<PAGE> 1
[PHOTO APPEARS HERE]
AIM EQUITY FUNDS, INC.
INSTITUTIONAL CLASSES
AIM CHARTER FUND
AIM CONSTELLATION FUND ANNUAL REPORT
[LOGO APPEARS HERE] AIM WEINGARTEN FUND OCTOBER 31, 1996
<PAGE> 2
TABLE OF CONTENTS
On the following pages is a complete discussion of your Fund's performance and
investment strategy. If you have any questions or comments about this report,
please call Client Services at 800-659-1005 during normal business hours.
AIM Charter Fund 2 - 16
AIM Constellation Fund 17 - 32
AIM Weingarten Fund 33 - Inside
back cover
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Shareholder:
As you may have heard in the financial news, A I M Management
[PHOTO OF Group Inc. recently announced a significant event in our
Charles T. company's history--an agreement to merge with INVESCO PLC,
Bauer, one of the world's largest independent investment management
Chairman of groups.
the Board of AIM has long been known for its strategic planning and
the Fund forward thinking. In seeking this merger, AIM had specific
APPEARS HERE] goals in choosing a partner: to better AIM's position to
succeed in an increasingly competitive financial services
environment, both in the U.S. and globally; to ensure the
continuation of AIM's independent culture, investment
philosophy, and dedication to our shareholders; and to offer
the broadest range of products and services to our
shareholders.
A "MERGER OF EQUALS" THAT PRESERVES INDEPENDENCE
When the merger is completed, AIM and INVESCO will be combined under a new
holding company to be named AMVESCO, to reflect the strongly complementary
strengths of our two companies which together create a "merger of equals."
AMVESCO will have combined assets under management in excess of $150 billion.
Most importantly, the agreement enables AIM to preserve its independent
culture--which has been so essential to our company's success. The locations,
management, structure, and brand names of AIM and INVESCO will not change.
With INVESCO, AIM achieves a strategic combination with a partner that
offers complementary rather than overlapping strengths. AIM has delivered
impressive performance over the years as a domestic retail fund manager.
INVESCO brings to AIM its primary strengths as an institutional money manager,
and as a successful international investment manager with significant
operations in North America, Europe, and the Pacific region.
NO CHANGES IN YOUR AIM FUND OR ITS MANAGEMENT
While AIM certainly will be enriched through these added strengths, it will
retain those qualities that have produced two decades of successful
performance. The reputation of AIM funds has been built by its seasoned team of
portfolio managers who adhere to AIM's disciplined and successful investment
management process. AIM's central goal is to keep the current investment team
in place and our time-tested investment philosophy intact. Also, the names of
AIM funds will not change.
Moreover, because the merger will not result in any changes in the way AIM
does business, this transaction will be seamless--without any disruption of
service to you.
YOUR VOTE IS IMPORTANT
The merger is expected to be completed on or about February 28. As a result of
the merger, it is necessary for shareholders of AIM funds to approve a new
investment advisory agreement.
Recently, we mailed an announcement for the shareholder meeting planned on
February 7, along with a proxy card that describes proposals that relate to the
management and policies of your Fund. We encourage you to review and return
your proxy as soon as possible. Your Fund's Board of Directors carefully
considered and unanimously approved the proposals and recommends that you vote
in favor of each one. Your vote is important to us. If you haven't yet mailed
your proxy card, please send it today.
The AIM/INVESCO merger marks a new and promising era for AIM, and we believe
it will yield exciting opportunities for AIM shareholders. We appreciate the
trust you have placed in us.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
---------------------------
With INVESCO, AIM
achieves a strategic
combination with a
partner that offers comple-
mentary rather than
overlapping strengths.
---------------------------
<PAGE> 4
AIM CHARTER FUND
For shareholders who seek growth and income by investing primarily in stocks of
large-cap, well-run companies with a history of stable and improving earnings
and generally increasing dividend payouts.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Charter Fund Institutional Class performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
o One-year performance includes reinvested distributions of $1.101 per share.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
o The Fund's portfolio composition is subject to change, and there is no
assurance the Fund will continue to hold any particular security.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Growth and Income Fund Index represents an
average of the performance of the 30 largest growth-and-income mutual funds.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Dow Jones
Industrial Average (DJIA) is an unmanaged composite of the performance of 30
large-company stocks.
o The Consumer Price Index (CPI) is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
1 Year 17.29%
3 Years 13.56
5 Years 12.43
Inception (7/30/91) 12.86
================================================================================
GROWTH OF A $10,000 INVESTMENT
Past performance is no guarantee of comparable future results.
