"), calendar renewal notices to be sent to
Depositor as provided in Section 30, and request the initial deposit
("Initial Deposit") from Depositor. Depositor has an obligation to make
the Initial Deposit. In the event that Depositor has not made the
Initial Deposit within sixty (60) days of the execution of this
1
<PAGE> 9
Agreement, DSI shall request the initial Deposit from Depositor and
notify Preferred Registrant that such Initial Deposit has not been
received.
2. Preferred Registration Account. Following the execution and delivery of
the Agreement, DSI shall open a registration account ("Registration
Account") for Preferred Registrant. The opening of the Registration
Account means that DSI shall establish under the Deposit Account an
account ledger with a unique registration number ("Registration Number")
in the name of Preferred Registrant, calendar renewal notices to be sent
to Preferred Registrant as provided in Section 30, and request the
Initial Deposit from Depositor. DSI shall notify Preferred Registrant
upon receipt of Initial Deposit.
3. Term of Agreement. The Agreement will commence on the effective date
and continue through January 31, 2000, unless terminated earlier as
provided in the Agreement. The Agreement may be extended for one (1)
year terms.
4. Exhibit A, Notices and Communications. Notices and invoices to
Depositor, Preferred Registrant or DSI should be sent to the parties at
the addresses identified in the Exhibit A.
Documents, payment of fees, deposits of material, and any written
communication should be sent to the DSI offices as identified in the
Exhibit A.
Depositor and Preferred Registrant agree to each name their respective
designated contact ("Designated Contact") to receive notices from DSI
and to act on their behalf in the performance of their obligations as
set forth in the Agreement. Depositor and Preferred Registrant agree to
notify DSI immediately in the event of a change of their Designated
Contact in the manner stipulated in Exhibit A.
5. Exhibit B and Deposit Material. Depositor will submit proprietary data
and related material ("Deposit Material") to DSI for retention and
administration in the Deposit Account.
The Deposit Material will be submitted together with a completed
document called a "Description of Deposit Material", hereinafter
referred to as Exhibit B. Each Exhibit B should be signed by Depositor
prior to submission to DSI and will be signed by DSI upon completion of
the Deposit Material inspection.
Depositor represents and warrants that it lawfully possesses all Deposit
Material, can transfer Deposit Material to DSI and has the authority to
store Deposit Material in accordance with the terms of the Agreement.
6. Deposit Material Inspection. Upon receipt of an Exhibit B and Deposit
Material, DSI will be responsible only for reasonably matching the
labeling of the materials to the item descriptions listed on the Exhibit
B and validating the count of the materials to the quantity listed on
the Exhibit B. DSI will not be responsible for any other claims made by
2
<PAGE> 10
the Depositor on the Exhibit B. Acceptance will occur when DSI concludes
that the Deposit Material Inspection is complete. Upon acceptance DSI
will sign the Exhibit B and assign it the next Exhibit B number. DSI
shall issue a copy of the Exhibit B to Depositor and Preferred
Registrant within ten (10) days of acceptance.
7. Initial Deposit. The Initial Deposit will consist of all material
initially supplied by Depositor to DSI.
8. Deposit Changes. Depositor may desire or may be obligated to update the
Deposit Account with supplemental or replacement Deposit Material of
technology releases.
Supplemental Deposit ("Supplemental") is Deposit Material which is to be
added to the Deposit Account.
Replacement Deposit ("Replacement") is Deposit Material which will
replace existing Deposit Material as identified by any one or more
Exhibit B(s) in the Deposit Account. Replaced Deposit Material will be
destroyed or returned to Depositor.
9. Deposit. The existing deposit ("Deposit") means all Exhibit B(s) and
their associated Deposit Material currently in DSI's possession.
Destroyed or returned Deposit Material is not part of the Deposit;
however, DSI shall keep records of the destruction or return of Deposit
Material.
10. Replacement Option. Within ten (10) days of receipt of Replacement from
Depositor, DSI will send a letter to Preferred Registrant stating that
Depositor requests to replace existing Deposit Material, and DSI will
include a copy of the new Exhibit B(s) listing the new Deposit Material.
Preferred Registrant has twenty (20) days from the mailing of such
letter by DSI to instruct DSI to retain the existing Deposit Material
held by DSI, and if so instructed, DSI will change the Replacement to a
Supplemental. Conversion to Supplemental may cause an additional
storage unit fee as specified by DSI's Fee and Services Schedule.
If Preferred Registrant does not instruct DSI to retain the existing
Deposit Material, DSI shall permit such Deposit Material to be replaced
with the Replacement. Within ten (10) days of acceptance of the
Replacement by DSI, DSI shall issue a copy of the executed Exhibit B(s)
to Depositor and Preferred Registrant. DSI will either destroy or
return to Depositor all Deposit Material replaced by the Replacement.
11. Storage Unit. DSI will store the Deposit in defined units of space,
called storage units. The cost of the first storage unit will be
included in the annual Deposit Account fee.
12. Deposit Obligations of Confidentiality. DSI agrees to establish a locked
receptacle in which it shall place the Deposit and shall put the
receptacle under the administration of
3
<PAGE> 11
one or more of its officers, selected by DSI, whose identity shall be
available to Depositor at all times. DSI shall exercise a
professional level of care in carrying out the terms of the Agreement.
DSI acknowledges Depositor's assertion that the Deposit shall contain
proprietary data and that DSI has an obligation to preserve and
protect the confidentiality of the Deposit.
Except as provided for in the Agreement, DSI agrees that it shall not
divulge, disclose, make available to third parties, or make any use
whatsoever of the Deposit.
13. Audit Rights. DSI agrees to keep records of the activities undertaken
and materials prepared pursuant to the Agreement. DSI may issue to
Depositor and Preferred Registrant an annual report profiling the
Deposit Account. Such annual report will identify the Depositor,
Preferred Registrant, the current Designated Contacts, selected
special services, and the Exhibit B history, which includes Deposit
Material acceptance and destruction or return dates.
Upon reasonable notice, during normal business hours and during the
term of the Agreement, Depositor or Preferred Registrant will be
entitled to inspect the records of DSI pertaining to the Agreement,
and accompanied by an employee of DSI, inspect the physical status and
condition of the Deposit. The Deposit may not be changed during the
audit.
14. Renewal Period of Agreement. Upon payment of the initial fee or
renewal fee, the Agreement will be in full force and will have an
initial period of at least one (1) year unless otherwise specified.
The Agreement may be renewed for additional periods upon receipt by
DSI of the specified renewal fees prior to the last day of the period
("Expiration Date"). DSI may extend the period of the Agreement to
cover the processing of any outstanding instruction made during any
period of the Agreement.
Preferred Registrant has the right to pay renewal fees and other
related fees. In the event Preferred Registrant pays the renewal fees
and Depositor is of the opinion that any necessary condition for
renewal is not met, Depositor may so notify DSI and Preferred
Registrant in writing. The resulting dispute will be resolved
pursuant to the dispute resolution process defined in Section 25.
15. Expiration. If the Agreement is not renewed, or is otherwise
terminated, all duties and obligations of DSI to Depositor and
Preferred Registrant will terminate. If Depositor requests the return
of the Deposit, DSI shall return the Deposit to Depositor only after
any outstanding invoices and the Deposit return fee are paid. If the
fees are not received by the Expiration Date of the Agreement, DSI, at
its option, may destroy the Deposit.
16. Certification by Depositor. Depositor represents to Preferred
Registrant that:
4
<PAGE> 12
a. The Deposit delivered to DSI consists of the following: source
code deposited on computer magnetic media; all necessary and
available information, proprietary information, and technical
documentation which will enable a reasonably skilled
programmer of Preferred Registrant to create, maintain and/or
enhance the Software without the aid of Depositor or any other
person or reference to any other materials; maintenance tools
(test programs and program specifications); proprietary or
third party system utilities (compiler and assembler
descriptions); description of the system/program generation;
descriptions and locations of programs not owned by Depositor
but required for use and/or support; and names of key
developers for the technology on Depositor's staff.
b. The Deposit will be defined in the Exhibit B(s).
These representations shall be deemed to be made continuously
throughout the term of the Agreement.
17. Indemnification. Depositor and Preferred Registrant agree to defend
and indemnify DSI and hold DSI harmless from and against any and all
claims, actions and suits, whether in contract or in tort, and from
and against any and all liabilities, losses, damages, costs, charges,
penalties, counsel fees, and other expenses of any nature (including,
without limitation, settlement costs) incurred by DSI as a result of
performance of the Agreement except in the event of a judgment which
specifies that DSI acted with gross negligence or willful misconduct.
18. Filing for Release of Deposit by Preferred Registrant. Upon notice to
DSI by Preferred Registrant of the occurrence of a release condition
as defined in Section 21 and payment of the release request fee, DSI
shall notify Depositor by certified mail or commercial express mail
service with a copy of the notice from Preferred Registrant. If
Depositor provides contrary instruction within ten (1O) days of the
mailing of the notice to Depositor, DSI shall not deliver a copy of
the Deposit to Preferred Registrant.
19. Contrary Instruction. "Contrary Instruction" is the filing of an
instruction with DSI by Depositor stating that a Contrary Instruction
is in effect. Such Contrary Instruction means an officer of Depositor
warrants that a release condition has not occurred or has been cured.
DSI shall send a copy of the instruction by certified mail or
commercial express mail service to Preferred Registrant. DSI shall
notify both Depositor and Preferred Registrant that there is a dispute
to be resolved pursuant to Section 25. Upon receipt of Contrary
Instruction, DSI shall continue to store the Deposit pending Depositor
and Preferred Registrant joint instruction, resolution pursuant to
Section 25, order by a court of competent jurisdiction, or termination
by non-renewal of the Agreement.
20. Release of Deposit to Preferred Registrant. Pursuant to Section 18, if
DSI does not receive Contrary Instruction from Depositor, DSI is
authorized to release the Deposit, or if more than one Preferred
Registrant is registered to the Deposit, a copy of the Deposit,
5
<PAGE> 13
to the Preferred Registrant filing for release following receipt of
any fees due to DSI including Deposit copying and delivery fees.
21. Release Conditions of Deposit to Preferred Registrant.
Release conditions are:
a. Depositor ceases to do business, makes an assignment for the
benefit of creditors, becomes insolvent (as revealed by its
books and records or otherwise), is generally unable to pay
its debts as such debts become due, or commences, or has
commenced against it a case under any chapter of state or
federal bankruptcy laws; and Depositor fails to cure any such
event within 60 days after receiving notice from Preferred
Registrant; and
b. Preferred Registrant has paid all amounts due Depositor under
the Remote Agreement.
22. Grant of Use License. Subject to the terms and conditions of the
Agreement, Depositor hereby transfers and upon execution by DSI, DSI
hereby accepts a non-exclusive, nontransferable, royalty-free license
("Use License") for the unexpired term of the Remote Agreement subject
to Section 15 thereof which DSI will transfer to Preferred Registrant
upon controlled release of the Deposit as described in the Agreement.
The Use License will be solely for Preferred Registrant's internal
purposes in connection with support, maintenance, and operation of the
Software solely as set forth in the Remote Agreement and not for any
other purpose or person.
23. Use License Representation. Depositor represents and warrants to
Preferred Registrant and DSI that it has no knowledge of any
incumbrance or infringement of the Deposit, or that any claim has been
made that the Deposit infringes any patent, trade secret, copyright or
other proprietary right of any third party. Depositor warrants that it
has the full right, power, and ability to enter into and perform the
Agreement, to grant the foregoing Use License, and to permit the
Deposit to be placed with DSI.
24. Conditions Following Release. Following a release and subject to
payment to DSI of all outstanding fees, DSI shall transfer the Use
License to Preferred Registrant. Additionally Preferred Registrant
shall be required to maintain the confidentiality of the released
Deposit.
25. Disputes. In the event of a dispute, DSI shall so notify Depositor and
Preferred Registrant in writing. Upon agreement of the parties at the
time of a dispute, such dispute will be settled by arbitration in
accordance with the commercial rules of the American Arbitration
Association ("AAA"). Unless otherwise agreed to by Depositor and
Preferred Registrant, arbitration will take place in San Diego,
California, USA.
6
<PAGE> 14
26. Verification Rights. Depositor grants to Preferred Registrant the
option to verify the Deposit for accuracy, completeness and
sufficiency. Depositor agrees to permit DSI and at least one employee
of Preferred Registrant to be present at Depositor's facility to
verify, audit and inspect of the Deposit for the benefit of Preferred
Registrant. If DSI is present or is selected to perform the
verification, DSI will be paid according to DSI's then current
verification service hourly rates and any out of pocket expenses.
27. General. DSI may act in reliance upon any instruction, instrument, or
signature believed to be genuine and may assume that any employee
giving any written notice, request, advice or instruction in
connection with or relating to the Agreement has apparent authority
and has been duly authorized to do so. DSI may provide copies of the
Agreement or account history information to any employee of Depositor
or Preferred Registrant upon their request. For purposes of
termination or replacement, Deposit Material shall be returned only to
Depositor's Designated Contact, unless otherwise instructed by
Depositor's Designated Contact.
DSI is not responsible for failure to fulfill its obligations under the
Agreement due to causes beyond DSI's control.
The Agreement is to be governed by and construed in accordance with
the laws of the State of California.
The Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes all previous
communications, representations, understandings, and agreements,
either oral or written, between the parties. The Agreement may be
amended only in a writing signed by the parties.
If any provision of the Agreement is held by any court to be invalid
or unenforceable, that provision will be severed from the Agreement
and any remaining provisions will continue in full force.
28. Title to Media. Subject to the terms of the Agreement, title to the
media, upon which the proprietary data is written or stored, is and
shall be irrevocably vested in DSI. Notwithstanding the foregoing,
Depositor will retain ownership of the proprietary data contained on
the media including all copyright, trade secret, patent or other
intellectual property ownership rights subsisting in such proprietary
data.
29. Termination of Rights. The Use License as described above will
terminate in the event that the Agreement is terminated without the
Use License transferring to Preferred Registrant.
30. Fees. Fees are due upon receipt of signed contract, receipt of Deposit
Material, or when service is requested, whichever is earliest. If
invoiced fees are not paid within sixty (60) days of the date of the
invoice, DSI may terminate the Agreement. If the payment is not
7
<PAGE> 15
timely received by DSI, DSI shall have the right to accrue and collect
interest at the rate of one and one-half percent per month (18% per
annum) from the date of the invoice for all late payments.
Renewal fees will be due in full upon the receipt of invoice unless
otherwise specified by the invoice. In the event that renewal fees are
not received thirty (30) days prior to the Expiration Date, DSI shall
so notify Depositor and Preferred Registrant. If the renewal fees are
not received by the Expiration Date, DSI may terminate the Agreement
without further notice and without liability of DSI to Depositor or
Preferred Registrant.
DSI shall not be required to process any request for service unless
the payment for such request shall be made or provided for in a manner
satisfactory to DSI.
All service fees and renewal fees will be those specified in DSI's Fee
and Services Schedule in effect at the time of renewal or request for
service, except as otherwise agreed. For any increase in DSI's
standard fees, DSI shall notify Depositor and Preferred Registrant at
least ninety (90) days prior to the renewal of the Agreement. For any
service not listed on the Fee and Services Schedule, DSI shall provide
a quote prior to rendering such service.
Fees invoiced by DSI are the responsibility of the Preferred
Registrant and as such all invoices in accordance with this Agreement
are to be sent to the Preferred Registrant.
8
<PAGE> 16
On behalf of the Investment Companies
and respective Portfolios and Classes
set forth in Schedule A attached
hereto as may be amended from
time to time.
<TABLE>
<S> <C>
By: FIRST DATA INVESTOR SERVICES
--------------------------------- GROUP, INC.
Name:
------------------------------- By:
Title: ---------------------------------
------------------------------ Name:
-------------------------------
Title:
------------------------------
DATA SECURITIES
INTERNATIONAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
</TABLE>
<PAGE> 17
SCHEDULE A
LIST OF FUNDS
AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Blue Chip Fund Class A and B Shares
AIM Capital Development Fund Class A and B Shares
AIM Charter Fund Class A and B Shares
AIM Weingarten Fund Class A and B Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares
</TABLE>
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Balanced Fund Class A and Class B Shares
AIM Global Utilities Fund Class A and Class B Shares
AIM Growth Fund Class A and Class B Shares
AIM High Yield Fund Class A and Class B Shares
AIM Income Fund Class A and Class B Shares
AIM Intermediate Government Fund Class A and Class B Shares
AIM Municipal Bond Fund Class A and Class B Shares
AIM Value Fund Class A and Class B Shares
AIM Money Market Fund Class A, Class B and AIM Cash Reserve Shares
</TABLE>
AIM INTERNATIONAL FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM International Equity Fund Class A and Class B Shares
AIM Global Aggressive Growth Fund Class A and Class B Shares
AIM Global Growth Fund Class A and Class B Shares
AIM Global Income Fund Class A and Class B Shares
</TABLE>
AIM INVESTMENT SECURITIES FUNDS
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
</TABLE>
AIM TAX-EXEMPT FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Tax-Exempt Cash Fund n/a
AIM Tax-Exempt Bond Fund of Connecticut n/a
Intermediate Portfolio AIM Tax-Free Intermediate Shares
</TABLE>
<PAGE> 18
EXHIBIT A
DESIGNATED CONTACT
Account Number: __________
<TABLE>
<S> <C>
NOTICES, DEPOSIT MATERIAL RETURNS AND INVOICES TO DEPOSITOR SHOULD BE ADDRESSED TO:
COMMUNICATION, INCLUDING DELINQUENCIES TO
DEPOSITOR SHOULD BE ADDRESSED TO: ------------------------------------------------
[Company Name/Address] ------------------------------------------------
- ----------------------------------------
------------------------------------------------
- ----------------------------------------
------------------------------------------------
- ----------------------------------------
Invoice Contact:
- ---------------------------------------- --------------------------------
Designated Contact:
---------------------
Telephone:
------------------------------
Facsimile:
------------------------------
State of Incorporation:
-----------------
NOTICES AND COMMUNICATION, INCLUDING INVOICES TO PREFERRED REGISTRANT SHOULD BE
DELINQUENCIES TO PREFERRED REGISTRANT ADDRESSED TO:
SHOULD BE ADDRESSED TO:
-----------------------------------------------
First Data Investor Services Group, Inc.
4400 Computer Drive -----------------------------------------------
Westborough, MA 01581
-----------------------------------------------
-----------------------------------------------
Designated Contact: Invoice Contact:
--------------------- -------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Requests from Depositor or Preferred Registrant INVOICE INQUIRIES AND FEE REMITTANCES TO DSI
Contact should be given Contact or authorized SHOULD BE ADDRESSED TO:
employee Registrant.
DSI
CONTRACTS, DEPOSIT MATERIAL AND NOTICES TO DSI Attn: Accounts Receivable
SHOULD BE ADDRESSED TO:
DSI
Attn: Contract Administration
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Date:
-----------------------------------
</TABLE>
<PAGE> 19
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number:
--------------------------------------------------------
Depositor Company Name:
--------------------------------------------------------
DEPOSIT TYPE:
Initial Supplemental Replacement
- ------ ------ ------
If Replacement: Destroy Deposit Return Deposit
------ ------
ENVIRONMENT:
Host System CPU/OS:
------------------------------------------------------------
Version:
-----------------------------------------------------------------------
Backup:
------------------------------------------------------------------------
Source System CPU/OS:
----------------------------------------------------------
Version:
-----------------------------------------------------------------------
Compiler:
----------------------------------------------------------------------
Special Instructions:
----------------------------------------------------------
DEPOSIT MATERIAL:
Exhibit B Name: Version:
----------------- ------------------------------------
<TABLE>
<CAPTION>
Item Label Description Media Quantity
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C>
For Depositor, I certify that the above For DSI, I received the above described
described Deposit Material was sent to DSI: Deposit Material subject to the terms on
the reverse side of this Exhibit:
By: By:
--------------------------------------- ---------------------------------------
Print Name: Print Name:
------------------------------- -------------------------------
Date: Date of Acceptance:
------------------------------------- -----------------------
ISE: EXHIBIT B#:
--------- ---------------
</TABLE>
<PAGE> 20
SCHEDULE C
FEE SCHEDULE
I. SHAREHOLDER ACCOUNT FEES. The Fund shall pay the following fees:
("Shareholder Account Fees"):
For the period beginning on the date of this Agreement, and continuing through
January 31, 2000, the Fund shall pay FDISG an annualized fee for shareholder
accounts open during any monthly period ("Open Account Fee") as follows:
<TABLE>
<CAPTION>
Account Volume Fee
<S> <C>
1-1.5 million $3.60/shareholder account
Exceeding 1.5 million $2.25/shareholder account
</TABLE>
The Fund also shall pay FDISG an annualized fee of $1.80 per shareholder
account that is closed during any monthly period ("Closed Account Fee") (The
Open Account Fees and Closed Account Fees hereafter collectively referred to as
"Shareholder Account Fees"). The Shareholder Account Fees shall be billed by
FDISG monthly in arrears on a prorated basis of 1/12 of the annualized fee for
all such accounts.
FDISG will provide a credit to the Shareholder Account Fees of one million
dollars in the years 1998 and 1999. The credit shall be applied as a reduction
of $83,333.33 on each monthly fee bill in 1998 and 1999.
In addition, on January 1 of the years 1998, 1999, and 2000 the Shareholder
Account fees may be increased by FDISG in an amount equal to the lesser of (i)
the cumulative percentage increase in the Consumer Price Index for all Urban
Consumers (CPI-U) U.S. City Average, All Items (unadjusted - (1982-84 + 100),
published by the U.S. Department of Labor, or (ii) seven percent (7%) of the
Shareholder Account Fees charged by FDISG to the Fund for the preceding twelve
(12) month period.
In return for the Shareholder Account Fees, FDISG agrees to provide the
following to the Fund:
o Remote Access to FDISG's FSR System
o License for 512 IMPRESS Plus software installations valued at 2.5
million dollars. Includes six weeks of technical and user training
(train-the-trainer).
o License for up to 10 copies of FDISG's ACE+ (Automate Control
Environment) software as further defined in Schedule H
o Dedicated Programming Support equivalent to I Systems Manager, 4
Programmers, and 2 Business Systems Analysts
o Implementation of a Separate FSR processing cycle by September 15,
1997, as more fully described in the attached Exhibit 3 of this
Schedule C.
o Implementation of the core TA system functionality identified in
Exhibit 1 of this Schedule C.
<PAGE> 21
o Implementation of IWT functionality as identified in Exhibit 2 of this
Schedule C
o Continued use of FDISG's Price/Rate Transmission (PRAT) application.
The PRAT Application will accept prices and dividend rates from the
Fund Accounting Department of the Fund electronically and post them to
the FDISG Pricing System. The PRAT application will run interconnected
via Local Area Network hardware and software.
II. DEDICATED PROGRAMMING SUPPORT
FDISG and the Fund will jointly determine the level of dedicated system
resources required to meet the Fund's enhancement priorities. FDISG agrees to
use reasonable efforts to make dedicated programming support available for all
projects required by the Fund. The amount of the resources required and the
projects to be worked on shall be determined jointly based upon joint periodic
review of project requirements; however, the Fund will decide the priorities
which will be assigned to each project and will determine what projects the
dedicated resources are to work on. All enhancements, improvements,
modifications or new features added to the FDISG System shall be, and shall
remain, the confidential, exclusive property of, and proprietary to, FDISG. The
parties agree to use best efforts to ensure that all enhancements to FDISG's
System, whether made by the Dedicated Team or otherwise, shall be made in a
manner that will not adversely effect the operational efficiency or
functionality of the FDISG System. Request for software changes may be
initiated by those representatives of the Fund identified in Exhibit 4 of this
Schedule C. The Fund will use its best efforts to notify FDISG in writing of
requests for software changes within 72 hours of an initial verbal request.
FDISG reserves the right to stop work on a request for which written
specifications have not been received.
a. SUPPORT PROVIDED TO THE FUND PERFORMED IN GROUPS OTHER
THAN THE DEDICATED PROGRAMMING TEAM
1. Coding to correct deficiencies in the system, unless such
deficiencies are included in item (II)(b)(9) below in which
event the Fund will be charged for such services. A system
deficiency is defined as a system process which does not
operate according to the design of the computer application or
system specifications. To correct system deficiencies, FDISG
will, at its own expense, expend whatever resources are
necessary to analyze the deficiency and apply an appropriate
remedy, in the form of corrected application code as
expeditiously as possible. An alternate process, in the form
of a functional work around, may be a suitable substitute for
the actual system fix, if the level of effort to develop the
system fix is deemed to be impractical or the elapsed time to
develop and apply the fix extends beyond the reasonable time
needed. For deficiencies identified by the Fund, the use of a
functional work around as an alternate process shall be
mutually agreed upon by the parties.
FDISG will evaluate all reported referrals, to validate
deficiency status or reclassify as a system enhancement, based
on the above definition.
2. Simple Maintenance determined to be core processing.
<PAGE> 22
3. FDISG generated (i.e., internal) requests to extend system
functionality and ensure industry competitiveness.
4. Enhancements required to comply with regulatory changes;
provided, however, FDISG will make such changes to the extent
that they are technically and commercially practical and are
within the scope of the software functions, capabilities and
database. FDISG agrees to use good faith in determining
whether such changes are technically and commercially
reasonable and agrees to negotiate with the Fund in good faith
to resolve any such issues.
b. EXAMPLES OF ACTIVITY TO BE PROVIDED TO THE FUND WHICH WILL
BE PERFORMED BY THE DEDICATED PROGRAMMING TEAM:
1. Customized form output (i.e., statements, confirmation
statements, commission statements).
2. Customized reports.
3. Addition of new features (enhancements) requested by the Fund.
4. Addition of existing features not used by the Fund.
5. Addition of new funds to the fund group.
6. Customized year-end processing.
7. Conversions from other systems to FSR subsequent to initial
funds being live.
8. Clean-up/Recovery project resulting from Fund error or causes
beyond the reasonable control of either party.
9. System "fixes" - coding to correct errors attributable to
code developed and currently maintained by the dedicated
teams.
10. Customization of existing functions specific to the Fund
11. Program documentation as requested by the Fund.
Software Exclusivity. The Fund may choose to have exclusive use of
enhancement software developed by its dedicated programming staff. Such
exclusivity would extend for a period of nine (9) months from the date
the enhancement is placed into the production libraries. Software
exclusivity would be waived if the Fund accepts either of the
following conditions:
a) If prior to implementation, FDISG or other FDISG clients agree
to share in the expense of the enhancements.
b) At any time during the 9 months following implementation,
FDISG or other FDISG clients agree to share the expense for
the enhancements.
Access and Capability. The Funds' dedicated programmers will have
access and capability to update any part of the System. However,
depending on the skill set of the programmers, as well as the scope of
the requested enhancement, it may be in the best interest of both the
Fund and FDISG to utilize non-dedicated programmers to address
<PAGE> 23
certain enhancements. In addition, because many programs are shared by
multiple clients, some enhancements may require approval from those
clients. These enhancements should be handled on an item by item
basis.
III. ADDITIONAL FEES
a. If the Fund chooses to use resources in addition to the
Dedicated Programming Team to accomplish work as outlined in
Section II.b, the following rates will apply:
<TABLE>
<CAPTION>
Annual Hourly
------ ------
<S> <C> <C>
Programmer $100,000 $135/hr
Business Systems Analyst $ 90,000 $100/hr
Acceptance Tester $ 85,000 $ 90/hr
</TABLE>
These rates apply to development and customization on all
software covered under this agreement (i.e. core TA system,
IMPRESS Plus, ACE+).
b. IMPRESS Plus Maintenance and Support Fees - The Fund will be
billed a monthly fee of $64,000 (fee based on $1500 per
workstation per year for 512 workstation license). Billing to
commence on the earlier of a) first production usage of
IMPRESS Plus software or b) August 1, 1997. Maintenance and
Support Fees include:
o All third party software maintenance charges from
software licensed in Exhibit 1 of Schedule G
o Full IMPRESS Plus applications support (bug fixes,
application assistance, etc.)
o Remote Dial-in IMPRESS Plus application support (if
needed)
o Subsequent interim and major releases for all
licensed IMPRESS Plus products
o 7x24 Help Desk Support for IMPRESS Plus applications
o Full support through First Data for third party
applications licensed in Exhibit 1 of Schedule G
o Participation in IMPRESS Plus User Group
c. IMPRESS Plus Installation Fees - Billable to the Fund at
$135/hr. (Estimate for 512 IMPRESS Plus workstations is 1100
hours). Installation includes:
o IMPRESS Plus application installation
o IMPRESS Plus third party software installation
o Network Design Assistance
o Hardware Configuration Assistance
o Workflow analysis
<PAGE> 24
o Project Management
o Post Installation Support
d. On each anniversary date of this Agreement, FDISG may adjust
the hourly and annual rates to reflect salary increases
and/or to maintain competitive rates in attracting qualified
personnel. Such annual increase will not exceed seven percent
(7%).
e. IMPRESS Plus Maintenance and Support and EMPRESS Plus
Installation Fees do not include the following:
o Hardware
o Network and Server Software not listed in Exhibit 1
of Schedule G
o Customization or application integration
o Support for IMPRESS Plus applications customized or
built by the Fund (see Section 3 of Exhibit 3 of
Schedule G)
o Installation, Integration and On-going Support of
hardware, network, and software components not
included in Schedule G
o Travel Expenses for install and support staff for
on-site visits (billed separately per Schedule D)
o Application Source Code
f. IMPRESS Plus Maintenance and Support and IMPRESS Plus
Installation Fees for Separate Test or Training System.
Maintenance and Support Fees - The Fund will be billed a
monthly fee of $2,666.66 (based on $1000 per workstation per
year with a minimum 32 workstation license). Billing to
commence on first production usage of IMPRESS Plus software in
the Training or Test environment. Maintenance and Support
includes items listed in Section III.b above.
Installation Fees - Billable to the Fund at $135/hr. (Estimate
for 32 IMPRESS Plus workstations is 200 hours). Installation
includes items listed in Section III.c above.
<PAGE> 25
g. Fees for IMPRESS Plus workstations in excess of 512:
<TABLE>
<CAPTION>
o Number of workstations ordered One-time License Fee
<S> <C>
32 $1300/workstation
64 $1000/workstation
128 waived
256 waived
</TABLE>
o Maintenance and Support - $1500 per workstation per
year; billable on first production usage of IMPRESS
Plus software; includes items listed in Section III.b
above
o Installation Fees - Billable to the Fund at $135/hr;
includes items listed in Section III.c above
The Fund agrees to pay a minimum of 18 months Maintenance and
Support for each workstation in excess of 512.
<PAGE> 26
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOI SYSTEMMATIC Specs
1 26610 DEFAULT/RECALCULATION PROBLEM Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
*Recalc does not include all
purchases applied to the LOI.*
Dealer comm credit not posted in
recalc.* No adjustment code to
adjust underwriter. * Trades
outside LOI period included in
recalc.* No ability to turn off
systematic recalc.
====================================================================================================================================
====================================================================================================================================
PRODUCE CHECKS ON NT2 ACCOUNTS Specs
2 19164 WITH DIRECT REDEMPTIONS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Checks should be produced for
direct reds on NT2 accounts.
Transactions post to history, yet
no checks are produced. Update
DRDM0750 to allow.
====================================================================================================================================
====================================================================================================================================
3 25276 WIRE ORDER PROCESSING PROBLEM Specs
Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Wire order cancel/replacements
(OPR/OPC) do not update master
controls if not double Qc'd. If not
double Qc'd both trades appear
as new purchase orders.
====================================================================================================================================
====================================================================================================================================
Specs
4 24262 CERTIFICATE REPORT MISSING DATA Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
PFSR135D-R12 does not include
the work of several days in 1996.
Unable to reconcile certificate
issues without adhocs to identify
missing data.
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSCC REPORT PNSC802D - Specs
INCORRECT COMMISSIONS ON Received
5 26768 SPLIT REPS
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
This report overestimates the
commission paid to split reps.
NSCC regulation requires
settlement by this report,
resulting in overpayments.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NSCC REJECT REPORT PNSCSPSD- Specs
R01 - MULTI PAGE REJECT RECEIVED
6 26769 DELETIONS AND TRUNCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
NSCC rejects for a dealer that
run for more than one page are
dropping accounts, resulting in
inconsistencies from one page to
the next. Also truncation pro-
blems with Settlement Value,
Commission Amount and Fund Owes
Dealer amount.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ONLINE EDIT PREVENTING USE OF Specs
7 26772 CDSC EXEMPT OPTION 3. Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Exempt option 3 grosses up
CDSC on SWiPs, ensuring
consistent dollar amount
swips. For funds allowing
CDSC-free SWIPs, edit pre-
venting a shareholder
redeeming an amount
greater than 12% annually
from having a SWIP with a set
dollar amount.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOIMNT DELETING Specs
BROKER CLIENT Received
8 23849 NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Systematic completion
of an LOI removes the
Broker Client Number
form the account in
error. Absence of the
BRCN causes problems
for the dealer.
Maintenance journals
are reviewed to
identify these accounts
and re-add the BRCN.
====================================================================================================================================
====================================================================================================================================
NET INDICATOR NOT Specs
CARRYING TO QC SCREEN Received
9 26155 AND NO MISMATCH WARNING
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
When entering a wire
order redemption as a
"net" amount trade, the
net indicator is not
carried forward in the
QC process, and does not
provide a mismatch
warning. The trade then
processes as "gross",
the default.
====================================================================================================================================
====================================================================================================================================
ASSIGNMENT OF CLOSED Specs
11 26770 ACCOUNTS ON QA RECORD Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
If a QA record is
manually created and
the master account is
not designated, FSR
assigns the first
account entered. If
this account is
closed, a consolidated
statement will not
print. Results in
additional phone calls
and duplicate statement
requests.
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REASSIGNMENT OF MASTER ACCOUNT Specs
12 26771 NUMBER Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
When a master account closes
AIM would like the master
account status to be reassigned
systematically to an open account
within the QA cluster. Currently
this is a time consuming manual
process.
====================================================================================================================================
====================================================================================================================================
Specs
13 26611 DIVIDEND CONTROL REPORT PROBLEMS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
The Dividend and Capital Gain
reports do not match the
summary reports.
====================================================================================================================================
====================================================================================================================================
DUPLICATE STATEMENTS BY DBR NOT Specs
14 26612 AVAILABLE Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
AFS would like the ability to
request duplicate statements by
dealer, dealer/branch,
dealer/branch/rep. Current
functionality is by fund/account.
====================================================================================================================================
====================================================================================================================================
PAC'S NOT RUNNING ON CAPITAL Specs
16 26154 DEVELOPMENT ACCOUNTS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts opened via merger
subscription with converted PAC
information, when the PAC is
turned on, do not run. Deletion
and reestablishment of the PAC
data does not resolve the issue.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUNDSERV REDEMPTION SHOWS
INCORRECT SHARE AMOUNT ON Specs
17 25763 HISTORY Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Several examples of FundSERV
reds where the less than the
full amount of shares appear
redeemed in the line of
history, but the account is
left with a zero balance. The
correct amount is paid through
the NSCC. Control balancing
problems result.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
EXHIBIT 2 OF SCHEDULE C
IWT FUNCTIONALITY
<TABLE>
<CAPTION>
- ---------------------------- ----------------------------
NEW ACCOUNT FINANCIALS
- ---------------------------- ----------------------------
<S> <C>
CASHIERING REPORT
- ---------------------------- ----------------------------
ACCOUNT OPTIONS EXCEPTION WAIVER
- ---------------------------- ----------------------------
AUTO EXCHANGE ENHANCED QC
- ---------------------------- ----------------------------
BANK ADDRESS
- ---------------------------- ----------------------------
AIP FINANCIAL QC
- ---------------------------- ----------------------------
BANK WIRE IMBALANCE REPORT
- ---------------------------- ----------------------------
BENEFICIARY INTERNAL ASSET MOVE
- ---------------------------- ----------------------------
CHECKWRITING EXCHANGE
- ---------------------------- ----------------------------
DIVIDENDS/CAPGAIN TRANSFER
- ---------------------------- ----------------------------
SWP PURCHASES
- ---------------------------- ----------------------------
TELEPHONE RED REDEMPTIONS
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
ACCOUNT SEARCH
- ---------------------------- ----------------------------
ACCOUNT SETUP
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
DEALER
- ---------------------------- ----------------------------
DEALER OFFICE REP LIST
- ---------------------------- ----------------------------
DEALER ALPHA SEARCH
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
FINANCIAL INQUIRY
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
GROUP MASTER ADD
- ---------------------------- ----------------------------
LOI/ROA
- ---------------------------- ----------------------------
ACCOUNT LINK/UNLINK
- ---------------------------- ----------------------------
IWT ACCOUNT LIST
- ---------------------------- ----------------------------
PROCESSED ITEM LIST
- ---------------------------- ----------------------------
</TABLE>
<PAGE> 32
EXHIBIT 3 OF SCHEDULE C
AIM SEPARATE CYCLE OVERVIEW
This project removes AIM from all FSR regions, files, jobstreams, control
cards, etc. and establishes them with their own. It will allow AIM to have more
control over their processing and removes any unexpected complications caused
by dependency on the activities of other management companies.
VOLUME
o 1700+ Jobstreams (JCL, Procs, and Control Cards) to evaluate
o Approximately 70% of these will qualify for processing
(create new AIM and modify FSR)
o * Files to convert
o * GDGs
o * additional Tapes/Cartridges
o * additional DASD required
o * additional Tape Mounts
* These figures are currently being researched.
AFFECTED AREAS/DEPARTMENTS
o AIM Client Services - John Corey
o Atest - Kathy McNeil, Steve Carlson
o BOSS Application - Tom Farnsworth (B)
o Capacity Planning - Ron Larue
o Corporate Actions - Joe Viens
o DASD - John Dryer, Janet Rose (B)
o Database Administration (DBA) for On-line - Steve Powers (B)
o DCX - Linda Messore, Ann Stadtherr
o ESG - Connie Ciulla, Arthur Roy
o Express Delivery - Don Morgan
o FSR - Tom Woislow, Bill VonHandorf, Bill Quigley, Bob Reilly,
Ray Bennison
o NSCC - Carl Damelio
o Print Mail - Helene Grunes (B)
o Tape Operations - Don Chappell
o SCE - Ed Oelerich, Ellen Rhode
o Tax/CBA - Ed Boyle
o Transmissions - Frank Pitzi
Because of the large volume of work to be done and the number of departments
involved we are developing a "phased in" development and implementation
approach. This will cause the least impact to both our client and our own
internal departments. It will require tight project management and dedicated
point people both from AIM and our own departments. Each phase will migrate up
through test, acceptance and production.
<PAGE> 33
PHASE 1 - START-UP FILES
The foundation of this approach is to create six basic files with an AIM
high-level qualifier on a daily basis from the FSR system which can be used by
jobs which read them but not update them (see Phase 2). They would be deleted
at the beginning of the next day's cycle and recreated by the FSR cycle. These
files are:
P03AIM.PRIV.MASTER.DATE
P03AIM.PRIV.BATCH.DATE
P03AIM.PRIV.MASTER.FUND
P03AIM.PRIV.BATCH.FUND
P03AIM.PRIV.TRANS.ACCEPT1
P03AIM.PRIV.TRANS.DIVIDEND
The first four files would be copied from FSR files to AIM files in a new
temporary AIM job which would run daily.
The last two files, trans.accept1 and trans.dividend, currently exist with
different names in FSR. Job PFSR13DD (FSR/FED WIRE) now creates
P03FSR.TEMP.XMITOUT.ACCEPT1.AIM which contains all accept records for AIM. Job
PFSR13ED (FSR/FED WIRE) now creates P03FSR.TEMP.XMITOUT.DIV.AIM which contains
all dividend records for AIM. These files are input to AIM transmission jobs
(PFSRXCGD and PFSRXCLD) and the FSR/POST BACKUPS job (PFSR71HD).
We would rename P03FSR.PRIV.TRANS.ACCEPT1 and P03FSR.PRIV.TRANS.DIVIDEND to
P03AIM.PRIV.TRANS.ACCEPT1 and P03AIM.PRIV.TRANS.DIVIDEND in jobs PFSR13DD and
PFSR13ED. We would rename the transmission jobs to PAIMxxxx modify them
replacing FSR references with AIM, set up the appropriate schedule and move
them up the regions. We would place an override in PFSR71HD which would now
reference the PO3AIM file for backup. Once tested and QA'd by us and AIM we
would replace the FSR transmission jobs with the new AIM jobs.
RESULT OF PHASE 1
We now have three production jobs running in the AIM region and we have set up
the 6 basic AIM files which will be the basis for Phase 2.
<PAGE> 34
PHASE 2 - REPORTS, TRANSMISSIONS, AND AIM-ONLY JOBS
This phase involves converting jobs which do not update any of the master files.
They may read them and create temporary files but updating will wait for phase
3. Phase 2 jobstreams will include mainly report and transmission jobs as well
as any AIM-only jobs. We will be adding new schedule entries (CA-7) for AIM and
modifying existing FSR schedules where needed paying special attention to
triggers, requirements and dependencies. We will add new Express Delivery
entries for AIM reports and delete the AIM entries from the FSR system.
The actual migration of reports and transmission files from the FSR cycle to
the AIM cycle will be on a specific schedule. As we introduce reports to the
AIM cycle they will be available in SAR from both FSR and AIM cycles for a week
to allow AIM to review them. They will then be turned off in SAR for FSR. We
will provide AIM with a report schedule each week to aid this process.
Transmission files will be tested using record counts and selective file
compares. AIM-only jobs will also parallel for a week where feasible.
An example of a Phase 2 job is PFSR143D (FSR/AUTOEX). This job reads the batch
fund file, the batch date file and the trans.accept1 file to produce reports.
All these files are available in the AIM region.
Phase 2 work to be done described in a programmer's template includes (but is
not limited to):
Copy and rename the JCL jobs.
Modify procs and/or control cards if necessary for the test/acpt/prod
regions.
Verify that JCL, procs and control cards follow our current standards.
Create high-level overrides for FSR read-only files.
Change Express Delivery for AIM output and set up the FSR RID entry to
be deleted in n days.
Schedule the new AIM jobs with the same requirements and dependencies
as the FSR jobs but using the appropriate high level qualifier. This
requires tight control on the status of all jobs.
Change the schedules of any jobs which are dependent upon the FSR job
to be dependent upon the new AIM job. Note: this will not be the case
with all AIM jobs.
Move it up the regions testing at appropriate points.
Review the output (First Data and AIM).
After a week inhibit AIM output from FSR jobs from going to SAR. Only
AIM output from AIM jobs will be available in SAR.
The key to the success of this phase is an aggressive implementation schedule
and active participation by AIM representatives in checking and validating the
output.
RESULT OF PHASE 2
We now have report-only jobs (not associated with the actual updating of
files), most of the transmission jobs and all AIM-only jobs which are not
associated with updating files in AIM production. All converted reports and
files have been signed off by AIM. These AIM activities are also being
processed in FSR. We have gone as far as possible without updating files.
<PAGE> 35
PHASE 3 - ANCILLARY FILES AND SYSTEMS
This phase includes updating ancillary files and their associated jobstreams.
Examples of this type may include Bluesky, history, cert or check files, etc.
These files are not mainstream and tend to be localized in how they are
updated. In order to qualify for Phase 3 the Management Company must be the
high order sort key field.