<TABLE>
<CAPTION>
=========================================================================================================================
AIM Charter Fund, Institutional Lipper Growth & Income Fund Standard & Poor's 500
(In thousands)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7/30/91 $10,000 $10,000 $10,000
10/31/91 10,512 10,316 10,231
10/31/92 10,988 11,234 11,247
10/31/93 12,898 13,424 12,921
10/31/94 12,637 13,848 13,421
10/31/95 16,105 16,612 16,959
10/31/96 18,891 20,221 21,033
=========================================================================================================================
</TABLE>
AIM Charter Fund
2
<PAGE> 5
The Managers' Overview
FUND PURSUES CONSERVATIVE APPROACH TO GROWTH AND INCOME INVESTING
A roundtable discussion with the Fund management team for AIM Charter Fund for
the fiscal year ended October 31, 1996.
- --------------------------------------------------------------------------------
Q. HOW DID AIM CHARTER FUND PERFORM DURING THE FISCAL YEAR?
A: The Fund's Institutional Class produced total return of 17.29% including
reinvested distributions of $1.101 per share. Net assets of the Institutional
Class stood as $29.6 million at the close of the fiscal year.
Q. HOW WOULD YOU DESCRIBE MARKET CONDITIONS DURING THE FISCAL YEAR?
A. Financial markets produced very good returns, but they were quite volatile.
For example, the widely followed Dow Jones Industrial Average (DJIA) rose a
dramatic 20% during the first 10 months of 1996, but it was hardly a smooth
ride up. Trading curbs were triggered often on the New York Stock Exchange
because there was so much intraday volatility in stock prices. And between
July 1 and 15, the DJIA lost 7% of its value when unexpectedly strong
employment figures heightened fears of inflation. The market was pretty
unforgiving, and the Fund's performance also slumped during the summer
downturn.
But toward the end of the fiscal year, data suggested what some have
called a "Goldilocks economy"--not too hot, not too cold. The DJIA recouped
its losses and by October 14 had passed the 6,000 level. However, market
participants became more cautious. There was a "flight to quality."
Investors began to favor steady-growing blue-chip stocks over more volatile
small company stocks.
Q. HOW DID YOU MANAGE THE PORTFOLIO DURING THIS PERIOD?
A. We continued our comparatively conservative approach, stressing growth and
income. We looked for companies that are growing their earnings and that
give us confidence those earnings are going to stay there whatever the state
of the economy.
About 80% of the portfolio is invested in dividend-paying common stocks
and convertible securities. Convertibles often are very attractive because
they produce a steady income stream while participating in any advance in
the market value of the underlying common stock.
Q. DID THE PORTFOLIO CONTAIN ANY NOTABLE CONVERTIBLE SECURITIES?
A. Service Corp. International, or SCI, has been a profitable holding. SCI is
the world's largest operator of funeral homes and cemeteries, and through
aggressive acquisitions has been the leading consolidator in a very
fragmented, localized industry. SCI's convertible preferred stock has
offered dividends combined with growth in market value as the price of the
company's common stock has risen.
Q. WERE THERE PARTICULAR INDUSTRIES IN WHICH YOU FOUND GOOD OPPORTUNITIES?
A. We found good opportunities in the health-care sector, particularly
pharmaceuticals, and also in technology.
Q. WHAT DO YOU LIKE ABOUT THE HEALTH-CARE SECTOR?
A. One health-care industry, pharmaceuticals, represents more than 9% of the
Fund's portfolio. It's an industry in which recent mergers have improved
efficiencies and reduced costs. An additional trend has been the search for
less intrusive but more effective medical treatments.
One holding, American Home Products, participates in both these trends.
Its 1994 acquisition of American Cyanamid boosted earnings per share because
of cost savings. And the company owns a majority stake in Immunex, which
recently received Food and Drug Administration approval for an
easier-to-administer version of a drug that treats side effects of
chemotherapy for leukemia. Other pharmaceutical holdings include SmithKline
Beecham and Johnson & Johnson, companies whose earnings are growing and
where it looks like the fundamentals are in their favor probably for another
two or three years at least.