There are two approaches we will use depending upon the main file's on-line
considerations. The first approach involves converting the main file once along
with all associated jobs and the other involves splitting out AIM from FSR at
the start of the cycle, updating it in AIM jobs and merging it back in FSR at
the end. Either approach will involve multiple jobs per master file.
For example, The Bluesky File is only used by 3 jobs: PFSRS07D which creates
the batch file, PFSR190D which updates the file and does an AIM-only extract,
and PFSR194D which does reports. In this case, we would split the FSR Bluesky
File into AIM-only and all other. The FSR Bluesky subsystem would then be
cloned for AIM and the result would be two separate Bluesky subsystems. Online
would access the appropriate Bluesky file.
Other subsystems may be too routed in our core to fully separate out and would
be better served breaking out AIM at the beginning of its cycle, updating in
AIM-only jobs and remerging it at the end of the cycle. Any special jobs used
for splitting out files or merging them after update will have to be backed out
in Phase 4.
All activities described in Phase 2 apply here as well.
RESULT OF PHASE 3
We have now isolated and converted any subsystems not bound to core processing.
Most AIM reports and transmissions are being produced in the AIM region. We are
updating some master files and have done everything possible surrounding the
core without touching it. We are ready for Phase 4.
<PAGE> 36
PHASE 4 - THE CORE
This phase deals with updates to our core master files, our functional
processes, converting large volume files (Share A and its splits, history, lots,
global, etc.) and includes all jobstreams that have not yet been converted.
Additionally, it includes backing out any special split or merge jobs as well
as special overrides introduced in earlier phases. This will be the largest
phase. On-line will now access all AIM-only files.
Many of the activities done in the previous phases will be performed here as
well. Because so many programs interact with the core modules there is no easy
way to break this activity up. As always we will need our AIM partners to help
in the QA activities for this hefty stage.
It is possible to combine Phases 3 and 4 if it were felt to be desirable.
However, it is our intention to have all peripheral completed before attacking
the core so there will be no unnecessary distractions. Additionally, for
development contention reasons, we would like to turn these modules over as
expeditiously as possible.
All AIM-related activities, programs, control cards, overrides, splits, merges,
etc. will be removed from all FSR jobs.
RESULT OF PHASE 4
All AIM processing is now contained in its own region and runs under its own
schedule. On-line accesses AIM-only files. FSR no longer has any AIM
processing relationship with the exception of any files which are to be merged
from both regions for transmission or system reasons.
<PAGE> 37
EXHIBIT 4 of SCHEDULE C
AUTHORIZED PERSONS REQUESTING SYSTEM MODIFICATIONS
---------------------------------------------------
John Caldwell
President, A I M Fund Services, Inc.
---------------------------------------------------
Joseph Charpentier
Assistant Vice President, A I M Fund Services, Inc.
---------------------------------------------------
Tony D. Green
Senior Vice President, A I M Fund Services, Inc.
---------------------------------------------------
Jean Miller, Director of Applications
Information Technology Services
A I M Advisors, Inc.
<PAGE> 38
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Telephone and telecommunication costs, including all lease,
maintenance and line costs
o NSCC transaction charges at $.15/per financial transaction,
$.10/per same day trade confirmations
o Shipping, Certified and Overnight mail and insurance
o Year-End form production and mailings
o Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
o Duplicating services, as pre-approved by the Fund
o Courier services
o Due Diligence Mailings
o Rendering fees as billed
o Overtime, as pre-approved by the Fund
o Temporary staff, as pre-approved by the Fund
o Travel and related expenses, as pre-approved by the Fund
o System training, as pre-approved by the Fund
o Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
o Third party audit review
o All conversion costs: including System start up costs, but
excluding costs associated with conversions between FDISG
systems
o Such other miscellaneous expenses reasonably incurred by FDISG
in performing its duties and responsibilities under this
Agreement
<PAGE> 39
SCHEDULE F
PERFORMANCE STANDARDS
I STANDARDS FOR RESOLUTION OF SYSTEM DEFICIENCIES
"SYSTEM DEFICIENCY" - A system process which does not operate according to the
design of the computer application or system specifications, and is not a
result of any act or failure to act by the Fund.
1. FIRE CALL - A System Deficiency with at least one of the following
characteristics:
1. Potential or real financial exposure in excess of $100,000, or
2. Causes the Fund to be out of compliance with a major
regulatory requirement, or
3. Causes incorrect transaction processing and/or shareholder
confirmations with no reasonable manual workaround available
either at the Fund or in FDISG's systems
FDISG Response: Analysis and resolution within 36 hours or 2 nightly
processing cycles
2. CRITICAL DEFICIENCY - A System Deficiency with at least one of the
following characteristics:
o Potential or real financial exposure estimated from
$25,000-$100,000 or,
o Manual workaround requires substantial manual effort and
carries a high potential for error
FDISG Response: Impact Analysis within 3 business days of initial
notification; Determination of problem cause within 5 business days of
initial notification; Problem resolution within an average of 30
business days of initial notification
3. NON-CRITICAL DEFICIENCY - All other System Deficiencies
FDISG Response: Impact Analysis within 3 business days of initial
notification; Determination of problem cause within an average of 15
business days of initial notification; Problem resolution and target
dates to be determined on an item-by-item basis jointly by the Fund
and FDISG.
<PAGE> 40
II STANDARDS FOR ON-LINE SYSTEMS AVAILABILITY AND RESPONSE TIME
These standards shall apply on business days of the Funds.
o On-line systems availability between 7:00 a.m. and 7:00 p.m
Central Time ("CT") - 99% of hours available measured monthly.
o Average response time (7:00 a.m. to 7:00 p.m. CT) of 3 seconds
or less, measured end-to-end, in response to the system
employed by A I M Fund Services, Inc. as of September 1, 1994
- 99% measured monthly.
III STANDARDS FOR DELIVERY OF SYSTEM REPORTS
o CRITICAL REPORTS - The following report bundles in queue and
ready to begin transmission no later than 7:00 a.m. CT each
business day - a cumulative of two late bundles permitted per
month:
EFSR047H
EFSR601H
Changes to critical report bundles must be jointly approved by
an FDISG Client Service Officer and an authorized requestor of
the Fund as listed in Exhibit 4 of Schedule C.
o All other nightly report bundles in queue and ready to begin
transmission no later than 7:00 a.m. CT each business day -
95% measured monthly.
<PAGE> 41
IV STANDARDS FOR DELIVERY OF FILE TRANSMISSIONS
o CRITICAL FILES - The following jobs in queue and ready to
begin transmission no later than 4:30 CT each business day of
the Fund - a cumulative of two late files permitted per month:
<TABLE>
<CAPTION>
JOB NAME FREQUENCY APPLICATION
-------- --------- -----------
<S> <C> <C>
PFSRXCAD Daily Cap Stock File
PFSRXCYD Daily DISC Cap Stock File
PFSRXCTD Daily DISC ACH File
PFSRXCVD Daily DISC NSCC Green Sheets File
</TABLE>
o The following jobs in queue and ready to begin transmission no
later than 4:30 CT each business day of the Fund - 95%
measured monthly
<TABLE>
<CAPTION>
JOB NAME FREQUENCY APPLICATION
-------- --------- -----------
<S> <C> <C>
PFSRXCGD Daily Acceptance File
PFSRXCKD Daily Dealer File
PFSRXCHD Daily Order File
PFSRXCID Daily Share A Master File
PFSRXCJD Daily Fund File
PFSRXCMD Daily Lot History File
PFSRXCND Daily Lot Maintenance File
PFSRXCLD Periodic. Dividend Activity
</TABLE>
The standards will not apply on business days with the
following activity: Processing of Year-end Dividend and
Capital Gain Activity, Annual Trustee Fee Payment; Year-end
File Initialization.
V STANDARDS FOR THE FUND
All inbound transmissions (i.e. SIAC, various third parties) and fund prices in
receipt by FDISG by 8:00 p.m. CT
VI RIGHT TO AUDIT
The Fund shall have the option, on an annual basis, to audit the reports used
to measure the standards listed in this Schedule F. Notice of an audit will be
given 14 days in advance, and the audit will not last more than one day.
<PAGE> 42
VII PENALTIES/INCENTIVES
FDISG agrees to achieve the performance levels specified in Schedule F,
Sections II, III, and IV, and semiannually (as of each June 30th and December
31st) to adjust the monthly Account Fee Invoice to reflect any
penalties/incentives as outlined below. Penalties for a given business day will
be applied only if the Standards of the Fund in Section V are achieved.
ON-LINE SYSTEMS AVAILABILITY - MONTHLY
For each one-tenth of 1% under 99%, the monthly Account Fees will be reduced by
the same percentage. The monthly maximum percentage penalty reduction will be
3% of the monthly bill. For each one-tenth of 1% in excess of 99% up to a
maximum of 1%, the monthly Account Fees will be increased by the same
percentage.
ON-LINE SYSTEMS AVAILABILITY - DAILY
If systems availability on any given business day is less than 80%, the monthly
account Fees will be reduced by the percentage of systems availability below
80% for that day times 1/30 of the monthly Account Fees.
REPORT AVAILABILITY - CRITICAL REPORTS
Monthly Account Fees will be reduced by $250.00 for each late instance greater
than the allowable error rate, up to a maximum of $500.00 per day. For each
month within the allowable error rate, monthly Account Fees shall be increased
by $1,000.
FILE TRANSMISSIONS - CRITICAL FILES
Monthly Account Fees will be reduced by $500.00 for each late instance greater
than the allowable error rate with a maximum penalty of $10,000 per month. For
each month within the allowable error rate, monthly Account Fees shall be
increased by $1,000.
The Performance Standards and related penalties set forth in this Schedule F
shall not apply in the event of any occurrence defined in Section 8(g) of the
Agreement.
<PAGE> 43
SCHEDULE G
IMPRESS PLUS SOFTWARE AND SUPPORT TERMS
ARTICLE 1 - SYSTEM, SUPPORT AND IMPLEMENTATION
1.1 Software and Support. FDISG shall provide or has previously provided
to the Fund and the Fund shall acquire from FDISG the right to use the computer
software programs set forth in Exhibit 1 of this Schedule G (the "Software"),
for the fees indicated in Schedule C of Amendment Number 3 to the Agreement.
Software includes related user manuals and reference guides (collectively,
"DOCUMENTATION"). One copy of the Documentation shall be provided to the Fund
at no additional cost. FDISG shall provide only the machine readable object
version of the Software and not source code. Additional terms and conditions
concerning the Software are set forth in Exhibits 1 of Schedule G ("EXHIBIT 1")
and Exhibit 1.1 of Schedule G ("EXHIBIT 1.1") (collectively, the "SOFTWARE
EXHIBITS"). Subject to the terms and conditions set forth in this Schedule G,
FDISG grants to the Fund and the Fund accepts from FDISG the non-exclusive,
non-transferable license to use the Software during the term of the Agreement
("LICENSE"). Some software components ("THIRD PARTY SOFTWARE") required to be
used with the Software were developed by a third party ("THIRD PARTY VENDOR").
Third Party Software is licensed to the Fund only pursuant to: (a) shrink
wrapped or other agreements between the Third Party Vendor and the Fund and (b)
the specifically indicated terms and conditions in this Schedule G. The
Software Exhibits shall indicate which Third Party Software the Fund is
required to obtain and license from FDISG and which Third Party Software the
Fund shall be solely responsible to obtain and license. As part of the
Software, FDISG shall provide the Fund with the interfaces set forth in Exhibit
1, between the Software and Third Party Software ("INTERFACES"). FDISG shall
provide the software support services ("SOFTWARE SUPPORT") so designated in
Exhibit 3 of Schedule G ("EXHIBIT 3"). Software Support shall include a
License to error corrections, minor enhancements and interim upgrades to the
Software which are made generally available to FDISG client's of the Software
under Software Support, but shall not include a License to substantial added
functionality, new interfaces, new architecture, new platforms or other major
software development efforts, as determined solely by FDISG.
1.2 Ownership. FDISG or its licensors shall retain tide to and ownership
of the Software, copies, derivative works, inventions, discoveries, patentable
or copyrightable matter, concepts, expertise, techniques, patents, copyrights,
trade secrets and other related legal rights ("PROPRIETARY INFORMATION"). FDISG
reserves all rights in the Proprietary Information not expressly granted to the
Fund in this Schedule G. Upon FDISG's reasonable request, the Fund shall inform
FDISG in writing of the quantity and location of any Software.
1.3 Equipment, System Implementation and Access. Fund is responsible for
acquiring, installing and maintaining the data processing and related equipment
("EQUIPMENT") set forth in Exhibit 2.1 of Schedule G with respect to production
equipment and Exhibit 2.2 of Schedule G with respect to Test/Training equipment
(collectively, ("EXHIBIT 2"). Additional terms and conditions concerning the
Equipment are set forth in Exhibit 2. The Equipment identified in Exhibit 2
represents the minimum equipment configuration required to properly operate the
Software. FDISG disclaims responsibility for the performance of the Software in
the event that the Fund utilizes equipment different than that which is set
forth in Exhibit 2. FDISG and the Fund shall (a) within a reasonable time after
the Effective Date, agree upon the tasks required to implement the Software,
Third Party Software and Equipment ("SYSTEM") and the party responsible and
time frames for each task ("SCOPE OF WORK"); (b) perform their respective
assigned tasks according to the Scope of Work; and (c) if not the party
assigned to a task, cooperate with the responsible party. To the extent the
Scope of Work is incomplete, FDISG shall follow its reasonable and customary
practices. Upon prior notice by FDISG to the Fund, the Fund shall give
reasonable access to the System to FDISG, FDISG's employees. affiliates,
representatives, agents, contractors, licensors and suppliers ("FDISG'S
AGENTS") who are providing services under the Agreement or auditing adherence
to the Agreement.
1.4 Use of Software. Fund may use the Software during the term of this
Agreement only on the Equipment and only to process the Fund's data for
internal business purposes (which shall not, for purposes of this Agreement,
include use by Fund to provide services to its customers on a service bureau
basis) and solely in connection with the Fund's use of the FDISG System and
only at the locations identified in the Agreement. If the Equipment is
inoperative due to malfunction, the license grant shall, upon written notice to
FDISG, be temporarily extended to authorize the Fund to use the Software on any
other equipment approved in writing by FDISG until the Equipment is returned to
operable condition. FDISG, in its reasonable discretion, may suspend any
Software Support while the Software is being used on such other Equipment. No
right is granted for use of the Software by any third party or by the Fund to
process for any third party, or for any other purpose whatsoever, except as
expressly provided in this paragraph. Except as otherwise specifically stated
herein, the Fund shall not modify, re-engineer, decompile or reverse engineer
the Software or otherwise attempt to obtain any source code without FDISG's
prior written consent.
<PAGE> 44
1.5 Software Installation and Acceptance. FDISG shall advise the Fund that
the Software as listed in Exhibit 1 is installed and functioning on the
Equipment ("Software Installation Date") so that implementation and training
activities can proceed. The Fund shall be deemed to have accepted the Software
sixty (60) days after Software Installation Date or sixty (60) days after the
Fund's first use of any Software component to process live production data
("SOFTWARE ACCEPTANCE DATE").
1.6 Copies of Software. The Fund may not copy the software except for
backup and archival purposes only, and the Fund shall include on all copies of
the Software all copyright and other proprietary notices or legends included on
the Software. The provisions of this Paragraph do not apply to Fund data files
in machine-readable form.
1.7 No-Export. The Software shall not be shipped or used by the Fund
outside the United States. The Fund shall comply with all applicable export and
re-export restrictions and regulations of the U.S. Department of Commerce or
other U.S. agency or authority. The Software shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
1.8 Termination. Terms and conditions of this Schedule G which require
their performance after the termination of the Agreement, including but not
limited to the License and Software use restrictions, limitations of liability,
indemnification, and confidentiality obligations, shall survive and be
enforceable despite the termination of the Agreement.
ARTICLE 2 - WARRANTIES AND REPRESENTATIONS
2.1 Software Warranties and Remedies. For the term of the Agreement, FDISG
warrants ("PERFORMANCE WARRANTY") that the Software shall perform on the
Equipment substantially in accordance with the Documentation and shall enable
the Funds to meet the requirements set forth in Section 240.17a-4 of the
Securities Exchange Act of 1934, except for Directly Obtained Third Party
Software as set forth in Section 2.2 below. The timely correction of errors
and deficiencies in the Software pursuant to Software Support shall be Fund's
sole and exclusive remedy for the Performance Warranty. FDISG warrants ("RIGHTS
WARRANTY") it has the right to license the Software in accordance with the
Agreement. Provided the Fund gives FDISG timely written notice, reasonable
assistance, including assistance from the Fund's employees, agents, independent
contractors and affiliates (collectively, "FUND'S AGENTS"), and sole authority
to defend or settle the action, then FDISG shall do the following
("INFRINGEMENT INDEMNIFICATION"): (a) defend or settle, at its expense, any
action brought against the Fund or the Fund's Agents to the extent the action is
based on a claim that the Software infringes a duly issued United States'
patent or copyright or violates a third party's proprietary trade secrets or
other similar intellectual property rights ("INFRINGEMENT"); and (b) pay
damages and costs finally awarded against the Fund or the Fund's Agents
directly attributable to such claim. FDISG shall have no Infringement
Indemnification obligation if the alleged Infringement is based upon the Fund's
use of the Software with equipment or software not furnished or approved by
FDISG or if such claim arises from FDISG's compliance with the Fund's designs,
or from the Fund's modifications of the Software. The Infringement
Indemnification states FDISG's entire liability for Infringement and shall be
the Fund's sole and exclusive remedy for the Rights Warranty.
2.2 Directly Obtained Third Party Software Warranties. All warranties for
the Directly Obtained Third Party Software identified Section 2.2 of Exhibit 1,
if any, are specifically set forth in the applicable agreements supplied by the
Third Party Vendors of such products.
2.3 Exclusion of Warranties. THE WARRANTIES SET FORTH IN PARAGRAPH 2.1
ABOVE AS TO THE SOFTWARE AND IN PARAGRAPH 2.2 ABOVE AS TO THIRD PARTY SOFTWARE
ARE IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING
OUT OF OR RELATED TO THIS SCHEDULE G. FDISG SPECIFICALLY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
2.4 Fund Responsibility. The System is an information system only,
designed to assist the Fund and the Fund's Agents in performing their
professional activities and is not intended to replace the professional skill
and judgment of the Fund's Agents. Fund shall be solely responsible for: (a)
acts or omissions of the Fund's Agents in entering data into the System,
including its accuracy and adequacy; (b) checking the correctness and accuracy
of the System output and data; and (c) any use of or reliance upon the System
output by the Fund's Agents. Except for the Infringement Indemnification and as
limited by applicable law, the Fund shall indemnify, defend and hold FDISG and
FDISG's Agents harmless from any losses, costs, damages, and liabilities,
including without limitation, reasonable attorneys' fees and court costs,
relating to any claim by any third party arising from or related to the Fund's
and the Fund's Agents' use of the System or System output.
ARTICLE 3 - MISCELLANEOUS
<PAGE> 45
3.1 Confidentiality Obligations. Each party shall keep confidential any
information relating to the other party's business which is clearly designated
or described in writing to be confidential ("CONFIDENTIAL INFORMATION"). Each
party shall keep and instruct its employees and agents to keep such information
confidential by using at least the same care and discretion as used with that
party's own confidential information. Information shall not be subject to such
confidentiality obligations if it is: (a) in the public domain, (b) known to a
party prior to the time of disclosure by the other party, (c) lawfully and
rightfully disclosed to a party by a third party on a non-confidential basis,
(d) developed by a party without reference to Confidential Information or (e)
required to be disclosed by law. If either party, its employees or agents
breaches or threatens to breach the obligations relating to use of the
Confidential Information, the other party may obtain injunctive relief, in
addition to its other remedies, inadequate monetary damages and irreparable
harm being acknowledged.
3.2 Confidential and Privileged Information. The Proprietary Information,
other FDISG software and related information, and the Agreement are
Confidential Information of FDISG and FDISG's Agents. Absent FDISG's written
permission, Fund shall not duplicate FDISG's Confidential Information. Fund
accepts full responsibility for complying with all laws, rules and regulations
concerning use and disclosure of privileged data regarding any information
placed or stored in the System or output from the System.
<PAGE> 46
EXHIBIT 1 OF SCHEDULE G
SOFTWARE
1. FDISG Software.
1.1 FDISG Software includes the following IMPRESS Plus products which are
further described in Exhibit 1.1 ("Specifications"):
IMPRESS Plus Workflow/Image Release 5.3
IMPRESS Plus Intelligent Workstations (IWT) Release 5.3 for FSR
IMPRESS Plus Customer Service System Release 5.3
1.2 Interfaces. Except as agreed in writing, FDISG shall not be required
to modify the Software or the Interfaces to accommodate changes made by the
Fund's vendor to its portion of the interface. If the Fund's vendor needs
information about the Software, then the vendor must first execute a
nondisclosure agreement in form and content reasonably acceptable to FDISG.
FDISG shall not be liable for any delay or degradation to the Software or
Equipment attributable to the Fund's use of Interfaces.
1.3 Customization. The listed products are licensed for IMPRESS Plus use
and customization only. Use of these tools to develop or customize non-IMPRESS
Plus applications is not permitted without the express written authorization of
FDISG.