A number of compelling factors suggest further growth for the health-
care industry. An aging population is bound to produce continued demand. A
new federal entitlement initiative in the health-care area seems unlikely,
which means a more certain environment in the industry. Finally, health-care
companies have made enormous strides in cost control and increased
efficiency through consolidation in recent years.
AIM Charter Fund
3
<PAGE> 6
The Managers' Overview
<TABLE>
<S> <C>
=====================================================================================
PORTFOLIO COMPOSITION Top 10 Holdings
(excluding U.S. Treasuries)
As of 10/31/96
1. MFS Communications Co.
Number of Holdings: 216 2. Federal National Mortgage Association
3. Philip Morris Companies, Inc.
COMMON STOCK 75.58% 4. SmithKline Beecham plc-ADR
CONVERTIBLE BONDS 12.95% 5. Intel Corp.
CONVERTIBLE PREFERRED STOCK 6.55% 6. Cincinnati Bell, Inc.
U.S. GOVERNMENT BONDS 4.52% 7. CIGNA Corp.
OTHER 0.40% 8. Nabisco Holdings Corp.
9. Federal Home Loan Mortgage Association
Top 10 Holdings 10. SCI Financial LLC
(excluding U.S. Treasuries)
=====================================================================================
</TABLE>
Please keep in mind that the Fund's portfolio composition is subject to change
and there is no assurance the Fund will continue to hold any particular
security.
Q. DID YOU FIND TECHNOLOGY STOCKS THAT ESCAPED THE GENERAL VOLATILITY IN THAT
SECTOR?
A. Many technology stocks tend to be volatile, and many had steep declines late
in 1995 and during the July sell-off. A number already have started to
rebound, and trends favor some technology companies over others. For
example, while commodity-type semiconductor producers are suffering from
overcapacity and an inability to raise prices, that helps personal computer
makers like portfolio holdings Compaq and Dell whose component costs
decrease as a result.
Technology leaders like Microsoft and Intel are still going strong. And
new products, such as Windows NT from Microsoft and the Pentium Pro chip
from Intel, should fuel another upgrade cycle for corporations. We are
optimistic about the technology sector in general.
Additionally, some companies aren't official members of the technology
universe but act as if they are. We can use another portfolio holding as an
example. As its name suggests, Cincinnati Bell, Inc. used to be a local
phone company. It had excellent billing and customer information services.
Capitalizing on this expertise, it now furnishes data processing, consulting
and software development services to AT&T Corp., among others.
Q. WHICH OTHER INDUSTRIES DID YOU FIND ATTRACTIVE?
A. Record trading volumes on the nation's biggest stock exchanges and a wave of
merger and acquisition activity have contributed to record earnings for
brokerage houses. The profitability of the mutual fund industry also has
helped such portfolio holdings as Morgan Stanley and Merrill Lynch.
At the close of the fiscal year, the Fund's portfolio was composed of 216
holdings. Of course, the portfolio's composition is subject to change and
there can be no assurance the Fund will continue to hold any particular
security.
Q. WHAT IS YOUR MARKET OUTLOOK FOR THE NEAR TERM?
A. As the Fund's fiscal year drew to a close, economic growth appeared to be
moderating, led by a slowdown in consumer spending. The job market began
displaying signs of weakness; the average monthly gain in employment during
the third quarter of 1996 was barely half the average monthly gain during
the second quarter of the year. Inflation remained at bay, though the
specter of wage inflation still hovers.
The bull market for stocks marked its sixth year in October, making it
the longest in history. Can this continue? Analysts disagree. Some predict
the bulls will continue running into 1997; others think the rally may end
soon. No one can know for sure.
To some the stock market seems overpriced after the huge runup in values
the past two years. We certainly don't think the market is undervalued, but
many companies continue to report favorable earnings, even with a slower
rate of growth. And a good earnings report is the most important indicator
about a stock's future performance.
----------------------
And a good earnings
report is the most
important indicator
about a stock's future
performance.
----------------------
AIM Charter Fund
4
<PAGE> 7
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>
5
C H A R T E R
<PAGE> 8
<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>
6
C H A R T E R
<PAGE> 9
<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>
7
C H A R T E R
<PAGE> 10
<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 09/27/96-10/30/96; 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.
8
C H A R T E R
<PAGE> 11
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.
9
C H A R T E R
<PAGE> 12
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.