2. Third Party Software.
2.1 FDISG Provided Third Party Software. The following Third Party
Software is licensed to the Fund directly by FDISG subject to the terms of the
Agreement:
2.1.1 BancTec Software. The following Third Party Software is licensed
directly to the Fund by FDISG subject to the mandatory BancTec ("BancTec")
terms and conditions set forth in Attachment 1 of this Exhibit 1 of Schedule G
("Attachment 1"), attached and incorporated by reference. To the extent that
the terms of Attachment 1 conflict with or differ from the other terms and
conditions in the Agreement, the terms of Attachment 1 shall prevail with
respect to the following BancTec Software ("BancTec Software"):
Informix Multi-User with 512 maximum users
XDP Storage Manager Multi-User with 512 maximum users
FloWare Multi-User with 512 maximum users
Application Designer Single-User with 512 maximum users
2.1.2 Pegasystems Software. The following Third Party Software is licensed
directly to the Fund by FDISG subject to the mandatory Pegasystems
("Pegasystems") terms and conditions set forth in Attachment 2 of this Exhibit
1 of Schedule G ("Attachment 2"), attached and incorporated by reference. To
the extent that the terms of Attachment 2 conflict with or differ from the
other terms and conditions in the Agreement, the terms of Attachment 2 shall
prevail with respect to the following Pegasystems Software ("Pegasystems
Software"):
Product Name Version Function
PegaSHARES RES 6.2 Workflow Engine
PegaENVIRONMENT ENV 4.2 Operating Shell
PegaPRISM Prism 5.1 Image Viewer
PegaStorage Manager Stor 2.1 Image Librarian
PegaREACH Real.0 Desktop Graphical Interface
2.2 Directly Obtained Third Party Software. The following Third Party,
Software is separately licensed by the Third Party Vendor directly to the Fund
subject to the respective terms and conditions of any "shrink-wrapped" or
<PAGE> 47
other agreements between the Third Party Vendor and the Fund. The Third Party
Software in the Required Column must be obtained by the Fund. The Third Party
Software in the Optional column is helpful but not required unless the
indicated features are being used. The Fund accepts the provisions of such
agreements, including the warranty provisions, if any, and agrees to comply
with the terms set forth in such agreements:
<TABLE>
<CAPTION>
Required: Optional:
<S> <C>
- - Microsoft DOS 6.2 or higher - ALCOM LanFax Redirector V2.15gl or greater
- - Microsoft Windows 95 or NT 4.0 (required if using fax)
- - Microsoft Office 95 or better - HiJaak PRO 2.0 or greater for Windows
- - Microsoft NT Server 3.5 (required if using fax)
- - Microsoft NTSQL Database 4.x and client - Word for Windows 6.Oc or greater (required if
Licenses using fax)
- - Microsoft TCP/IP Stack - Quarterdeck QEMM 7.X or greater (required if
- - Novell NetWare 3.11 or greater using fax)
- - SNA Server 3.0 or higher - CGS Computer Associates, Inc. Scanlib software
- - UNIX for selected Image Server platform (required for Ricoh scanners)
- - UNIX ESQL/C Compiler for selected - Powersoft PowerViewer (required for adhoc
UNIX platform reports)
- - MDI Gateway for DB2 by - 3270 Windows emulation package
MicroDecisionware Inc., A Sybase client (usually Rumba for Windows by WaUData)
- - Sybase Open Client NetLibrary for the
selected TCP/IP stack
</TABLE>
<PAGE> 48
ATTACHMENT 1 OF EXHIBIT 1 OF SCHEDULE G
TERMS AND CONDITIONS
BANCTEC
1. Each BancTec Software Package listed in Exhibit 1 of Schedule G
("Program") which is identified as "Multi-User Program" is licensed for
installation on a single network server computer which is supplied by BancTec,
FDISG, or a third party, and which is electronically linked with one or more
workstations having access to the Program. If Section 2.1.1 of Exhibit 1 of
Schedule G ("Exhibit 1") designates a maximum number of users authorized to
simultaneously access the Multi-User Program, no access will be permitted in
excess of such maximum number. In all other cases, Multi-User Program is
authorized to be accessed by all workstations which are configured to
communicate with that network server computer.
2. Each Program listed in Exhibit 1 identified as "Single-User Software"
is licensed for installation and use on a single computer.
3. Each Program listed in Exhibit 1 identified as an "Unlimited User
Program" is licensed for use by Client after ordering a copy of the Program.
Once ordered, the Fund may make unlimited copies of such Programs at no
additional charge.
4. Each Program listed in Exhibit 1 identified as a "Device Program" is
licensed for use solely to facilitate the operation of the corresponding
equipment device. If a Device Program is used for more than one device, the
license must be upgraded in accordance with Exhibit 1.
5. Each Program listed in Exhibit 1 identified as a "Development-User
Program" is licensed for installation and use on a single computer for
development and testing purposes. The license for Development-User Programs
also includes a license for production use on a single computer.
6. Each Program listed in Exhibit 1 identified as a "Production-User
Program" consists of necessary runtime modules and associated link libraries
for inclusion with custom software applications. Production-User Programs are
not licensed for use in the development of custom software applications and may
be either Multi-User or Single-User Programs.
7. Only a nontransferable, nonexclusive, perpetual license to use the
Programs and related BancTec documentation for its own internal use (including,
without limitation, providing processing services to third parties in a service
bureau or facilities management environment) is granted to the Fund.
8. BancTec or its vendors retain all title to the Programs, and all
copies thereof, and no title to the Programs, or any intellectual property in
the Programs, is being transferred; provided, however, nothing contained herein
shall give BancTec or its vendors any right, title or interest in the Software.
9. The Programs shall not be copied, except as specifically authorized
under an Exhibit to this Agreement and except for backup or archival purposes.
All such copies shall contain all copyright and other proprietary notices or
legends of BancTec or its vendors contained in the Programs delivered under
this Agreement.
10. The Programs shall not be modified, reverse assembled or decompiled by
the Fund. No attempt shall be made by the Fund to derive source code from the
Programs.
11. The Programs will not be shipped or used by FDISG or the Fund to
Africa or the Middle East. All applicable export and re-export restrictions and
regulations of the U.S. Department of Commerce or other U.S. agency or
<PAGE> 49
authority shall be complied with. The Programs shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
12. Each Program is copyrighted and contains proprietary and confidential
trade secret information of BancTec and its vendors. Each sublicensee of the
Programs shall protect the confidentiality of the Programs with at least the
same standard of care used to protect the Fund's own similar confidential
information.
13. BancTec and its vendors are each a direct and intended beneficiary of
the sublicenses granted for the Programs and may enforce such sublicenses
directly against sublicenses of the Programs.
14. Neither BancTec nor its vendors shall be liable to the Fund for any
general, special, direct, indirect, consequential, incidental, or other damages
arising out of the sublicense of the Programs.
15. The license granted to the Fund of the Programs may be terminated,
either immediately or after a notice period not exceeding thirty (30) days,
upon violation by the Fund of any of the terms or conditions of the Agreement,
including but not limited to Attachment 1.
16. Upon termination of the license grant to the Fund to use the Program
or the Agreement, the Fund shall return all copies of the Programs to FDISG.
<PAGE> 50
ATTACHMENT 2 OF EXHIBIT 1 OF SCHEDULE G
PEGASYSTEMS TERMS AND CONDITIONS
In addition to the terms of the Agreement, the following terms shall apply with
respect to the Pegasystems Software:
1. The Fund is prohibited from assigning, timesharing, renting, or
hypothecating any of the Pegasystems Software, without prior written approval
of Pegasystems.
2. The Fund is prohibited from passing or transferring any right, title,
or interest to the Pegasystems Software to any third party.
3. The Fund is prohibit from publicizing or disseminating any results of
any benchmark or other testing of the Pegasystems Software.
4. To the fullest extent permitted by applicable law, (i) Pegasystems
shall have no liability to the Fund for damages and claims, whether direct,
indirect, incidental, consequential, or punitive, and all attorneys' fees and
costs, arising from the Fund's use of the Pegasystems Software, and (ii) the
Fund shall have no rights to assert claims for damages against Pegasystems,
including claims against Pegasystems as a third party beneficiary of this
agreement.
5. Pegasystems, Inc. is a third party beneficiary of this agreement to
the extent permitted by applicable law.
<PAGE> 51
IMPRESSive Technology, IMPRESSive Results
EXHIBIT 1.1 OF SCHEDULE G
SPECIFICATIONS
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. PRODUCT OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . Page 1
II. PRODUCT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . Page 3
III. TECHNICAL OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . Page 5
IV. HIGH LEVEL OVERVIEW OF IMPRESS Plus FUNCTIONALITY . . . . . . . Page 6
A. Workflow Management
B. Image Processing
C. Intelligent Workstation Processing
D. Customer Service System
</TABLE>
This item is the property of First Data Investor Services Group (First Data) of
Boston, Massachusetts, and contains confidential and trade secret information.
This item may not be transferred from the custody or control of First Data
except as authorized by, and then only by way of loan for limited purposes. It
must be returned to First Data upon request and, in all events, upon completion
of the purpose of the loan. Neither this item nor the information it contains
may be used or disclosed to persons not having a need for such use or
disclosure consistent with the purpose of the loan, without the prior written
consent of First Data.
Copyright First Data Investor Services Group
1994, 1995, 1996
ALL RIGHTS RESERVED
This media contains unpublished, confidential, and proprietary information of
First Data Investor Services Group. No disclosure or use of any portion of
these materials may be made without the express written consent of First Data
Investor Services Group.
<PAGE> 52
IMPRESSive Technology, IMPRESSive Results
I. PRODUCT OVERVIEW
IMPRESS Plus is First Data's workstation product. Designed to be a
cost-effective customer service and workflow management solution, it
takes an integrated approach to transfer agent service and processing
applications. IMPRESS Plus uses an open, three-tiered, client/server
architecture that provides both the flexibility and scalability to
address client's customization and growth needs.
IMPRESS Plus's valuable benefits include:
o Extensive management tools and employee empowerment via
intelligent workstation technologies.
o A lower cost of processing delivery through workflow routing
and document imaging.
o Efficient customer service through reduced research time,
automated inquiry tracking and correspondence tracking.
o State-of-the-art three-tiered client/server architecture
backed by relational databases and open systems.
o Client configurable screens, dialogue scripts, and workflow
rules for those components which use the Pegaysystems
technology.
o Automated correspondence generation.
IMPRESS Plus consists of these major components:
1.) A SOPHISTICATED MANAGEMENT WORKFLOW TOOL that contributes to
streamlining the flow of information on an enterprise-wide
basis. Automated workflow processes are systematically created
and the user's process is automatically documented at the same
time. Product users can continuously examine and redesign
their current processes, managing them interactively, focusing
on improving organizational productivity and quality.
2.) AN IMAGE PROCESSING SYSTEM that has the ability to scan
incoming documents, store them digitally and automatically
route them to the appropriate processing department thereby
eliminating paper from the workflow. This system also allows
for long term storage of documents and document retrieval.
Users can modify workflow and business rules on site.
3.) AN INTELLIGENT WORKSTATION APPLICATION (IWT) that improves
data entry speed and service quality by using graphical user
interface tools that seamlessly connect the user's desktop to
First Data's transfer agent processing systems, office
automation tools, correspondence/service tracking and
policy/procedure access systems.
4.) A CUSTOMER SERVICE SYSTEM that automates and enhances the
correspondence and customer servicing areas in mutual fund
operations. Customer Service staff can log all activity, such
as phone calls, letters, transactions, etc., while interacting
with customers. The system enables the service representative
to perform transactions over the phone, create "electronic
forms" consisting of instructions for other processors, and
dynamically sends work items to other staff electronically.
The Customer Service System is designed to enhance the quality
and efficiency of the service provided to customers through
the use of state-of-the-art client/server technology.
<PAGE> 53
IMPRESSive Technology, IMPRESSive Results
II. PRODUCT BENEFITS
o Allows clients to process transactiona and customer
correspondence quickly and efficiently.
o Allows clients to be at the leading edge of technology to
maintain competitiveness and to effectively deliver quality
service.
o IMPRESS Plus enables the organization to:
- enhance service responsiveness and quality
- streamline workflow and improve document control by
eliminating paper
- increase employee productivity and participation
- have access to real-time production statistics
- enhance organization cohesion and effectiveness
- reduce manual tasks
- increase accuracy by using intelligent rules-based
applications
- reduce processing costs
- Tie Customer Service Reps to sales
o The IMPRESS Plus workflow tools allow business/operational
workflows to be set up. Automated workflow processes are
created and the user's process is automatically documented at
the same time. Product users can continuously examine and
redesign their business processes and manage them
interactively, focusing on improving organizational
productivity and quality.
o IMPRESS Plus is a scaleable and flexible solution that allows
the user to choose an enterprise-wide or a departmental
solution. It allows the client to determine an implementation
strategy that meets their strategic plans and goals.
o The IMPRESS Plus product platform allows the user to build
upon and utilize future First Data services such as
information delivery of shareholder/investor data, sales and
marketing data and customer service processing.
o IMPRESS Plus is modular to support increasing volumes,
increasing numbers of users and future advances in component
technologies. This allows for functional as well as
enterprise-wide solution.
o The IMPRESS Plus product's UNIX and NT-based platform allows
for the flexibility and growth needed to market position and
grow in the '90s to meet the demands of the mutual fund
industry.
o IMPRESS Plus is developed to run in an open systems
environment, so that the application has the ability to
incorporate diverse hardware choices, such as servers,
scanners and printers.
Additional benefits that can be provided through customization of
certain products include:
o Ability for AIM Funds operations associates to customize
interfaces, rules, scripts, etc. based on predefined "levels"
of operators. Levels may range from entire organization right
down to the individual CSR.
o Creation of an Integrated Service Backbone within the AIM
organization designed to allow consistent processing of
service items, documents, correspondence, etc. regardless of
where they originated. (Internet, scan mail, fax, phone,
etc.)
o Optional ability to link VRU to the desktop via CTI and
related technologies for more efficiency and quality in
servicing.
<PAGE> 54
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
o Ability for AIM Funds operations associates to change workflow rules,
scripts, menus, screens, etc. associated with the front end servicing
applications as they see fit to effectively run their business efficiently
and with highest regard to quality.
o Ability for AIM Funds to introduce intelligent, 'point of contact'
scripting for service associates in the front end selling process.
Through the customized rules capability, AIM Funds can set up random
sales, campaigns, or promotions. In addition, IMPRESS Plus can be told
when to prompt CSR's that selected promotions apply to the customer at
hand based on data points in the customer's profile, recent activity, or
the like.
<PAGE> 55
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
III. TECHNICAL OVERVIEW
First Data's combined Customer Service, Workflow, Image and
Intelligent Workstation (IWT) technologies enable users to display the
digitized image of a shareholder form on the workstation along with
other service, data entry and office automation applications. This
allows a user to enter information directly from the image without
having to look away from the screen or handle paper. IMPRESS Plus
will have access to First Data's transfer agent processing system,
office automation tools, and correspondence tracking and
policy/procedure access systems. First Data has developed the
workflow and image capabilities of the system to meet the needs of the
financial industry.
The Customer Service and Intelligent Workstation applications improve
data entry speed and quality by using graphical user interface tools
and LAN/WAN topologies to seamlessly connect the users desktop to the
mainframe servers. These tools and technologies will significantly
off-load transactions and query processing from the mainframe by
putting these capabilities on the desktops and empowering the
end-user.
IMPRESS Plus is designed to run in an open systems environment. It has
the ability to incorporate various workstation platforms due to a
common set of access routines and open communication architecture.
IMPRESS Plus supports high-performance networking architectures
including Novell's SPX/IPX as well as the UNIX TCP/IP standard. SNA
connectivity is supported for LU6.2, 3270, and 5250 communications.
The application supports Microsoft Windows 3.11, Windows 95, and NT
client workstations, multiple UNIX server back-end platforms, and the
latest client/server database technologies offered by the INFORMIX and
Microsoft database systems.
IMPRESS Plus contains a state-of-the-art integration API (application
programming interface) that allows other applications, including
customer-specific applications, to be seamlessly integrated into
IMPRESS Plus.
The Customer Service and IWT applications have been designed with an
object-based architecture that allows one common application to
support First Data's multiple back-end transfer agent systems. They
are designed around First Data's newly defined and implemented
corporate data model. This model represents the future data source
for First Data's common transfer agent application. This object-based
architecture allows for a high level of client customization and
integration.
<PAGE> 56
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
IV. HIGH LEVEL OVERVIEW OF IMPRESS PLUS FUNCTIONALITY
WORKFLOW MANAGEMENT FUNCTIONALITY OVERVIEW
WORKFLOW DYNAMIC WORKFLOW DESIGN AND MONITORING
MANAGEMENT
IMPRESS Plus provides a set of client/server based tools that
allow designers and authorized system users to build workflow
rules to be implemented on the work floor. These rules can be
built and implemented, then changed as required by trained
administrators.
GENERIC WORKFLOW AVAILABLE FOR ALL TRANSACTIONS
IMPRESS Plus offers a generic wordflow that can be used for
any transaction type that is designated in an operation.
Liquidations, correspondence, new accounts, etc. are just some
examples of transactions that can be processed through this
generic workflow. Should the workflow need to be customized or
altered, it can be.
WORK FLOW MONITORING
IMPRESS Plus provides the following work flow monitoring
activities in a real time mode:
o Allow users with the proper security access to
monitor the status of workflow activities or entire
work flow maps
o Monitor work-in-process items via a graphical display
which produces bar graphs in a variety of
presentation formats
o Monitor multiple statistics simultaneously on a
graphical display.
PRIORITIZATION OF WORK
IMPRESS Plus allows the setting of a default priority of items
during workflow design, and, in addition, dynamically during
work in process. During work in process, an item's priority
is based on its transaction type, its default or subsequently
manually altered priority setting, as well as its age in the
activity queue.
<PAGE> 57
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
WORKFLOW MANUAL ROUTING OF ITEMS
MANAGEMENT
(CONTINUED) IMPRESS Plus allows items to be manually routed to
workflow map destinations, or, in some cases, to
specific end users by those users with authorization
to do so.
AUTOMATIC ROUTING OF WORK
IMPRESS Plus routes work items to the next
destination on a pre-defined set of workflow rules.
These rules can be overridden by the user when
necessary.
ITEM COPY ROUTING
IMPRESS Plus allows users to make "copies" of items
within the workflow and route them to other workflow
activities. This is commonly used when an individual
processing the work determines that an item must be
forwarded to another processing department or review
the steps because it is actually two or more
transactions.
ENHANCED QUALITY CONTROL
IMPRESS Plus allows for random or pre-determined QC,
statistical QC, or other more intelligent or
selective QC means.
ENHANCED QUALITY ASSURANCE
IMPRESS Plus allows for random or pre-determined QA,
statistical QA, or other more intelligent or
selective QA means.
<PAGE> 58
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
IMAGE FUNCTIONALITY OVERVIEW
IMAGE DOCUMENT SCAN, STORE, ROUTE, AND RETRIEVE
PROCESSING
IMPRESS Plus captures, through scanning, electronic
images OF documents, stores these electronic images
on magnetic disk, and subsequently allows for
retrieval of the electronic images. IMPRESS Plus
allows images to be accessed for image quality review
and provides for the rescanning of images determined
to be of unacceptable quality. Following the
completion of scanning and any image quality review,
items are automatically routed to subsequent
activities, based on a predefined set of workflow
rules.
ELECTRONIC DOCUMENT IMAGE PRESENTATION AND
MANIPULATION
IMPRESS Plus allows images to be viewed on image-
enabled workstations. Multi-page documents can be
scrolled through, and selected portions of an image
can be magnified.
IMAGE CROSS-REFERENCE TO PHYSICAL DOCUMENT LOCATION
TRACKING
AND RETRIEVAL IMPRESS Plus is designed so that the image database
stores the location of the physical document for each
document image. This location - known as a storage
box - is entered into the system while scanning
documents.
INDEXING OF IMAGES
IMPRESS Plus automatically assigns a unique indexing
number to each document that is created through
scanning. The unique indexing number consists of a
system-generated number that can subsequently be used
to cross-reference an item to a mainframe transfer
agent system. In addition, IMPRESS Plus allows for
the alternate indexing of documents by other user-
entered fields such as fund/account.
SOURCE KEY GENERATION AND DISPLAY
Each transaction type processed within IMPRESS Plus
receives a unique identifier that can be used to link
an item to the First Data transfer agent system.
This key may also be used for document retrieval.
IMAGE SCANNING, INDEXING, AND STORAGE OF DOCUMENTS
TRACKING PROCESSED PRIOR TO IMAGE WORKFLOW
AND RETRIEVAL
(CONTINUED) Through the IMPRESS Plus merge facility, users can
scan documents processed prior to the installation of
IMPRESS Plus. The merge facility allows you to
associate documents with existing, already scanned
and indexed documents, making them available for
future inquiry using IMPRESS Plus.
IMAGE ARCHIVAL AND SUBSEQUENT RETRIEVAL FROM OPTICAL
STORAGE
IMPRESS Plus provides storage and backup functions
for data objects, is designed to handle media
management, and communicates with the database
management system. IMPRESS Plus supports archival of
items to magnetic or selected WORM (Write Once
<PAGE> 59
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
Read Many) optical media. Archival from magnetic to
optical media criteria are set during installation
time.
PRINTING OF IMAGES
IMPRESS Plus allows you to print copies of document
images at LAN-based printers equipped with the
appropriate print server components.
REAL-TIME ADMINISTRATION TOOLS
IMPRESS Plus offers an administration function that
allows authorized users to add and maintain user
profiles, funds, transaction types, locations, and
other client site-specific data. This tool also
allows authorized users to change courier status,
determine the status of work that may have been
affected by an environmental mishap, and perform
other administrative tasks.
DOCUMENT/ACTIVITY HISTORY AND AUTOMATIC UPDATE
IMPRESS Plus automatically records and stores
document/activity history statistics on audit trail
logs during workflow activities, and produces
standard reports for such items as:
o Workflow activity type
o Date/time/user of each activity
o Beginning/ending date/time of each activity
o Last update user/date/time
ADMINISTRATIVE IMPRESS Plus allows much of this activity history to
FUNCTIONS be viewed on-line in various portions of the
(CONTINUED) application.