10
C H A R T E R
<PAGE> 13
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. 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
11
C H A R T E R
<PAGE> 14
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
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
12
C H A R T E R
<PAGE> 15
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>
13
C H A R T E R
<PAGE> 16
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1996 and the period July 30, 1991 (date operations commenced)
through October 31, 1991.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.66 $ 8.93 $ 9.48 $ 8.38 $ 8.42 $7.92
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Income from investment operations:
Net investment income 0.24 0.23 0.25 0.19 0.20 0.05
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Net gains (losses) on securities (both realized and
unrealized) 1.44 2.07 (0.44) 1.23 0.16 0.45
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Total from investment operations 1.68 2.30 (0.19) 1.42 0.36 0.50
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Less distributions:
Dividends from net investment income (0.20) (0.24) (0.20) (0.32) (0.17) --
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Distributions from capital gains (0.90) (0.33) (0.16) -- (0.23) --
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Total distributions (1.10) (0.57) (0.36) (0.32) (0.40) --
- ----------------------------------------------------------- ------- ------- ------- ------- ------ -----
Net asset value, end of period $ 11.24 $ 10.66 $ 8.93 $ 9.48 $ 8.38 $8.42
=========================================================== ======= ======= ======= ======= ====== =====
Total return(a) 17.29% 27.45% (2.02)% 17.39% 4.53% 6.31%
=========================================================== ======= ======= ======= ======= ====== =====
Net assets, end of period (000s omitted) $29,591 $25,538 $21,840 $24,196 $7,800 $ 775
=========================================================== ======= ======= ======= ======= ====== =====
Ratio of expenses to average net assets 0.69%(b)(c) 0.74% 0.73% 0.79% 0.87% 1.00%(d)
=========================================================== ======= ======= ======= ======= ====== =====
Ratio of net investment income to average net assets 2.24%(b) 1.98% 2.76% 2.26% 2.44% 2.43%(d)
=========================================================== ======= ======= ======= ======= ====== =====
Portfolio turnover rate 164% 161% 126% 144% 95% 144%
=========================================================== ======= ======= ======= ======= ====== =====
Average broker commission rate(e) $0.0638 N/A N/A N/A N/A N/A
=========================================================== ======= ======= ======= ======= ====== =====
</TABLE>
(a) For periods less than one year, total return is not annualized.
(b) Ratios are based on average daily net assets of $27,200,235. The ratios of
expenses and net investment income to average net assets prior to the
reduction of advisory fees were 0.70% and 2.23% for 1996.
(c) Ratios include 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.
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.
14
C H A R T E R
<PAGE> 17
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.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
15
C H A R T E R
<PAGE> 18
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
11 Greenway Plaza
Charles T. Bauer Charles T. Bauer Suite 1919
Chairman and Chief Executive Officer Chairman Houston, TX 77046
A I M Management Group Inc.
Robert H. Graham INVESTMENT ADVISOR
Bruce L. Crockett President A I M Advisors, Inc.
Formerly Director, President, and 11 Greenway Plaza
Chief Executive Officer John J. Arthur Suite 1919
COMSAT Corporation Senior Vice President and Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Institutional Fund
Cortland Trust Inc. Services, Inc.
Scott G. Lucas 11 Greenway Plaza
Carl Frischling Senior Vice President Suite 1919
Partner Houston, TX 77046
Kramer, Levin, Naftalis & Frankel Carol F. Relihan
Senior Vice President and Secretary CUSTODIAN
Robert H. Graham State Street Bank & Trust Company
President and Chief Operating Officer Jonathan C. Schoolar 225 Franklin Street
A I M Management Group Inc. Senior Vice President Boston, MA 02110
John F. Kroeger Melville B. Cox COUNSEL TO THE FUND
Formerly Consultant Vice President Ballard Spahr
Wendell & Stockel Associates, Inc. Andrews & Ingersoll
Dana R. Sutton 1735 Market Street
Lewis F. Pennock Vice President and Assistant Treasurer Philadelphia, PA 19103
Attorney
P. Michelle Grace COUNSEL TO THE DIRECTORS
Ian W. Robinson Assistant Secretary Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive 919 Third Avenue
Vice President and David L. Kite New York, NY 10022
Chief Financial Officer Assistant Secretary
Bell Atlantic Management DISTRIBUTOR
Services, Inc. Nancy L. Martin Fund Management Company
Assistant Secretary 11 Greenway Plaza
Louis S. Sklar Suite 1919
Executive Vice President Ofelia M. Mayo Houston, TX 77046
Hines Interests Assistant Secretary
Limited Partnership AUDITORS
Kathleen J. Pflueger KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
Samuel D. Sirko Houston, TX 77002
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Charter Fund Institutional Class paid ordinary dividends in the amount of
$0.777 per share, during the Fund's tax year ended October 31, 1996. Of this
amount 35% is eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $0.324 per share during the
Fund's tax year ended October 31, 1996.