PRODUCTIVITY REPORTING AND QUALITY/TIMELINESS
REPORTING
IMPRESS Plus logs document/activity history
statistics to produce standard productivity reports
that can be run at the client's request.
ADHOC REPORTING
IMPRESS Plus provides a suite of standard reports
that can be customized. A client can also create
their own additional reports.
QUALITY CONTROL PROCESSING
IMPRESS Plus currently allows for processing
activities to be reviewed for quality by routing them
to a Quality Control queue. Authorized users can
then QC work items. Future IMPRESS Plus releases
will include various rule-based options for selective
quality control. IMPRESS Plus prevents users from
quality control checking their own work.
ACCESS SECURITY
IMPRESS Plus image processing provides security
access in the form of user logons and user profiles.
Users must have a user ID to access the system and
are further constrained by their user profile. The
client assigns user IDs for staff to access the
system and specifies the parameters of each user
profile. These profiles limit users to performing
<PAGE> 60
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
only those specific activities for which they have
been given permission (e.g. processing, scan, etc.).
It is recommended that the logon IDs match the user's
logon ID from the First Data transfer agent system.
VALUE-ADDED SHAREHOLDER ACCOUNTING SYSTEM ACCESS
FUNCTIONALITY
IMPRESS Plus allows workstation access to First
Data's transfer agent recordkeeping system. 3270
terminal emulation is accomplished through a
Windows-based software application. Keyboard mapping
is limited to the technical capabilities of the
emulation software and/or hardware.
DYNAMIC DATA EXCHANGE (DDE) FUNCTIONALITY
IMPRESS Plus will allow for Dynamic Data Exchange at
selected points in application modules when necessary
to transfer data between processes. An example would
be the passing of a source key stored on a transfer
agent system history line to the imaging inquiry
screen for a customer service operator.
ON-LINE HELP FOR USERS
IMPRESS Plus offers a comprehensive on-line help
system that follows Microsoft Windows help system
conventions. It is designed to serve both new users
learning how to use the system and more experienced
users who may occasionally need assistance or
additional information.
SYSTEM ADMINISTRATION PROCEDURES
IMPRESS Plus System Administration is made easier for
designated IMPRESS Plus technical support staff due
to the IMPRESS Plus Systems Administration and
Procedures manual and related documentation.
<PAGE> 61
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
INTELLIGENT WORKSTATION PROCESSING
(IWT) FUNCTIONALITY OVERVIEW
INTELLIGENT IWT is designed with a graphic interface ("GUI")
WORKSTATION which will provide an intelligent real-time interface
PROCESSING to the First Data transfer agent system for the
(IWT) following transaction activity:
NEW ACCOUNT SETUP
The IWT new account setup application is designed to
provide a MS/Windows graphic interface ("GUI") to
allow an intelligent real-time interface to the First
Data transfer agent system. New account setup
functionality includes:
o new account setup entry
o dealer/rep list
o TIN list for shareholder list
o systematic city and state population based on
entry of a 5 digit zip code
o dividend/cap gain addresses
o beneficiary addresses
o statement addresses
o ABA lookup and validation
o fund list
o wire and ACH bank addresses
Financial Transactions
The IWT financial transaction entry application is
designed to provide a MS/Windows graphic interface
("GUI") to allow an intelligent real-time interface
to the First Data transfer agent system. Financial
transaction entry functionality includes:
o telephone redemptions
o telephone exchange
o exchange processing
o transfer processing
o redemption processing
o subscription processing
Group
o linking and linking of accts by ROA, confirm,
L01, plan
<PAGE> 62
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
CUSTOMER SERVICE & ENHANCED INQUIRY SYSTEMS
FUNCTIONALITY OVERVIEW
CUSTOMER The Customer Service System is a client/server based,
SERVICE graphical user interface (GUI) system designed to
SYSTEM provide an intelligent real-time application to
enable clients to improve the quality of the service
provided to both shareholders and broker dealers.
This system provides functionality in the following
areas:
CONTACT TRACKING AND MANAGEMENT
A key feature of the Customer Service System will be
the ability to track and report on all interaction
with an end customer, be it a shareholder or
broker/dealer. Designed for ease of use by a
customer service representative, this system will
allow for the logging of telephone calls and
correspondence, the creation and updating of service
items, the processing and resolution of customer
issues to insure customer satisfaction at the end of
any contact. In addition, via reason codes and aging
information, management is empowered with the use of
statistical and trending reports regarding contact
made with their customer base .
CORRESPONDENCE GENERATION AND TRACKING
The Customer Service System is closely integrated to
word processing to allow for the automatic generation
of outgoing correspondence related to service items.
A service representative can choose from customized
pre-defined letters to generate high quality customer
correspondence.
TELEPHONE TRADING
Authorized customer service system users will be able
to perform transactions while on the telephone with
customers by invoking simplified graphical data entry
screens. In addition, customer service
representatives can create electronic forms
consisting of processing instructions for other
departments and dynamically send route these work
items via the workflow manager.
CUSTOMER ENHANCED INQUIRY
SERVICE
SYSTEM The Enhanced Inquiry windows provide enriched and
(Continued) user-friendly replacements for legacy transfer agent
inquiry screens. Examples of the inquiry functions
are search for customer information by name, account
number and social security number, account
information, financial transaction history, service
history, and correspondence history.
<PAGE> 63
EXHIBIT 2.1 OF SCHEDULE G
EQUIPMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
IMPRESS IMAGE PRODUCTION HARDWARE AND SYSTEMS SOFTWARE
- ---------------------------------------------------------------------------------------------------------
PRODUCT Description QTY
<S> <C> <C> <C> <C>
486/66 DX, 200 MB HG, 16 MB RAM, Network Intface
Card, VGA Monitor, Windows 3.1, Novell LWP 5.0,
Print Servers Parallel Cable for printer 10
- ---------------------------------------------------------------------------------------------------------
HP IV+ / 5 Laser Printer with 6 MB Ram, Jet Direct for
Printers other printing can be installed 10
- ---------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 16 MB RAM, Network
Interface Card, Cornerstone DP120 Mono, Image
Accel2 PCI, Adaptec 1542cp SCSI Card, SCSI Cable,
Scan Server Terminator. 5
- ---------------------------------------------------------------------------------------------------------
Ricoh IS-520 SCSI with Ink Jet Endorser. SCSI
Mid Speed Scanner Version 5
- ---------------------------------------------------------------------------------------------------------
Sun SPARCstation 5 Model 170, 17" Color Display,
48MB RAM, 2X2.1 GB Int disks, 4mm Tape, 3.5"
Floppy Drive, CD-ROM, Solaris 2.5.1, Solarais
Answerbooks, 1 @ X1053A, Solaris 2.5.1 SDK Kit,
Kodak Scan Server Solaris 2.5.1 Motif ToolKit, SUN Professional C 4.0 3
- ---------------------------------------------------------------------------------------------------------
High Speed Scanner Kodak 923D Scanners 3
- ---------------------------------------------------------------------------------------------------------
Sun ULTRAserver 6000, 12 250MHZ CPU's, 17" Color
Display, 1.2GB RAM, 2x9 GB Int disks, DG Clariion 42
Gb Raid 5 disk array, 4mm Tape, CD-ROM, Solaris
2.5.1. Answerbooks, 35/7OGb DLT Tape Changer, 1 @
1053A, 1 @ X1052A, 2 @ X1062, Fast
Image Server Ethernet/FDDI/ATM 1
- ---------------------------------------------------------------------------------------------------------
CYGNET 1802 with (3) Philips LD6100 Optical Drives,
Jukebox Optical SCSI Cable, RS-232 Null Modem Cable 1
- ---------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 32 MB RAM, Network
Interface Adapter, 15" SVGA Monitor, Resolution of at
least 1024 x 768, Windows 3.1, Hiijack Pro for
Fax Controller PC Windows, Microsoft Word 6.X 1
- ---------------------------------------------------------------------------------------------------------
Tower Style P90 or greater, 2 GB HG, 32 MB RAM,
Network interface adapter, 14" VGA Monitor, (4)
Gamalink CP4/LSI Fax Cards (4) Lines per card,
FAX Server** QEMM 8.X, Allcom LANFAX 2.15gl/2.2gl 1
- ---------------------------------------------------------------------------------------------------------
Existing File Server with at least 500 MB of disk space
Novell File Servers available 2 or 3
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
**The fax server will require analog modem lines a max of 16 lines would
- ---------------------------------------------------------------------------------------------------------
be required for the hardware listed above.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN, Optical) (10 KVA) 1
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN) (1.4 KVA) 3
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (FAX HW) (1 KVA) 2
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 64
EXHIBIT 2.1 OF SCHEDULE G
EQUIPMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
28.8 K Modem, lines, and cables (SUN for remote
Remote Link suppor) 1
- ---------------------------------------------------------------------------------------------------------
Equipment to maintain a routed or switched network
environment with no more that 25-30 clients per
Network Hardware network segment.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Pentium 90 or greater with 24-32MB ram. Display
should optimally support Image resolutions of
1600X1280 but other resolutions can be supported for
Workstations casual use. (1280X1024) 400
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Software required on all workstations
- ---------------------------------------------------------------------------------------------------------
Windows 95, Windows NT
- ---------------------------------------------------------------------------------------------------------
Microsoft Word 6.X or Greater
- ---------------------------------------------------------------------------------------------------------
Microsoft TCP/IP Stack
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 65
EXHIBIT 2.2 OF SCHEDULE G
EQUIPMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IMPRESS Test/Training Hardware and Systems Software
- -------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION QTY
<S> <C> <C> <C> <C>
486/66 DX, 200 MB HG, 16 MB RAM, Network Intface
Card, VGA Monitor, Windows 3.1, Novell LWP 5.0,
Print Server Parallel Cable for printer 1
- -------------------------------------------------------------------------------------------------------
HP IV+/5 Laser Printer with 6 MB Ram, Jet Direct for
Printer other printing can be installed 1
- -------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 16 MB RAM, Network
Interface Card, Cornerstone DP 120 Mono, Image
Accel2 PCI, Adaptec 1542cp SCSI Card, SCSI Cable
Scan Server Terminator 1
- -------------------------------------------------------------------------------------------------------
Ricoh IS-420 SCSI with Ink Jet Endorser, SCSI
Low Speed Scanner Version 1
- -------------------------------------------------------------------------------------------------------
Sun ULTRAserver 1, 250MHZ CPU, 17" Color Display,
128MB RAM, 2X2.1 GB Int disks, SUN 4GB External
Disk Pack, (2) 4mm Tape Drives, CD-ROM, Solaris
Image Server 2.5.1, Answerbooks, 1 @ 1053A, 1 @ X1052A. 1
- -------------------------------------------------------------------------------------------------------
Phillips LD6100 Optical Drive Differential, SCSI Cable
Standalone Optical SCSI Differential Terminator. 1
- -------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 32 MB RAM, Network
Interface Adapter, 15" SVGA Monitor, Resolution of at
least 1024 X 768, Windows 3.1, Hijack Pro for
Fax Controller PC Windows, Microsoft Word 6.X 1
- -------------------------------------------------------------------------------------------------------
Tower Style P90 or greater, 1 GB HG, 32 MB RAM,
Network interface adapter, 14" VGA Monitor, (1)
Gamalink CP4/LSI Fax Cards (4) Lines per card,
FAX Server** QEMM 8.X, Allcom LANFAX 2.15gl/2.2gl 1
- -------------------------------------------------------------------------------------------------------
Existing File Server with at least 500 MB of disk space
Novell File Servers available 1
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
** THE FAX SERVER WILL REQUIRE ANALOG MODEM LINES A MAX OF 4 LINES WOULD BE
REQUIRED FOR THE HARDWARE LISTED ABOVE.
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (FAX) (1 KVA) 1
- -------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN, Optical) (3 KVA) 1
- -------------------------------------------------------------------------------------------------------
28.8 K Modem, lines, and cables (SUN for remote
Remote Link suppor) 1
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Pentium 90 or greater with 24-32 MBram. Display
should optimally support image resolutions of
1600X1280 but other resolutions can be supported for
Workstations casual use. (128X1024) 10
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Software required on all workstations
- -------------------------------------------------------------------------------------------------------
Windows 95, Windows NT
- -------------------------------------------------------------------------------------------------------
Microsoft Word 6.X or Greater
- -------------------------------------------------------------------------------------------------------
Microsoft TCP/IP Stack
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 66
EXHIBIT 3 OF SCHEDULE G
MAINTENANCE AND SUPPORT TERMS
These terms are based on an IMPRESS User network environment of up to 512 Users
and the associated server(s), as described in Exhibits 1 and 2 of this Schedule
G.
1. Software Support.FDISG shall provide the following Software support
services ("Software Support"):
1.1. FDISG shall provide the Fund with full System Administration Guide(s)
for FDISG Software.
1.2. FDISG will have a Response Center (help desk) to provide 24 hours a
day, 7 days a week to designated client contacts.
1.3. FDISG shall use reasonable efforts to resolve all Software failures
through; (a) remote support to the Fund's information systems staff ("Fund's
Staff"); (b) coordination of Third Party Vendor support (on-site or remotely);
(c) coordination of other subcontractors' actions; or (d) direct on-site
support by FDISG personnel.
1.4. FDISG shall investigate errors in the Software reported by the Fund
which prevent substantial compliance with the then current Documentation and to
initiate the corrective action, if any, which FDISG considers reasonable and
appropriate, including but not limited to temporary fixes, patches and
corrective releases to FDISG's clients generally. Notwithstanding the
foregoing, if reported errors result from or arise out of. (i) malfunctions of
equipment other than the Equipment, (ii) improper Fund operator procedure or
misuse of the system by the Fund, (iii) modifications or changes made to the
system without FDISG's prior written approval, (iv) causes beyond the
reasonable control of either party, or (v) user developed features such as
those users may develop with form generators, ad hoc report writers and user
customized screens, then FDISG shall have no responsibility for investigating
the error or making the correction, except as the parties may otherwise agree
to in writing. The Fund shall pay FDISG's then current time and materials
charges plus reasonable travel and out-of-pocket expenses incurred in
investigating and attempting to correct any such errors.
1.5. FDISG shall from time to time provide bug fixes, error corrections,
maintenance, minor enhancements, upgrades and updates to the Software which are
generally made available by FDISG to its similar customers as part of Software
Support ("Updates"). The cost of the Updates is included in the fees and other
charges identified in Schedule C of the Agreement, if the updates are supplied
to the Fund using FDISG's standard update facility. FDISG installation
assistance for the new Updates may be required and, is billable to the Fund as
an Additional Service. During the term of the Agreement, FDISG will use
reasonable efforts to provide the Fund with not less than thirty (30) days
prior written notice of FDISG's intent issue a new update of Software. The
Fund shall implement an Update within ninety (90) days of receipt. Any support
by FDISG of any prior release of the Software after such ninety (90) day period
shall be at FDISG's sole discretion and as an Additional Service.
1.6. Software Support, the License, and the Software shall not include any
modification to the Software which contains any substantial added functionality
(including any significant new interface features), as determined solely by
FDISG or any new architecture or any significant modification of the Software
which contains any substantial added or different functionality, whether or not
such new functionality is coupled with any change in software architecture or
hardware platform ("New Products"). New Products shall be provided and
licensed to the Fund as an Additional Service.
1.7. FDISG may decline to support the Software if (i) the Software or
Equipment was added to or changed without FDISG's prior approval; (ii) the Fund
does not perform the Software Support; or (iii) FDISG determines that such
support would adversely affect the Scope of Work.
1.8 Software Support for the FDISG Software shall conform to the standards
set forth in Section I of Schedule F.
2. The Fund's Maintenance and Support Responsibilities. The Fund's facility
will have all of the required security, space, electrical power source,
communications lines, heating, ventilation and cooling, and other physical
<PAGE> 67
requirements reasonably necessary for the installation and proper operation of
the Equipment. The Fund's users will first direct all questions and problem to
the Fund's Staff for proper call tracking and problem resolution. The Fund's
Staff will coordinate all facility issues at the site and will serve as primary
contact for FDISG when planning installs, upgrades and other equipment changes.
The Fund's Staff shall:
2.1. Identify designated client contacts, one for Operations and one
technical systems administrator, to function as single points of contact for
discussion, review and resolution of problems with FDISG.
2.2. Perform initial problem determination and symptom documentation.
2.3. Be responsible for all system hardware and network hardware components
and shrink-wrap software from a maintenance, support and problem resolution
standpoint.
2.4. Provide (a) data back-up and recovery, (b) preventive maintenance,
and (c) perform server administration tasks as described in the Systems
Administration Guide(s) and Third Party Software documentation.
2.5. Maintain all network and trouble-log documentation required by FDISG
or by third-party vendors. FDISG shall be allowed to review such documentation
if necessary to resolve support issues.
2.6. Be available during normal business hours and reachable for support 24
hours a day, 7 days a week, as required. The Fund shall maintain the
appropriate staff level to adequately perform the maintenance support functions
specified. This staff should have experience in network administration,
troubleshooting, Microsoft Windows, workstation memory management, and UNIX and
NT systems administration.
2.7. Consult with FDISG before performing any work that may affect the
Software or performance of the System, including installation, upgrading, or
unplanned maintenance affecting Equipment
2.8. The fund is responsible for maintenance and support of customized code
unless contracted with FDISG.
3. Support of Customized Code. (Code changed by Fund or FDISG on a customized
basis)
3.1 Software Revisions. At times, FDISG will provide software updates to
components (third party or FDISG software) to either enhance the product or
address quality deficiencies. FDISG is responsible for notifying the Fund of
these updates, and what changes have been made. The Fund is responsible for
installing the updates and modifying any code which they have customized to
accommodate these enhancements. Assistance can be provided by FDISG at stated
billable rates.
3.2 Support of Modified Code. FDISG will provide application, technical
and workflow support for modified code only on a time and materials basis.
FDISG may request the replacement of the modified code with the original code
in order to assist in the determination of the problem source.
3.3 Mainframe Resource Utilization. If customized code requires greater
FDISG mainframe CICS, DASD, or CPU resources than the base FDISG delivered
IMPRESS Plus solution, FDISG reserves the right to charge the Fund for this
usage. If there is concern that excessive resource utilization could impair
the mainframe system, FDISG reserves the right to disallow this modified code
from executing on the mainframe. The Fund is advised to consult with FDISG in
order to determine if planned customization may negatively impact mainframe
resources.
4. Roles and Responsibilities.
4.1 FDISG shall not be responsible for the support of any Directly
Obtained Third Party Software or any other third party products. The Fund is
responsible for network connectivity, Operating Systems, gateways, and other
third party products. FDISG is not responsible for hardware not listed in
Exhibit 2 of Schedule G or software not listed in Sections 1, 2.1.1, or 2.1.2
of Exhibit 1 of Schedule G, unless specifically covered in a separate
agreement.
4.2 Additional support tasks may be provided on a time and material basis.
This may include workflow analysis, customization, network design, third party
product installation and additional training.
<PAGE> 68
SCHEDULE H
ACE + SOFTWARE AND SUPPORT TERMS
ARTICLE 1 - SYSTEM, SUPPORT AND IMPLEMENTATION
1.1 Software and Support. FDISG shall provide or has previously provided
to the Fund and the Fund shall acquire from FDISG the right to use the computer
software programs set forth in Exhibit 1 of this Schedule H (the "SOFTWARE"),
for the fees indicated in Schedule C of Amendment Number 3 to the Agreement.
Software includes related user manuals and reference guides (collectively,
"DOCUMENTATION"). One copy of the Documentation shall be provided to the Fund
at no additional cost. FDISG shall provide only the machine readable object
version of the Software and not source code. Additional terms and conditions
concerning the Software are set forth in Exhibit 1 of Schedule H ("Exhibit 1").
Subject to the terms and conditions set forth in this Schedule H, FDISG grants
to the Fund and the Fund accepts from FDISG the non-exclusive, non-transferable
license to use the Software during the term of the Agreement ("LICENSE"). Some
software components ("THIRD PARTY SOFTWARE") required to be used with the
Software were developed by a third party ("THIRD PARTY VENDOR"). Third Party
Software is licensed to the Fund only pursuant to shrink wrapped or other
agreements between the Third Party Vendor and the Fund directly. Exhibit 1
shall indicate the Third Party Software that the Fund is responsible to obtain
and license. FDISG shall provide the Fund with all error corrections, minor
enhancements and interim upgrades to the Software which are made generally
available to FDISG client's of the Software ("SOFTWARE SUPPORT"), but shall not
provide a License to any substantial added functionality, new interfaces, new
architecture, new platforms or other major software development efforts, as
determined solely by FDISG.
1.2 Ownership. FDISG or its licensor shall retain title to and ownership
of the Software, copies, derivative works, inventions, discoveries, patentable
or copyrightable matter, concepts, expertise, techniques, patents, copyrights,
trade secrets and other related legal rights ("PROPRIETARY INFORMATION").
FDISG reserves all rights in the Proprietary Information not expressly granted
to the Fund in this Schedule H. Upon FDISG's request, the Fund shall inform
FDISG in writing of the quantity and location of any Software.
1.3 Equipment, System Implementation and Access. Fund is responsible for
acquiring, installing and maintaining the data processing and related equipment
("EQUIPMENT") also set forth in Exhibit 1 of Schedule H. Additional terms and
conditions concerning the Equipment are also set forth in Exhibit 1. The
Equipment identified in Exhibit 1 represents the minimum equipment requirements
to run the Software. FDISG disclaims responsibility for the performance of the
Software in the event that the Fund utilizes equipment different than that
which is set forth in Exhibit 1. FDISG and the Fund shall (a) within a
reasonable time after the Effective Date, agree upon the tasks required to
implement the Software, Third Party Software and Equipment ("SYSTEM") and the
party responsible and time frames for each task ("SCOPE OF WORK"); (b) perform
their respective assigned tasks according to the Scope of Work; and (c) if not
the party assigned to a task, cooperate with the responsible party. To the
extent the Scope of Work is incomplete, FDISG shall follow its reasonable and
customary practices. Upon prior notice by FDISG to the Fund, the Fund shall
give reasonable access to the System to FDISG, FDISG's employees, affiliates,
representatives, agents, contractors, licensors and suppliers ("FDISG'S
AGENTS") who are providing services under the Agreement or auditing adherence
to the Agreement.
1.4 Use of Software. Fund may use the Software during the term of this
Agreement only on the Equipment and only to process the Fund's data for
internal business purposes (which shall not, for purposes of this Agreement,
include use by Fund to provide services to its customers on a service bureau
basis) in connection with the Fund's use of the FDISG System and only at the
locations identified in the Agreement. If the Equipment is inoperative due to
malfunction, the license grant shall, upon written notice to FDISG, be
temporarily extended to authorize the Fund to use the Software on any other
equipment approved in writing by FDISG until the Equipment is returned to
operable condition. FDISG, in its reasonable discretion, may suspend any
Software Support while the Software is being used on such other Equipment. No
right is granted for use of the Software by any third party or by the Fund to
process for any third party, or for any other purpose whatsoever, except as
expressly provided in this paragraph..
1.5 Software Installation and Acceptance. FDISG shall advise the Fund
that the Software as listed in Exhibit 1 is installed and functioning on the
Equipment ("Software Installation Date") so that implementation and training
activities can proceed. The Fund shall be deemed to have accepted the Software
thirty (30) days after Software Installation Date or thirty (30) days after the
Fund's first use of Software to process live production data ("SOFTWARE
ACCEPTANCE DATE").
1.6 Copies of Software. The Fund may not copy the software except for
backup and archival purposes only, and the Fund shall include on all copies of
the Software all copyright and other proprietary notices or legends included on
the Software. The provisions of this Paragraph do not apply to Fund data files
in machine-readable form.
<PAGE> 69
1.7 No-Export. The Software shall not be shipped or used by the fund
outside the United States. The Fund shall comply with all applicable export
and re-export restrictions and regulations of the U.S. Department of Commerce
or other U.S. agency or authority. The Software shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
1.8 Termination. Terms and conditions of this Schedule H which require
their performance after the termination of the Agreement, including but not
limited to the License and Software use restrictions, limitations of liability,
indemnification, and confidentiality obligations, shall survive and be
enforceable despite the termination of the Agreement.
ARTICLE 2 - WARRANTIES AND REPRESENTATIONS
2.1 Software. For the term of the Agreement, FDISG warrants ("Performance
Warranty") that the Software shall perform on the Equipment substantially in
accordance with the Documentation, except for Third Party Software as set forth
in Paragraph 2.2 below. The timely correction of errors and deficiencies in
the Software shall be Fund's sole and exclusive remedy for the Performance
Warranty. FDISG warrants ("Rights Warranty") it has the right to license the
Software in accordance with the Agreement. Provided the Fund gives FDISG
timely written notice, reasonable assistance, including assistance from the
Fund's employees, agents, independent contractors and affiliates (collectively,
"Fund's Agents"), and sole authority to defend or settle the action, then FDISG
shall do the following ("Infringement Indemnification"): (a) defend or settle,
at its expense, any action brought against the Fund or the Fund's Agents to the
extent the action is based on a claim that the Software infringes a duly issued
United States' patent or copyright or violates a third party's proprietary
trade secrets or other similar intellectual property rights ("Infringement");
and (b) pay damages and costs finally awarded against the Fund or the Fund's
Agents directly attributable to such claim. FDISG shall have no Infringement
Indemnification obligation if the alleged Infringement is based upon the Fund's
use of the Software with equipment or software not furnished or approved by
FDISG or if such claim arises from FDISG's compliance with the Fund's designs,
or from the Fund's modifications of the Software. The Infringement
Indemnification states FDISG's entire liability for Infringement and shall be
the Fund's sole and exclusive remedy for the Rights Warranty.
2.2 Third Party Warranties. All warranties for the Third Party Software,
if any, are specifically set forth in the Software Exhibits, Exhibit 1 or in
the applicable agreements supplied by the Third Party Vendors. Subject to the
terms of the Exhibit 1 and to the extent permitted by FDISG's suppliers, FDISG
conveys to Fund all Third Party Software warranties made by the Third Party
Vendors.
2.3 Exclusion of Warranties. THE WARRANTIES SET FORTH IN PARAGRAPH 2.1
ABOVE AS TO THE SOFTWARE AND IN PARAGRAPH 2.2 ABOVE AS TO THIRD PARTY SOFTWARE
ARE IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING
OUT OF OR RELATED TO THIS SCHEDULE G. FDISG SPECIFICALLY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
2.4 Fund Responsibility. The System is an information system only,
designed to assist the Fund and the Fund's Agents in performing their
professional activities and is not intended to replace the professional skill
and judgment of the Fund's Agents. Fund shall be solely responsible for: (a)
acts or omissions of the Fund's Agents in entering data into the System,
including its accuracy and adequacy; (b) checking the correctness and accuracy
of the System output and data; and (c) any use of or reliance upon the System
output by the Fund's Agents. Except for the Infringement Indemnification and
as limited by applicable law, the Fund shall indemnify, defend and hold FDISG
and FDISG's Agents harmless from any losses, costs, damages, and liabilities,
including without limitation, reasonable attorneys' fees and court costs,
relating to any claim by any third party arising from or related to the Fund's
and the Fund's Agents' use of the System or System output.
ARTICLE 3 - MISCELLANEOUS
3.1 Confidentiality Obligations. Each party shall keep confidential any
information relating to the other party's business which is clearly designated
or described in writing to be confidential ("Confidential Information"). Each
party shall keep and instruct its employees and agents to keep such information
confidential by using at least the same care and discretion as used with that
party's own confidential information. Information shall not be subject to such
confidentiality obligations if it is: (a) in the public domain, (b) known to a
party, prior to the time of disclosure by the other party, (c) lawfully and
rightfully disclosed to a party by a third party on a non-confidential basis,
(d) developed by a party without reference to Confidential Information or (e)
required to be disclosed by law. If either party, its employees or agents
breaches or threatens to breach the obligations relating to use of the
Confidential
<PAGE> 70
Information, the other party may obtain injunctive relief, in addition to its
other remedies, inadequate monetary damages and irreparable harm being
acknowledged.
3.2 Confidential and Privileged Information. The Proprietary Information,
other FDISG software and related information, and the Agreement are
Confidential Information of FDISG and FDISG's Agents. Absent FDISG's written
permission, Fund shall not duplicate FDISG's Confidential Information. Fund
accepts full responsibility for complying with all laws, rules and regulations
concerning use and disclosure of privileged data regarding any information
placed or stored in the System or output from the System. Fund shall not
modify or reverse engineer the Software without FDISG's prior written consent.
<PAGE> 71
EXHIBIT 1 OF SCHEDULE H
SOFTWARE/HARDWARE
1. FDISG Software.
1.1 FDISG Software includes the following products:
ACE +
2. Third Party Software.
2.1 Directly Obtained Third-Party Software. The following Third Party
Software are separately licensed by the Third Party Vendor directly to the Fund
subject to the respective terms and conditions of "shrink-wrapped" or other
agreements between the Third Party Vendor and the Fund. The Third Party
Software in the Required Column must be obtained by the Fund. The Third Party
Software in the Optional column is helpful but not required unless the
indicated features are being used. The Fund accepts the provisions of such
agreements, including the warranty provisions, if any, and agrees to comply
with the terms set forth in such agreements:
<TABLE>
<CAPTION>
Required Optional
-------- --------
<S> <C>
Windows 3.1 Reachout PC Link (for external FDISG Support of ACE +)
DOS 3.3 or higher
</TABLE>
3. Hardware.
3.1 It is recommended that ACE + run on a PC Network (LAN) to fully use its
database features. The network should have at least 200 Mb of available disk
space. ACE + will also run on an individual local (hard) drive. PC
specifications are:
o 2 or more IBM PC Compatible 486/66 (486/33 minimum) Mhz (or
Pentium) with 16 Mb Ram (8 Mb minimum)
o 500 Mb Local (hard) drives (for backup only)
o External Fax/Modems (9600 baud or greater)(for PC faxing or
Reachout only)
o HP Laserjet 4 w/ Windows Drivers
3.2 PC/Mainframe Connection: ACE + data is based on mainframe ASCII files.
These files must be transmitted from the mainframe to LAN or PC. This can be
accomplished various ways. FDISG uses a mainframe to Gateway and BARR/SNA
transmission.
<PAGE> 72
SCHEDULE I
DISASTER RECOVERY SUMMARY
OVERVIEW
First Data's data center is a free standing building that is self sufficient
with back-up water supply, fuel storage, and diesel generator backup. The
building is protected with 24 hour on site guard protection as well as security
camera coverage throughout the property. Access is by picture ID only and all
doors are protected with card key access. Additionally, all systems are
protected by ACF2 Security. Security is audited on a regular basis.
Additionally, First Data maintains a reliable, tested disaster recovery system.
A tape backup system is set up on a daily rotation schedule with a full backup
of all data. The backup jobs run automatically every night and all tapes are
sent off-site on a daily basis to a physically secured facility. A business
resumption site has been established in our Providence facility. This Hot Site
is fully equipped with equipment, wiring and supplies in the case of a disaster
or business recovery.
A disaster is defined as any unforeseen business interruption or outage that
renders the data center or telecommunications network inoperable or
inaccessible for an undetermined amount of time suspending normal processing.
First Data's Disaster Recovery Plan provides us with the required procedures
and resource references to execute a full recovery of the data center and
associated critical processing.
This Plan addresses:
o Computer and communications equipment
o Programs, data and documentation
o Building and environmental concerns
o Fire detection and building evacuation
o Personnel, and
o Client Liaisons.
Due to contractual requirements, the data center must provide on-line
accessibility and processing availability within 24 hours of a declared
disaster. Total "downtime" is not to exceed 48 hours.
All outages that affect any client are considered priority one and all
available resources will be utilized to resolve outages, failures or slowdowns.
APPROACH
In a disaster situation, numerous issues and tasks must be addressed
immediately. To ensure all get equal attention, "teams" have been developed.
These teams are comprised of experienced First Data personnel responsible to
execute specific assigned functions critical to the overall recovery. Each team
will activate their procedures concurrently to affect a full system recovery at
the hot site. Some of the teams will act as support teams providing
<PAGE> 73
financial, administrative, and logistical coordination. The remaining recovery
teams will address more specific data and telecommunications issues.
o Support Teams
Financial/Administrative Support
Human Resources/Corporate Communications
Applications Team
Client Liaison Team
o Recovery Teams
Management Teams
Systems Software
Data Center Operations
Vendor
Telecommunications Team
Production Control
Facilities/Hardware
Each team will be headed by a team leader and a designated alternate. If, for
any reason, the team leader is unavailable, the alternate will assume
responsibility for the team notification and progress reporting to the team
management.
Dial backup capabilities, diverse routing of communications circuits and
triangulation present the best options for insuring continued system access in
the event of a communications failure. First Data can demonstrate each of these
capabilities at the client's request.
TESTING SUMMARY
First Data/FDT has contracted with Comdisco to provide hotsite disaster
recovery and backup services. First Data's overall goal is to establish network
connectivity for on-line and transmission capability, restore the application
and recover forward to a point in time and then re-process a batch cycle.
Using Comdisco's site at North Bergen, the First Data Technology (FDT)
operating system will be recovered while testing FDISG recoverability for all
network and application platforms.
The recovery will take place remotely with FDT, using the Business Recovery
Facilities (BRF) in Denver, and Westboro staff working out of the new BRF
in Tewksbury, MA. Comdisco will have staff at both BRFs, as well as North
Bergen, to assist whenever needed.
Tests are conducted annually. The test runs for 48 contiguous hours. Multiple
shifts will be required for FDT, FDISG, and Comdisco staff. Specific staff
requirements will be determined as the scope of the test becomes more clearly
defined.
The systems recovery portion of the test will take place at the Comdisco site in
New Jersey utilizing an IBM ES9000 with related peripherals. All the equipment
used in testing is
<PAGE> 74
compatible with the FDT hardware located in Denver. All tape mounts will be
handled by Comdisco staff in New Jersey, and the telecommunications testing
will be staffed by FDT with Comdisco assisting in New Jersey.
FDISG Test Objectives
o Test recoverability from both of Comdisco's new Business Recovery
Facilities
o Test transmission and network connectivity with clients
o Check and verify tape volumes stored offsite
o Benchmark the restore time for all (500) DASD volumes
o Ship all tapes from Denver to New Jersey
o Document (CDRS/FDISG) connectivity procedures
o Recover all applications to previous business cycle
<PAGE> 1
EXHIBIT 9(d)(1)
MASTER ADMINISTRATIVE SERVICES AGREEMENT
This MASTER ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made
this 28th day of February, 1997 by and between A I M ADVISORS, INC., a
Delaware corporation (the "Administrator") and AIM EQUITY FUNDS, INC., a
Maryland corporation (the "Company") with respect to the separate series set
forth from time to time in Appendix A to this Agreement (the "Portfolios").
W I T N E S S E T H:
WHEREAS, the Company is an open-end investment company registered under
the Investment Company Act of 1940, as amended ("the 1940 Act"); and
WHEREAS, the Portfolios are separate series of common stock
representing interests in separate investment portfolios of the Company; and
WHEREAS, the Company, on behalf of the Portfolios, has retained the
Administrator to provide investment advisory services pursuant to a Master
Investment Advisory Agreement which provides that the Administrator may perform
(or arrange for the performance of) accounting, shareholder servicing and other
administrative services as well as investment advisory services to the
Portfolios, and that the Administrator may receive reasonable compensation or
may be reimbursed for its costs in providing such additional services, upon the
request of the Board of Directors and upon a finding by the Board of Directors
that the provision of such services is in the best interest of the Portfolios
and their shareholders; and
WHEREAS, the Board of Directors has found that the provision of such
administrative services is in the best interest of the Portfolios and their
shareholders, and has requested that the Administrator perform such services;
NOW, THEREFORE, the parties hereby agree as follows:
1. The Administrator hereby agrees to provide, or arrange for the
provision of, any or all of the following services by the Administrator or its
affiliates:
(a) the services of a principal financial officer of the Company
(including related office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and
records of the Company and the Portfolios, including the review of
daily net asset value calculations and the preparation of tax returns;
and the services (including related office space, facilities and
equipment) of any of the personnel operating under the direction of
such principal financial officer;
(b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts; providing assistance to
shareholders in exchanges among the mutual funds managed or advised by
the Administrator; changing account designations or changing addresses;
assisting in the purchase or redemption of shares of the Portfolios;
supervising the operations of the custodian(s), transfer agent(s) or
dividend agent(s) for the Portfolios; or otherwise providing services
to shareholders of the Portfolios; and
<PAGE> 2
(c) such other administrative services as may be furnished from time
to time by the Administrator to the Company or the Portfolios at the
request of the Company's Board of Directors.
2. The services provided hereunder shall at all times be subject
to the direction and supervision of the Company's Board of Directors.
3. As full compensation for the services performed and the
facilities furnished by or at the direction of the Administrator, the
Portfolios shall reimburse the Administrator for expenses incurred by them or
their affiliates in accordance with the methodologies established from time to
time by the Company's Board of Directors. Such amounts shall be paid to the
Administrator on a quarterly basis.
4. The Administrator shall not be liable for any error of judgment
or for any loss suffered by the Company or the Portfolios in connection with
any matter to which this Agreement relates, except a loss resulting from the
Administrator's willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement.
5. The Company and the Administrator each hereby represent and
warrant, but only as to themselves, that each has all requisite authority to
enter into, execute, deliver and perform its obligations under this Agreement
and that this Agreement is legal, valid and binding, and enforceable in
accordance with its terms.
6. Nothing in this Agreement shall limit or restrict the rights of
any director, officer or employee of the Administrator who may also be a
director, officer or employee of the Company to engage in any other business or
to devote his time and attention in part to the management or other aspects of
any business, whether of a similar or a dissimilar nature, nor limit or
restrict the right of the Administrator to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association.
7. This Agreement shall continue in effect until February 28, 1999
and shall continue in effect from year to year thereafter; provided that such
continuance is specifically approved at least annually:
(a) (i) by the Company's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities of the Company
(as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Company's
directors who are not parties to this Agreement or interested persons
of a party to this Agreement, by votes cast in person at a meeting
specifically called for such purpose.
This Agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a) (4) of the 1940 Act) or, with respect to
one or more Portfolios in the event of termination of the Master Investment
Advisory Agreement relating to such Portfolio(s) between the Company and the
Administrator.
2
<PAGE> 3
8. This Agreement may be amended or modified, but only by a
written instrument signed by both the Company and the Administrator.
9. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (a) to the Administrator at Eleven Greenway
Plaza, Suite 1919, Houston, Texas 77046, Attention: President, with a copy to
the General Counsel, or (b) to the Company at Eleven Greenway Plaza, Suite
1919, Houston, Texas 77046, Attention: President, with a copy to the General
Counsel.
10. This Agreement contains the entire agreement between the
parties hereto and supersedes all prior agreements, understandings and
arrangements with respect to the subject matter hereof.
11. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
A I M ADVISORS, INC.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
---------------------------- --------------------------------
Assistant Secretary President
(SEAL)
AIM EQUITY FUNDS, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
---------------------------- --------------------------------
Assistant Secretary President
(SEAL)
3
<PAGE> 4
AIM EQUITY FUNDS, INC.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
February 28, 1997
AIM Aggressive Growth Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Weingarten Fund
4
<PAGE> 1
EXHIBIT 10(a)
[BALLARD SPAHR ANDREWS & INGERSOLL LETTERHEAD]
October 7, 1997
AIM Equity Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
Re: Securities Act File No. 2-25469
Investment Company Act File No. 811-1424
Gentlemen:
We have acted as counsel to AIM Equity Funds, Inc. (the
"Company"), a corporation organized under the laws of the State of Maryland and
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 ("1940 Act") as an open-end series management investment
company.
This opinion is given in connection with the filing by the
Company of Post-Effective Amendment No. 53 to its Registration Statement on
Form N-1A ("Registration Statement") under the Securities Act of 1933 and
Amendment No. 53 under the 1940 Act relating to the registration of an
indefinite number of shares of common stock, par value $.001 per share, of a
new class of shares known as Class B Shares of the AIM Constellation Fund, a
portfolio of the Company (the "Shares").
In connection with our giving this opinion, we have examined a
copy of the Charter of the Company, and originals or copies, certified or
otherwise identified to our satisfaction, of such other documents, corporate
records and other instruments as we have deemed necessary or advisable for
purposes of this opinion. We have also examined the prospectus included in the
Registration Statement substantially in the form in which it is to become
effective (the "Prospectus"). As to various questions of fact material to our
opinion, we have relied upon information provided by officers of the Company.
<PAGE> 2
AIM Equity Funds, Inc.
October 7, 1997
Page 2
Based on the foregoing, we are of the opinion that the Shares
to be offered for sale pursuant to the Prospectus are, to the extent of the
number of Shares authorized to be issued by the Company in its Charter, duly
authorized and, when sold, issued and paid for as described in the Prospectus,
will have been legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the captions
"General Information - Legal Counsel" in the Prospectus and "Miscellaneous
Information - Legal Matters" in the Statement of Additional Information
included in the Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE> 1
EXHIBIT 11(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
AIM Equity Funds, Inc.
We consent to the use of our reports on the AIM Blue Chip Fund (a portfolio of
AIM Equity Funds, Inc.) dated November 22, 1996 and AIM Charter Fund, AIM
Weingarten Fund, AIM Constellation Fund, AIM Aggressive Growth Fund, AIM
Capital Development Fund (portfolios of AIM Equity Funds, Inc.) dated December
6, 1996 included herein and to the references to our firm under the headings
"Financial Highlights" in the Prospectuses and "Audit Reports" in the Statement
of Additional Information.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 9, 1997
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated November 12, 1993 on the financial
statements of AIM Charter Fund, a portfolio of AIM Equity Funds, Inc., including
the financial highlights of the Retail Class and Institutional Class for the
periods indicated therein. Such financial statements and financial highlights
appear in the Statements of Additional Information which are included in Post
Effective Amendment No. 53 to the Registration Statement on Form N-1A of AIM
Equity Funds, Inc. We also consent to the references to our Firm in such
Registration Statement.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 7, 1997
<PAGE> 1
EXHIBIT 11(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 53 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 16, 1993 relating to the selected per share data ratios appearing in
the December 31, 1992 Annual Report to Shareholders of AIM Equity Funds, Inc.
(formerly AIM Funds (C)). We also consent to the reference to us under the
heading "Financial Highlights" in the Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Houston, Texas
October 8, 1997
<PAGE> 1
EXHIBIT 15(a)(1)
AMENDMENT NO. 1
AMENDED AND RESTATED MASTER DISTRIBUTION PLAN
The Amended and Restated Master Distribution Plan (the "Plan"), dated as
of June 30, 1997, pursuant to Rule 12b-1 of AIM Equity Funds, Inc., a Maryland
corporation, is hereby amended as follows:
Schedule A of the Plan is hereby deleted in its entirety and replaced
with the following:
"SCHEDULE A TO
MASTER DISTRIBUTION PLAN
AIM EQUITY FUNDS, INC.
(CLASS B SHARES)
<TABLE>
<CAPTION>
MAXIMUM
ASSET BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE FEE
<S> <C> <C> <C>
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%"
</TABLE>
All other terms and provisions of the Plan not amended herein shall
remain in full force and effect.
Dated , 1997
---------------------
AIM EQUITY FUNDS, INC.