REQUIRED STATE INCOME TAX INFORMATION
Of the total income dividends paid, 11% was derived from U.S. Treasury
obligations.
AIM Charter Fund
16
<PAGE> 19
AIM CONSTELLATION FUND
For shareholders who seek capital appreciation through investments in common
stocks, with emphasis on medium-size and smaller emerging growth companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Constellation Fund Institutional Class performance figures are
historical and reflect reinvestment of all distributions and changes in net
asset value.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Standard
& Poor's Mid-Cap Index (S&P 400) is an unmanaged index comprising common
stocks of approximately 400 mid-capitalization companies.
o The Consumer Price Index is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
o The Russell 2000 Stock Index is an unmanaged index generally considered
representative of small-capitalization stocks.
o The NASDAQ (National Association of Securities Dealers Automated Quotation
System) Composite Index is a group of more than 4,500 unmanaged
over-the-counter securities widely regarded by investors to be
representative of the small- and medium-size company stock universe.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
1 Year 11.81%
3 Years 17.40
Inception (4/8/92) 19.51
================================================================================
GROWTH OF A $10,000 INVESTMENT
Past performance is no guarantee of comparable future results.
<TABLE>
<CAPTION>
====================================================================================================================
AIM CONSTELLATION FUND, INSTITUTIONAL NASDAQ COMPOSITE INDEX STANDARD & POOR'S 400
(In thousands)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4/8/92 $10,000 $10,000 $10,000
10/31/92 10,797 10,023 10,291
10/31/93 13,938 12,907 12,499
10/31/94 15,045 12,877 12,798
10/31/95 20,173 17,160 15,509
10/31/96 22,556 20,231 18,191
====================================================================================================================
</TABLE>
AIM Constellation Fund
17
<PAGE> 20
The Managers' Overview
FUND PORTFOLIO RESTRUCTURED
IN CHALLENGING MARKET
A roundtable discussion with the Fund management team for AIM Constellation
Fund for the fiscal year ended October 31, 1996.
- --------------------------------------------------------------------------------
Q. THE MARKET HAS FAVORED LARGE-COMPANY STOCKS SINCE OCTOBER 1995. DID THIS
AFFECT AIM CONSTELLATION FUND?
A. The market's preference for large-company stocks is evidenced by the 24.08%
return for the Standard & Poor's Composite Index of 500 Stocks (S&P 500)
compared to the 16.61% total return posted for the Russell 2000 Index of
small-company stocks and the 17.35% total return of the Standard & Poor's
Mid-Cap Index (S&P 400).
The Institutional Class's total return of 11.81% for the year ended October
31, 1996, reflected this trend. It also reflects the volatile behavior of the
technology sector during the fiscal year, especially during the fall of 1995,
when the Fund was heavily invested in technology. From January 1, 1996,
through October 31, 1996, the Fund's performance improved--the Fund's total
return was 13.63% during that period, vs. 9.03% for the Russell 2000 Index
and 12.72% for the S&P 400.
Q. HOW DID YOU MANAGE THE PORTFOLIO IN THESE CHALLENGING MARKET CONDITIONS?
A. Because of its large holdings in technology stocks, the Fund was vulnerable
to that sector's broad-based decline in the fall of 1995. When the Fund's
fiscal year opened, approximately 40% of its holdings were in such industries
as semiconductors, computer peripherals and personal computer makers. By
April 1996, that percentage had been reduced to approximately one-fourth of
the portfolio, where it was at the close of the fiscal year. Thus, the Fund
still had major holdings in the technology sector, but while reducing our
exposure in that area, we also changed the nature of those holdings.
For example, commodity-type semi-conductor producers were suffering
from overcapacity and an inability to raise prices. Therefore, we reduced
holdings of semiconductors from almost 17% of the portfolio at the opening of
the fiscal year to just 2.68% at its close. Of course, the forces working
against semiconductor manufacturers buoy personal computer makers like Compaq
and Dell, whose component costs decrease as a result. We have retained
holdings of both these companies.