(on behalf of its Class B Shares)
Attest: By:
--------------------- ---------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT 15(a)(2)
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM EQUITY FUNDS, INC.
(CLASS B SHARES)
(SECURITIZATION FEATURE)
SECTION 1. AIM Equity Funds, Inc. (the "Fund"), on behalf of the
series of beneficial interest set forth in Schedule A to this plan (the
"Portfolios"), may pay for distribution of the Class B Shares of such
Portfolios (the "Shares") which the Fund issues from time to time, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur expenses for and pay any
institution selected to act as the Fund's agent for distribution of the Shares
of any Portfolio from time to time (each, a "Distributor") at the rates set
forth on Schedule A hereto based on the average daily net assets of each class
of Shares subject to any applicable limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc. in effect from time to
time (the "Conduct Rules"). All such payments are the legal obligation of the
Fund and not of any Distributor or its designee.
SECTION 3.
(a) Amounts set forth in Section 2 may be used to
finance any activity which is primarily intended to result in
the sale of the Shares, including, but not limited to,
expenses of organizing and conducting sales seminars and
running advertising programs, payment of finders fees,
printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other
than existing shareholders, preparation and distribution of
advertising material and sales literature, payment of overhead
and supplemental payments to dealers and other institutions as
asset-based sales charges. Amounts set forth in Section 2
may also be used to finance payments of service fees under a
shareholder service arrangement, which may be established by
each Distributor in accordance with Section 4, and the costs
of administering the Plan. To the extent that amounts paid
hereunder are not used specifically to reimburse the
Distributor for any such expense, such amounts may be treated
as compensation for the Distributor's distribution-related
services. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund
has suspended or otherwise limited sales.
(b) Subject to the provisions of Sections 8 and 9
hereof, amounts payable pursuant to Section 2 in respect of
Shares of each Portfolio shall be paid by the Fund to the
Distributor in respect of such Shares or, if more than one
institution has acted or is acting as Distributor in respect
of such Shares, then amounts payable pursuant to Section 2 in
respect of such Shares shall be paid to each such Distributor
in proportion to the number of such Shares sold by or
attributable to such Distributor's distribution efforts in
respect of such Shares in accordance with allocation
provisions of each Distributor's distribution agreement (the
"Distributor's
<PAGE> 2
12b-1 Share") notwithstanding that such Distributor's
distribution agreement with the Fund may have been terminated.
That portion of the amounts paid under the Plan that is not
paid or advanced by the Distributor to dealers or other
institutions that provide personal continuing shareholder
service as a service fee pursuant to Section 4 shall be deemed
an asset-based sales charge.
(c) Any Distributor may assign, transfer or
pledge ("Transfer") to one or more designees (each an
"Assignee"), its rights to all or a designated portion of its
Distributor's 12b-1 Share from time to time (but not such
Distributor's duties and obligations pursuant hereto or
pursuant to any distribution agreement in effect from time to
time, if any, between such Distributor and the Fund), free and
clear of any offsets or claims the Fund may have against such
Distributor. Each such Assignee's ownership interest in a
Transfer of a specific designated portion of a Distributor's
12b-1 Share is hereafter referred to as an "Assignee's 12b-1
Portion." A Transfer pursuant to this Section 3(c) shall not
reduce or extinguish any claims of the Fund against the
Distributor.
(d) Each Distributor shall promptly notify the
Fund in writing of each such Transfer by providing the Fund
with the name and address of each such Assignee.
(e) A Distributor may direct the Fund to pay an
Assignee's 12b-1 Portion directly to such Assignee. In such
event, the Distributor shall provide the Fund with a monthly
calculation of the amount of (i) the Distributor's 12b-1
Share, and (ii) each Assignee's 12b-1 Portion, if any, for
such month (the "Monthly Calculation"). In such event, the
Fund shall, upon receipt of such notice and Monthly
Calculation from the Distributor, make all payments required
under such distribution agreement directly to the Assignee in
accordance with the information provided in such notice and
Monthly Calculation upon the same terms and conditions as if
such payments were to be paid to the Distributor.
(f) Alternatively, in connection with a Transfer,
a Distributor may direct the Fund to pay all of such
Distributor's 12b-1 Share from time to time to a depository or
collection agent designated by any Assignee, which depository
or collection agent may be delegated the duty of dividing such
Distributor's 12b-1 Share between the Assignee's 12b-1 Portion
and the balance of the Distributor's 12b-1 Share (such
balance, when distributed to the Distributor by the depository
or collection agent, the "Distributor's 12b-1 Portion"), in
which case only the Distributor's 12b-1 Portion may be subject
to offsets or claims the Fund may have against such
Distributor.
SECTION 4.
(a) Amounts expended by the Fund under the Plan
shall be used in part for the implementation by the
Distributor of shareholder service arrangements with respect
to the Shares. The maximum service fee payable to any
provider of such shareholder service shall be twenty-five
one-hundredths of one percent (0.25%) per annum of the average
daily net assets of the Shares attributable to the customers
of such service provider. All such payments are the legal
obligation of the Fund and not of any Distributor or its
designee.
- 2 -
<PAGE> 3
(b) Pursuant to this Plan, the Distributor may
enter into agreements substantially in the form attached
hereto as Exhibit A ("Service Agreements") with such
broker-dealers ("Dealers") as may be selected from time to
time by the Distributor for the provision of continuing
shareholder services in connection with Shares held by such
Dealers' clients and customers ("Customers") who may from time
to time directly or beneficially own Shares. The personal
continuing shareholder services to be rendered by Dealers
under the Service Agreements may include, but shall not be
limited to, some or all of the following: (i) distributing
sales literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers
in changing dividend options, account designations and
addresses, and enrolling in any of several retirement plans
offered in connection with the purchase of Shares; (iv)
assisting in the establishment and maintenance of Customer
accounts and records, and in the processing of purchase and
redemption transactions; (v) investing dividends and capital
gains distributions automatically in Shares; (vi) performing
sub-accounting; (vii) providing periodic statements showing a
Customer's shareholder account balance and the integration of
such statements with those of other transactions and balances
in the Customer's account serviced by such institution; (viii)
forwarding applicable prospectuses, proxy statements, reports
and notices to Customers who hold Shares; and (ix) providing
such other information and administrative services as the Fund
or the Customer may reasonably request.
(c) The Distributor may also enter into Bank
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit B ("Bank Agreements") with selected
banks and financial institutions acting in an agency capacity
for their customers ("Banks"). Banks acting in such capacity
will provide some or all of the shareholder services to their
customers as set forth in the Bank Agreements from time to
time.
(d) The Distributor may also enter into Agency
Pricing Agreements substantially in the form attached hereto
as Exhibit C ("Pricing Agreements") with selected retirement
plan service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholder services to their customers as set forth in
the Pricing Agreements from time to time.
(e) The Distributor may also enter into
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit D ("Bank Trust Department
Agreements and Brokers for Bank Trust Department Agreements")
with selected bank trust departments and brokers for bank
trust departments. Such bank trust departments and brokers
for bank trust departments will provide some or all of the
shareholder services to their customers as set forth in the
Bank Trust Department Agreements and Brokers for Bank Trust
Department Agreements from time to time.
SECTION 5. This Plan shall not take effect until (i) it has
been approved, together with any related agreements, by votes of the majority
of both (a) the Board of Directors of the Fund, and (b) those directors of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Dis-interested Directors"), cast in
person at a meeting called for the purpose of
- 3 -
<PAGE> 4
voting on this Plan or such agreements, and (ii) the execution by the Fund and
A I M Distributors, Inc. of a Master Distribution Agreement in respect of the
Shares.
SECTION 6. Unless sooner terminated pursuant to Section 8, this
Plan shall continue in effect until June 30, 1998 and thereafter shall continue
in effect so long as such continuance is specifically approved, at least
annually, in the manner provided for approval of this Plan in Section 5.
SECTION 7. Each Distributor shall provide to the Fund's Board of
Directors and the Board of Directors shall review, at least quarterly, a
written report of the amounts expended for distribution of the Shares and the
purposes for which such expenditures were made.
SECTION 8. This Plan may be terminated with respect to the
Shares of any Portfolio at any time by vote of a majority of the Dis-interested
Directors, or by vote of a majority of outstanding Shares of such Portfolio.
Upon termination of this Plan with respect to any or all such classes, the
obligation of the Fund to make payments pursuant to this Plan with respect to
such classes shall terminate, and the Fund shall not be required to make
payments hereunder beyond such termination date with respect to expenses
incurred in connection with Shares sold prior to such termination date,
provided, in each case that each of the requirements of a Complete Termination
of this Plan in respect of such class, as defined below, are met. A
termination of this Plan with respect to any or all Shares of any or all
Portfolios shall not affect the obligation of the Fund to withhold and pay to
any Distributor contingent deferred sales charges to which such distributor is
entitled pursuant to any distribution agreement. For purposes of this Section
8, a "Complete Termination" of this Plan in respect of any Portfolio shall mean
a termination of this Plan in respect of such Portfolio, provided that: (i) the
Dis-interested Directors of the Fund shall have acted in good faith and shall
have determined that such termination is in the best interest of the Fund and
the shareholders of such Portfolio; (ii) the Fund does not alter the terms of
the contingent deferred sales charges applicable to Shares outstanding at the
time of such termination; and (iii) unless the applicable Distributor at the
time of such termination was in material breach under the distribution
agreement in respect of such Portfolio, the Fund shall not, in respect of such
Portfolio, pay to any person or entity, other than such Distributor or its
designee, either the asset-based sales charge or the service fee (or any
similar fee) in respect of the Shares sold by such Distributor prior to such
termination.
SECTION 9. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated with
respect to the Shares of any or all Portfolios at any time,
without payment of any penalty, by vote of a majority of the
Dis-interested Directors or by a vote of the majority of the
outstanding Shares of such Portfolio, on not more than sixty
(60) days' written notice to any other party to the agreement;
and
(b) that such agreement shall terminate
automatically in the event of its assignment; provided,
however, that, subject to the provisions of Section 8 hereof,
if such agreement is terminated for any reason, the obligation
of the Fund to make payments of (i) the Distributor's Share in
accordance with the directions of the Distributor pursuant to
Section 3(e) or (f) hereof if there exist Assignees for all or
any portion of such Distributor's 12b-1 Share, and (ii) the
remainder of such Distributor's 12b-1 Share to such
Distributor if there are no Assignees for such Distributor's
- 4 -
<PAGE> 5
Share, pursuant to such agreement and this Plan will continue
with respect to the Shares until such Shares are redeemed or
automatically converted into another class of shares of the
Fund.
SECTION 10. This Plan may not be amended to increase materially
the amount of distribution expenses provided for in Section 2 hereof unless
such amendment is approved by a vote of at least a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Shares, and no material
amendment to the Plan shall be made unless approved in the manner provided for
in Section 5 hereof.
AIM EQUITY FUNDS, INC.
(on behalf of its Class B Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ CAROL F. RELIHAN
-------------------------------- -----------------------------
Assistant Secretary Senior Vice President
Effective as of June 14, 1995, as amended as of June 11, 1996.
Amended and restated for all Portfolios as of June 30, 1997.
- 5 -
<PAGE> 6
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM EQUITY FUNDS, INC.
(DISTRIBUTION FEE)
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE FEE
---- -------------- ------------ --------------------
<S> <C> <C> <C>
AIM Charter Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Weingarten Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Blue Chip Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Capital Development Fund 0.75% 0.25% 1.00%
(Class B Shares)
</TABLE>
- 6 -
<PAGE> 1
EXHIBIT 15(a)(5)
THIRD
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM EQUITY FUNDS, INC.
(CLASS A SHARES AND CLASS C SHARES)
SECTION 1. AIM Equity Funds, Inc. (the "Fund") on behalf of the Shares
of common stock set forth in Appendix A attached hereto (the "Portfolios") may
act as a distributor of securities of such Portfolios (the "Shares") of which
the Fund is the issuer, pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "1940 Act"), according to the terms of this Distribution Plan (the
"Plan").
SECTION 2. The Fund may incur pursuant to the terms of this Master
Distribution Plan, expenses at the rates set forth in Appendix A per annum of
the average daily net assets of the Fund attributable to the Shares, subject to
any applicable limitations imposed from time to time by applicable rules of the
National Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Appendix A may be used to finance any
activity which is primarily intended to result in the sale of the Shares,
including, but not limited to, expenses of organizing and conducting sales
seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, overhead, supplemental payments to dealers and
other institutions as asset-based sales charges. Amounts set forth in Appendix
A may also be used to finance payments of service fees under a shareholder
service arrangement to be established by A I M Distributors, Inc.
("Distributors") as the Fund's distributor in accordance with Section 4, and
the costs of administering the Plan. To the extent that amounts paid hereunder
are not used specifically to reimburse Distributors for any such expense, such
amounts may be treated as compensation for Distributors' distribution-related
services. All amounts expended pursuant to the Plan shall be paid to
Distributors and are the legal obligation of the Fund and not of Distributors.
That portion of the amounts paid under the Plan that is not paid or advanced by
Distributors to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section 4 shall be deemed an
asset-based sales charge. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund has suspended or
otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan
shall be used in part for the implementation by Distributors
of shareholder service arrangements with respect to the
Shares. (With respect to AIM Charter Fund, AIM Constellation
Fund and AIM Weingarten Fund, the previous sentence applies
only to shares purchased on or after September 9, 1986.) The
maximum service fee paid to any service provider shall be
twenty-five one-hundredths of one percent (0.25%) per annum
of the average daily net assets of the Fund attributable to
the Shares owned by the customers of such service provider.
<PAGE> 2
(b) Pursuant to this program, Distributors may enter
into agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by
Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Shares to the Dealers' clients and customers ("Customers") to
Customers who may from time to time directly or beneficially
own Shares. The distribution-related personal continuing
shareholder services to be rendered by Dealers under the
Service Agreements may include, but shall not be limited to,
the following: (i) distributing sales literature; (ii)
answering routine Customer inquiries concerning the Fund and
the Shares; (iii) assisting Customers in changing dividend
options, account designations and addresses, and in enrolling
into any of several retirement plans offered in connection
with the purchase of Shares; (iv) assisting in the
establishment and maintenance of customer accounts and
records, and in the processing of purchase and redemption
transactions; (v) investing dividends and capital gains
distributions automatically in Shares; and (vi) providing
such other information and services as the Fund or the
Customer may reasonably request.
(c) Distributors may also enter into Bank
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit B ("Bank Agreements") with
selected banks acting in an agency capacity for their
customers ("Banks"). Banks acting in such capacity will
provide some or all of the shareholder services to their
customers as set forth in the Bank Agreements from time to
time.
(d) Distributors may also enter into Variable Group
Annuity Contractholder Service Agreements substantially in
the form attached hereto as Exhibit C ("Variable Contract
Agreements") (with respect to AIM Charter Fund, AIM
Constellation Fund and AIM Weingarten Fund) with selected
insurance companies ("Companies") offering variable annuity
contracts to employers as funding vehicles for retirement
plans qualified under Section 401(a) of the Internal Revenue
Code, where amounts contributed under such plans are invested
pursuant to such variable annuity contracts in Shares of the
Fund. The Companies receiving payments under such Variable
Contract Agreements will provide specialized services to
contractholders and plan participants, as set forth in the
Variable Contract Agreements from time to time.
(e) Distributors may also enter into Agency Pricing
Agreements substantially in the form attached hereto as
Exhibit D ("Pricing Agreements") with selected retirement
plan service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholder services to their customers as set forth in
the Pricing Agreements from time to time.
(f) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit E ("Bank Trust Department Agreements and Brokers
for Bank Trust Department Agreements") with selected
bank trust departments and brokers for bank trust
departments. Such bank trust departments and brokers for bank
trust departments will provide some or all of the shareholder
services to their customers as set forth in the Bank Trust
Department Agreements and Brokers for Bank Trust Department
Agreements.
-2-
<PAGE> 3
SECTION 5. Any amendment to this Plan that requires the approval of
the shareholders of a Class pursuant to Rule 12b-1 under the 1940 Act shall
become effective as to such Class upon the approval of such amendment by a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
such Class, provided that the Board of Directors of the Fund has approved such
amendment in accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements
related to this Plan shall become effective immediately upon the receipt by the
Fund of both (a) the affirmative vote of a majority of the Board of Directors
of the Fund, and (b) the affirmative vote of a majority of those directors of
the Fund who are not "interested persons" of the Fund (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Dis-interested Directors"), cast in
person at a meeting called for the purpose of voting on this Plan or such
agreements. Notwithstanding the foregoing, no such amendment that requires the
approval of the shareholders of a Class of a Fund shall become effective as to
such Class until such amendment has been approved by the shareholders of such
Class in accordance with the provisions of Section 5 of this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan
shall continue in effect until June 30, 1998 and thereafter shall continue in
effect so long as such continuance is specifically approved, at least annually,
in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Directors
and the Board of Directors shall review, at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made.
SECTION 9. This Plan may be terminated at any time by vote of a
majority of the Dis-interested Directors, or by vote of a majority of the
outstanding voting securities of the Shares. If this Plan is terminated, the
obligation of the Fund to make payments pursuant to this Plan will also cease
and the Fund will not be required to make any payments beyond the termination
date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority
of the Dis-interested Directors or by a vote of the
outstanding voting securities of the Fund attributable to the
Shares, on not more than sixty (60) days' written notice to
any other party to the agreement; and
(b) that such agreement shall terminate
automatically in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
-3-
<PAGE> 4
AIM EQUITY FUNDS, INC.
(on behalf of its Class A Shares and Class C Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------------ --------------------------
Assistant Secretary President
Effective as of September 27, 1993, as amended as of March 8, 1994, and as
further amended as of September 10, 1994 (effective October 4, 1993, with
respect to AIM Constellation Fund). Amended and restated as of June 15, 1995
(effective as of December 4, 1995, with respect to AIM Blue Chip Fund and AIM
Capital Development Fund).
Amended and restated for all Portfolios as of June 30, 1997, and as further
amended and restated for all Portfolios as of August 4, 1997.
-4-
<PAGE> 5
APPENDIX A
TO
MASTER DISTRIBUTION PLAN
OF
AIM EQUITY FUNDS, INC.
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan for
each Portfolio as designated below, a Distribution Fee* determined by applying
the annual rate set forth below as to each Portfolio (or Class A or Class C
thereof) to the average daily net assets of the Portfolio (or Class A or Class
C thereof) for the plan year, computed in a manner used for the determination
of the offering price of shares of the Portfolio (or Class A or Class C).
<TABLE>
<CAPTION>
MINIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
--------- ------ --- ---
<S> <C> <C> <C>
(Class A Shares)
AIM Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Charter Fund 0.05% 0.25% 0.30%
AIM Constellation Fund 0.05% 0.25% 0.30%
AIM Weingarten Fund 0.05% 0.25% 0.30%
AIM Blue Chip Fund 0.10% 0.25% 0.35%
AIM Capital Development Fund 0.10% 0.25% 0.35%
MAXIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
--------- ------ --- ---
(Class C Shares)
AIM Charter Fund 0.75% 0.25% 1.00%
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
</TABLE>
- ------------------------
* The Distribution Fee is payable apart from the sales charge, if any,
as stated in the current prospectus for the applicable Class and the
applicable Portfolio.
-5-
<PAGE> 1
EXHIBIT 15(a)(6)
SECOND
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM EQUITY FUNDS, INC.
(CLASS A SHARES)
SECTION 1. AIM Equity Funds, Inc. (the "Fund") on behalf of the
Shares of common stock set forth in Appendix A attached hereto (the
"Portfolios") may act as a distributor of securities of such Portfolios (the
"Shares") of which the Fund is the issuer, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"), according to the terms of this
Distribution Plan (the "Plan").
SECTION 2. Amounts set forth in Appendix A may be used to finance any
activity which is primarily intended to result in the sale of the Shares,
including, but not limited to, expenses of organizing and conducting sales
seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, overhead, supplemental payments to dealers and
other institutions as asset-based sales charges. Amounts set forth in Appendix
A may also be used to finance payments of service fees under a shareholder
service arrangement to be established by A I M Distributors, Inc.
("Distributors") as the Fund's distributor in accordance with Section 3, and
the costs of administering the Plan. To the extent that amounts paid hereunder
are not used specifically to reimburse Distributors for any such expense, such
amounts may be treated as compensation for Distributors' distribution-related
services. All amounts expended pursuant to the Plan shall be paid to
Distributors and are the legal obligation of the Fund and not of Distributors.
That portion of the amounts paid under the Plan that is not paid or advanced by
Distributors to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section 3 shall be deemed an
asset-based sales charge. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund has suspended or
otherwise limited sales.
SECTION 3.
(a) Amounts expended by the Fund under the Plan shall
be used in part for the implementation by Distributors of
shareholder service arrangements with respect to the Shares.
(With respect to AIM Charter Fund, AIM Constellation Fund and AIM
Weingarten Fund, the previous sentence applies only to shares
purchased on or after September 9, 1986.) The maximum service fee
paid to any service provider shall be twenty-five one-hundredths
of one percent (0.25%) per annum of the average daily net assets
of the Fund attributable to the Shares owned by the customers of
such service provider.
(b) Pursuant to this program, Distributors may enter
into agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by Distributors
for the provision of distribution-related personal shareholder
services in connection
<PAGE> 2
with the sale of Shares to the Dealers' clients and customers
("Customers") to Customers who may from time to time directly or
beneficially own Shares. The distribution-related personal
continuing shareholder services to be rendered by Dealers under
the Service Agreements may include, but shall not be limited to,
the following: (i) distributing sales literature; (ii) answering
routine Customer inquiries concerning the Fund and the Shares;
(iii) assisting Customers in changing dividend options, account
designations and addresses, and in enrolling into any of several
retirement plans offered in connection with the purchase of
Shares; (iv) assisting in the establishment and maintenance of
customer accounts and records, and in the processing of purchase
and redemption transactions; (v) investing dividends and capital
gains distributions automatically in Shares; and (vi) providing
such other information and services as the Fund or the Customer
may reasonably request.
(c) Distributors may also enter into Bank Shareholder
Service Agreements substantially in the form attached hereto as
Exhibit B ("Bank Agreements") with selected banks acting in an
agency capacity for their customers ("Banks"). Banks acting in
such capacity will provide some or all of the shareholder
services to their customers as set forth in the Bank Agreements
from time to time.
(d) Distributors may also enter into Variable Group
Annuity Contractholder Service Agreements substantially in the
form attached hereto as Exhibit C ("Variable Contract
Agreements") (with respect to AIM Charter Fund, AIM Constellation
Fund and AIM Weingarten Fund) with selected insurance companies
("Companies") offering variable annuity contracts to employers as
funding vehicles for retirement plans qualified under Section
401(a) of the Internal Revenue Code, where amounts contributed
under such plans are invested pursuant to such variable annuity
contracts in Shares of the Fund. The Companies receiving
payments under such Variable Contract Agreements will provide
specialized services to contractholders and plan participants, as
set forth in the Variable Contract Agreements from time to time.
(e) Distributors may also enter into Agency Pricing
Agreements substantially in the form attached hereto as Exhibit D
("Pricing Agreements") with selected retirement plan service
providers acting in an agency capacity for their customers
("Retirement Plan Providers"). Retirement Plan Providers acting
in such capacity will provide some or all of the shareholder
services to their customers as set forth in the Pricing
Agreements from time to time.
(f) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto as
Exhibit E ("Bank Trust Department Agreements and Brokers for Bank
Trust Department Agreements") with selected bank trust
departments and brokers for bank trust departments. Such bank
trust departments and brokers for bank trust departments will
provide some or all of the shareholder services to their
customers as set forth in the Bank Trust Department Agreements
and Brokers for Bank Trust Department Agreements.
- 2 -
<PAGE> 3
SECTION 4. This Plan shall not take effect until it has been approved
by a vote of at least a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Shares.
SECTION 5. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority of
both (a) the Board of Directors of the Fund, and (b) those directors of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Dis-interested Directors"), cast in
person at a meeting called for the purpose of voting on this Plan or such
agreements.
SECTION 6. Unless sooner terminated pursuant to Section 8, this Plan
shall continue in effect until June 30, 1998 and thereafter shall continue in
effect so long as such continuance is specifically approved, at least annually,
in the manner provided for approval of this Plan in Section 5.
SECTION 7. Distributors shall provide to the Fund's Board of
Directors and the Board of Directors shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 8. This Plan may be terminated at any time by vote of a
majority of the Dis-interested Directors, or by vote of a majority of the
outstanding voting securities of the Shares. If this Plan is terminated, the
obligation of the Fund to make payments pursuant to this Plan will also cease
and the Fund will not be required to make any payments beyond the termination
date even with respect to expenses incurred prior to the termination date.
SECTION 9. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Dis-
interested Directors or by a vote of the outstanding voting
securities of the Fund attributable to the Shares, on not more
than sixty (60) days' written notice to any other party to the
agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 10. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 4 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 5 hereof.
- 3 -
<PAGE> 4
AIM EQUITY FUNDS, INC.
(on behalf of its Class A Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ CAROL F. RELIHAN
-------------------------- ---------------------------------
Assistant Secretary Senior Vice President
Effective as of September 27, 1993, as amended as of March 8, 1994, and as
further amended as of September 10, 1994 (effective October 4, 1993, with
respect to AIM Constellation Fund). Amended and restated as of June 15, 1995
(effective as of December 4, 1995, with respect to AIM Blue Chip Fund and AIM
Capital Development Fund).
Amended and restated for all Portfolios as of June 30, 1997.
- 4 -
<PAGE> 5
APPENDIX A
TO
MASTER DISTRIBUTION PLAN
OF
AIM EQUITY FUNDS, INC.
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each
Portfolio (or Class A thereof) as designated below, a Distribution Fee*
determined by applying the annual rate set forth below as to each Portfolio (or
Class A thereof) to the average daily net assets of the Portfolio (or Class A
thereof) for the plan year, computed in a manner used for the determination of
the offering price of shares of the Portfolio (or Class A).
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
--------- -----------
<S> <C>
AIM Aggressive Growth Fund (Class A Shares) . . . . . . . . . 0.25%
AIM Charter Fund (Class A Shares) . . . . . . . . . . . . . . 0.30%
AIM Constellation Fund (Class A Shares) . . . . . . . . . . . 0.30%
AIM Weingarten Fund (Class A Shares) . . . . . . . . . . . . . 0.30%
AIM Blue Chip Fund (Class A Shares) . . . . . . . . . . . . . 0.35%
AIM Capital Development Fund (Class A Shares) . . . . . . . . 0.35%
</TABLE>
- -------------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Class and the
applicable Portfolio. The amount of the Distribution Fee is subject to
any applicable limitations imposed from time to time by applicable rules
of the National Association of Securities Dealers, Inc.
- 5 -
<PAGE> 1
EXHIBIT 18(a)
SECOND AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Second Amended and Restated Multiple Class Plan (the "Plan")
adopted in accordance with Rule 18f-3 under the Act shall govern the
terms and conditions under which the Funds may issue separate Classes
of Shares representing interests in one or more Portfolios of each
Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. CDSC - contingent deferred sales charge.
c. CDSC Period - the period of years following acquisition of
Shares during which such Shares may be assessed a CDSC upon
redemption.
d. Class - a class of Shares of a Fund representing an interest
in a Portfolio.
e. Class A Shares - shall mean those Shares designated as Class
A Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class A Shares for purposes of this Plan.
f. Class B Shares - shall mean those Shares designated as Class
B Shares in the Fund's organizing documents.
g. Class C Shares - shall mean those Shares designated as Class
C Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class C Shares for purposes of this Plan.
h. Directors - the directors or trustees of a Fund.
i. Distribution Expenses - expenses incurred in activities which
are primarily intended to result in the distribution and sale
of Shares as defined in a Plan of Distribution and/or
agreements relating thereto.
j. Distribution Fee - a fee paid by a Fund to the Distributor
to compensate the Distributor for Distribution Expenses.
k. Distributor - A I M Distributors, Inc. or Fund Management
Company, as applicable.
l. Fund - those investment companies advised by A I M Advisors,
Inc. which have adopted this Plan.
1
<PAGE> 2
m. Institutional Shares - shall mean Shares of a Fund
representing an interest in a Portfolio offered for sale to
institutional customers as may be approved by the Directors
from time to time and as set forth in the Fund's prospectus.
n. Plan of Distribution - Any plan adopted under Rule 12b-1
under the Act with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of a Fund constituting a
separate investment portfolio of the Fund.
p. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders
and/or the maintenance of shareholder accounts.
q. Share - a share of common stock of or beneficial interest in
a Fund, as applicable.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear
directly any and all Distribution Fees and/or Service Fees
payable by such Class pursuant to a Plan of Distribution
adopted by the Fund with respect to such Class.
b. Transfer Agency and Shareholder Recordkeeping Fees - Each
Class shall bear directly the transfer agency fees and
expenses and other shareholder recordkeeping fees and
expenses specifically attributable to that Class; provided,
however, that where two or more Classes of a Portfolio pay
such fees and/or expenses at the same rate or in the same
amount, those Classes shall bear proportionately such fees
and expenses based on the relative net assets attributable to
each such Class.
c. Allocation of Other Expenses - Each Class shall bear
proportionately all other expenses incurred by a Fund based
on the relative net assets attributable to each such Class.
d. Allocation of Income, Gains and Losses - Except to the extent
provided in the following sentence, each Portfolio will
allocate income and realized and unrealized capital gains and
losses to a Class based on the relative net assets of each
Class. Notwithstanding the foregoing, each Portfolio that
declares dividends on a daily basis will allocate income on
the basis of settled shares.
e. Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter or any other provider of services to the
Portfolio may waive or reimburse the expenses of a particular
Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below will apply for the following
Classes offered by a Fund with respect to a Portfolio. The provisions
of the Fund's prospectus describing the distribution and servicing
arrangements in detail are incorporated herein by this reference.
2
<PAGE> 3
a. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Directors and set forth in the Fund's prospectus,
may be reduced or eliminated for certain money market fund
shares, for larger purchases, under a combined purchase
privilege, under a right of accumulation, under a letter of
intent or for certain categories of purchasers as permitted
by Rule 22(d) of the Act and as set forth in the Fund's
prospectus. Class A Shares that are not subject to a
front-end sales charge as a result of the foregoing shall be
subject to a CDSC for the CDSC Period set forth in
Section 5(a) of this Plan if so provided in the Fund's
prospectus. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with
Rule 22c-1 and Section 22(d) of the Act and the rules and
regulations thereunder. Class A Shares shall be subject to
ongoing Service Fees and/or Distribution Fees approved from
time to time by the Directors and set forth in the Fund's
prospectus. Although AIM Cash Reserve Shares, AIM Limited
Maturity Treasury Shares, AIM Tax-Free Intermediate Shares
and shares of AIM Tax-Exempt Bond Fund of Connecticut and AIM
Tax Exempt Cash Fund are not designated as "Class A", they
are substantially similar to Class A Shares as defined herein
and shall be deemed to be Class A Shares for the purposes of
this Plan.
b. Class B Shares. Class B Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(b), (iii) subject to ongoing Service Fees
and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus, and (iv)
converted to Class A Shares eight years from the end of the
calendar month in which the shareholder's order to purchase
was accepted as set forth in the Fund's prospectus.
c. Class C Shares. Class C Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(c), and (iii) subject to ongoing Service
Fees and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus.
d. Institutional Shares. Institutional Shares shall be (i)
offered at net asset value, (ii) offered only to certain
categories of institutional customers as approved from time
to time by the Directors and as set forth in the Fund's
prospectus and (iii) may be subject to ongoing Service Fees
and/or Distribution Fees as approved from time to time by the
Directors and set forth in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that
do not incur a front-end sales charge and of Class B Shares and Class
C Shares as follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be
18 months. The CDSC Rate shall be as set forth in the Fund's
prospectus, the relevant portions of which are incorporated
herein by this reference. No CDSC shall be imposed on Class A
Shares unless so provided in a Fund's prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares
shall be six years. The CDSC Rate for the Class B Shares
shall be as set forth in the Fund's prospectus, the relevant
portions of which are incorporated herein by this reference.
3
<PAGE> 4
c. Class C Shares. The CDSC Period for the Class C Shares shall
be one year. The CDSC Rate for the Class C Shares shall be as
set forth in the Fund's prospectus, the relevant portions of
which are incorporated herein by reference.
d. Method of Calculation. The CDSC shall be assessed on an
amount equal to the lesser of the then current market value
or the cost of the Shares being redeemed. No sales charge
shall be imposed on increases in the net asset value of the
Shares being redeemed above the initial purchase price. No
CDSC shall be assessed on Shares derived from reinvestment of
dividends or capital gains distributions. The order in which
Shares are to be redeemed when not all of such Shares would
be subject to a CDSC shall be determined by the Distributor
in accordance with the provisions of Rule 6c-10 under the
Act.
e. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares and disclosed in
the Fund's prospectus or statement of additional information
and, for the Class A Shares, as allowed under Rule 6c-10
under the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Funds as follows:
a. Class A Shares may be exchanged for Class A Shares of another
Portfolio, subject to certain limitations set forth in the
Fund's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this
reference.
b. Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
c. Class C Shares may be exchanged for Class C Shares of any
other Portfolio at their relative net asset value.
d. Depending upon the Portfolio from which and into which an
exchange is being made and when the shares were purchased,
shares being acquired in an exchange may be acquired at their
offering price, at their net asset value or by paying the
difference in sales charges, as disclosed in the Fund's
prospectus and statement of additional information.
e. CDSC Computation. The CDSC payable upon redemption of Class A
Shares, Class B Shares and Class C Shares subject to a CDSC
shall be computed in the manner described in the Fund's
prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's
prospectus, relevant portions of which are incorporated herein by this
reference. All other terms and conditions with respect to Service Fees
and Distribution Fees shall be governed by the Plan of Distribution
adopted by the Fund with respect to such fees and Rule 12b-1 of the
Act.
4
<PAGE> 5
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and
Distributions - Shares purchased through the reinvestment of
dividends and distributions paid on Shares subject to
conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a Shareholder's account
(other than Shares held in the sub-account) convert to
Class A Shares, a proportionate number of Shares held in the
sub-account shall also convert to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All
conversions shall be effected on the basis of the relative
net asset values of the two Classes without the imposition of
any sales load or other charge.
c. Amendments to Plan of Distribution for Class A Shares - If
any amendment is proposed to the Plan of Distribution under
which Service Fees and Distribution Fees are paid with
respect to Class A Shares of a Fund that would increase
materially the amount to be borne by those Class A Shares,
then no Class B Shares shall convert into Class A Shares of
that Fund until the holders of Class B Shares of that Fund
have also approved the proposed amendment. If the holders of
such Class B Shares do not approve the proposed amendment,
the Directors of the Fund and the Distributor shall take such
action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class
identical in all material respects to Class A Shares of the
Fund as constituted prior to the amendment.
9. This Plan shall not take effect until a majority of the Directors of a
Fund, including a majority of the Directors who are not interested
persons of the Fund, shall find that the Plan, as proposed and
including the expense allocations, is in the best interests of each
Class individually and the Fund as a whole.
10. This Plan may not be amended to materially change the provisions of
this Plan unless such amendment is approved in the manner specified in
Section 9 above.
5
<PAGE> 1
EXHIBIT 18(b)
AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Amended and Restated Multiple Class Plan (the "Plan") adopted in
accordance with Rule 18f-3 under the Act shall govern the terms and
conditions under which the Funds may issue separate Classes of Shares
representing interests in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. CDSC - contingent deferred sales charge.
c. CDSC Period - the period of years following acquisition of
Shares during which such Shares may be assessed a CDSC upon
redemption.
d. Class - a class of Shares of a Fund representing an interest
in a Portfolio.
e. Class A Shares - shall mean those Shares designated as Class A
Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class A Shares for purposes of this Plan.
f. Class B Shares - shall mean those Shares designated as Class B
Shares in the Fund's organizing documents.
g. Class C Shares - shall mean those Shares designated as Class C
Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class C Shares for purposes of this Plan.
h. Directors - the directors or trustees of a Fund.
i. Distribution Expenses - expenses incurred in activities which
are primarily intended to result in the distribution and sale
of Shares as defined in a Plan of Distribution and/or
agreements relating thereto.
j. Distribution Fee - a fee paid by a Fund to the Distributor to
compensate the Distributor for Distribution Expenses.
k. Distributor - A I M Distributors, Inc. or Fund Management
Company, as applicable.
l. Fund - those investment companies advised by A I M Advisors,
Inc. which have adopted this Plan.
1
<PAGE> 2
m. Institutional Shares - shall mean Shares of a Fund
representing an interest in a Portfolio offered for sale to
institutional customers as may be approved by the Directors
from time to time and as set forth in the Fund's prospectus.
n. Plan of Distribution - Any plan adopted under Rule 12b-1 under
the Act with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of a Fund constituting a
separate investment portfolio of the Fund.
p. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders
and/or the maintenance of shareholder accounts.
q. Share - a share of common stock of or beneficial interest in
a Fund, as applicable.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear
directly any and all Distribution Fees and/or Service Fees
payable by such Class pursuant to a Plan of Distribution
adopted by the Fund with respect to such Class.
b. Transfer Agency and Shareholder Recordkeeping Fees - Each
Class shall bear directly the transfer agency fees and
expenses and other shareholder recordkeeping fees and
expenses specifically attributable to that Class.
c. Allocation of Other Expenses - Each Class shall bear
proportionately all other expenses incurred by a Fund based
on the relative net assets attributable to each such Class.
d. Allocation of Income, Gains and Losses - Except to the extent
provided in the following sentence, each Portfolio will
allocate income and realized and unrealized capital gains and
losses to a Class based on the relative net assets of each
Class. Notwithstanding the foregoing, each Portfolio that
declares dividends on a daily basis will allocate income on
the basis of settled shares.
e. Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter or any other provider of services to the
Portfolio may waive or reimburse the expenses of a particular
Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below will apply for the following
Classes offered by a Fund with respect to a Portfolio. The provisions
of the Fund's prospectus describing the distribution and servicing
arrangements in detail are incorporated herein by this reference.
a. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Directors and set forth in the Fund's prospectus,
may be reduced or eliminated for certain money market fund
2
<PAGE> 3
shares, for larger purchases, under a combined
purchase privilege, under a right of accumulation,
under a letter of intent or for certain categories of
purchasers as permitted by Rule 22(d) of the Act and as set
forth in the Fund's prospectus. Class A Shares that are not
subject to a front-end sales charge as a result of the
foregoing shall be subject to a CDSC for the CDSC Period set
forth in Section 5(a) of this Plan if so provided in the
Fund's prospectus. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with
Rule 22c-1 and Section 22(d) of the Act and the rules and
regulations thereunder. Class A Shares shall be subject to
ongoing Service Fees and/or Distribution Fees approved from
time to time by the Directors and set forth in the Fund's
prospectus. Although AIM Cash Reserve Shares, AIM Limited
Maturity Treasury Shares, AIM Tax-Free Intermediate Shares
and shares of AIM Tax-Exempt Bond Fund of Connecticut and AIM
Tax Exempt Cash Fund are not designated as "Class A", they
are substantially similar to Class A Shares as defined herein
and shall be deemed to be Class A Shares for the purposes of
this Plan.
b. Class B Shares. Class B Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(b), (iii) subject to ongoing Service Fees
and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus, and (iv)
converted to Class A Shares eight years from the end of the
calendar month in which the shareholder's order to purchase
was accepted as set forth in the Fund's prospectus.
c. Class C Shares. Class C Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(c), and (iii) subject to ongoing Service
Fees and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus.
d. Institutional Shares. Institutional Shares shall be (i)
offered at net asset value, (ii) offered only to certain
categories of institutional customers as approved from time
to time by the Directors and as set forth in the Fund's
prospectus and (iii) may be subject to ongoing Service Fees
and/or Distribution Fees as approved from time to time by the
Directors and set forth in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that
do not incur a front-end sales charge and of Class B Shares and Class
C Shares as follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be 18
months. The CDSC Rate shall be as set forth in the Fund's
prospectus, the relevant portions of which are incorporated
herein by this reference. No CDSC shall be imposed on Class A
Shares unless so provided in a Fund's prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares shall
be six years. The CDSC Rate for the Class B Shares shall be
as set forth in the Fund's prospectus, the relevant portions
of which are incorporated herein by this reference.
3
<PAGE> 4
c. Class C Shares. The CDSC Period for the Class C Shares shall
be one year. The CDSC Rate for the Class C Shares shall be as
set forth in the Fund's prospectus, the relevant portions of
which are incorporated herein by reference.
d. Method of Calculation. The CDSC shall be assessed on an
amount equal to the lesser of the then current market value
or the cost of the Shares being redeemed. No sales charge
shall be imposed on increases in the net asset value of the
Shares being redeemed above the initial purchase price. No
CDSC shall be assessed on Shares derived from reinvestment of
dividends or capital gains distributions. The order in which
Shares are to be redeemed when not all of such Shares would
be subject to a CDSC shall be determined by the Distributor
in accordance with the provisions of Rule 6c-10 under the Act.
e. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares and disclosed in
the Fund's prospectus or statement of additional information
and, for the Class A Shares, as allowed under Rule 6c-10 under
the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Funds as follows:
a. Class A Shares may be exchanged for Class A Shares of another
Portfolio, subject to certain limitations set forth in the
Fund's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this
reference.
b. Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
c. Class C Shares may be exchanged for Class C Shares of any
other Portfolio at their relative net asset value.
d. Depending upon the Portfolio from which and into which an
exchange is being made and when the shares were purchased,
shares being acquired in an exchange may be acquired at their
offering price, at their net asset value or by paying the
difference in sales charges, as disclosed in the Fund's
prospectus and statement of additional information.
e. CDSC Computation. The CDSC payable upon redemption of Class A
Shares, Class B Shares and Class C Shares subject to a CDSC
shall be computed in the manner described in the Fund's
prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's
prospectus, relevant portions of which are incorporated herein by this
reference. All other terms and conditions with respect to Service Fees
and Distribution Fees shall be governed by the Plan of Distribution
adopted by the Fund with respect to such fees and Rule 12b-1 of the
Act.
4
<PAGE> 5
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and
Distributions - Shares purchased through the reinvestment of
dividends and distributions paid on Shares subject to
conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a Shareholder's account
(other than Shares held in the sub-account) convert to Class A
Shares, a proportionate number of Shares held in the
sub-account shall also convert to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All
conversions shall be effected on the basis of the relative
net asset values of the two Classes without the imposition of
any sales load or other charge.
c. Amendments to Plan of Distribution for Class A Shares - If
any amendment is proposed to the Plan of Distribution under
which Service Fees and Distribution Fees are paid with
respect to Class A Shares of a Fund that would increase
materially the amount to be borne by those Class A Shares,
then no Class B Shares shall convert into Class A Shares of
that Fund until the holders of Class B Shares of that Fund
have also approved the proposed amendment. If the holders of
such Class B Shares do not approve the proposed amendment, the
Directors of the Fund and the Distributor shall take such
action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class
identical in all material respects to Class A Shares of the
Fund as constituted prior to the amendment.
9. This Plan shall not take effect until a majority of the Directors of a
Fund, including a majority of the Directors who are not interested
persons of the Fund, shall find that the Plan, as proposed and
including the expense allocations, is in the best interests of each
Class individually and the Fund as a whole.
10. This Plan may not be amended to materially change the provisions of
this Plan unless such amendment is approved in the manner specified in
Section 9 above.
5