Other thriving areas of the technology sector include companies that
specialize in computer networking, such as portfolio holdings 3Com and
Cisco Systems, Inc. And the drive to construct larger, more complex
networked information systems is fueling growth for service providers who
install and/or manage these networks. Computer software/services became our
largest industry concentration, approximately 13% of the portfolio at the
close of the fiscal year.
The Fund also benefited from such technology holdings as Intel and
Microsoft. New products like the Pentium Pro chip from Intel and Windows NT
from Microsoft should help fuel another computer upgrade cycle for
corporations. Overall, we are optimistic about the technology sector. It
still appears to be the industry of the 1990s.
Q. WHAT OTHER INDUSTRIES DID YOU FIND ATTRACTIVE?
A. The health-care sector continued to provide opportunities, and we
selectively expanded positions in retailing and in consumer cyclicals such
as textiles.
Q. WHAT AREAS OF THE HEALTH-CARE SECTOR ARE DOING WELL?
A. Pharmaceutical stocks are very attractive. Often it is cheaper to treat a
condition with drugs than through other interventions. In addition, a number
of promising new medicines are coming to market and biotechnology is
beginning to produce products. The portfolio includes Dura Pharmaceuticals,
Inc., for instance, which develops treatments for respiratory ailments and
has a number of innovative products in the pipeline. Dura's revenues rose
97% this year. Another holding, Cardinal Health, Inc., specializes in
pharmaceutical packaging and distribution services to hospitals and other
care providers, streamlining the delivery of medicine. Its revenue and
operating income are rising.
Among patient care providers, cost control efforts have produced two
trends.
First, there is an emphasis on less costly alternatives to nursing home
care or hospitalization. One example is assisted living centers, where the
frail or elderly can live in a homelike atmosphere and receive help with
daily tasks. Portfolio holding Manor Care, Inc. has one business unit
devoted to this growing industry.
AIM Constellation Fund
18
<PAGE> 21
The Managers' Overview
================================================================================
PORTFOLIO COMPOSITION
As of 10/31/96
NUMBER OF HOLDINGS: 313
Top 10 Industries Top 10 Common Stocks
1. Computer Software/Services 1. Microsoft Corp.
2. Retail (Stores) 2. Intel Corp.
3. Medical (Patient Services) 3. Cisco Systems, Inc.
4. Computer Networking 4. 3Com Corp.
5. Telecommunications 5. Parametric Technology Corp.
6. Medical (Instruments/Products) 6. HealthSouth Corp.
7. Finance (Consumer Credit) 7. Sun Microsystems, Inc.
8. Retail (Food & Drug) 8. Computer Associates International, Inc.
9. Computers MINI/PCS 9. Cardinal Health, Inc.
10. Semiconductors 10. Cascade Communications Corp.
================================================================================
Of course the portfolio's composition is subject to change, and there is no
assurance it will continue to hold any particular security.
A second trend has been consolidation. For example, through a series of
strategic acquisitions, portfolio holding HealthSouth Corp. opened its 1,000th
location during 1996. HealthSouth operates outpatient surgery and
rehabilitation centers as well as inpatient rehabilitation centers.
A number of compelling factors suggest further growth for the health-care
industry. An aging population is bound to fuel demand. A new federal initiative
in health-care seems unlikely, which means a more predictable environment for
the industry. Additionally, industry consolidation has produced significant cost
control and increased efficiency, and can be expected to continue.
Q. FINALLY, THE RETAIL SECTOR--WHAT DID YOU FIND ATTRACTIVE IN THIS AREA?
A. Many analysts are predicting a good Christmas season and New Year for
retailers. Consumer confidence is high, bolstered by low unemployment and the
absence of inflation. Nevertheless, this sector, like the market in general,
has become defensive. Competition is intense. In retailing--and in cyclical
consumer products as well--a powerful brand name matters.
The Fund's holdings in these two areas are mainly high-visibility names,
including The Gap, Inc., Home Depot, Inc., Tommy Hilfiger Corp., Nautica
Enterprises, Inc., and Gucci Group NV. With us, it's not a sector that's
attractive, but rather selected individual companies within a specific
sector.
As the reporting period closed, the portfolio was broadly diversified with
313 holdings. Of course, the portfolio's holdings are subject to change and
there is no assurance it will continue to hold any particular security.
Q. WHAT IS YOUR MARKET OUTLOOK FOR THE NEAR TERM?
A. The bull market for stocks marked its sixth year in October, making it the
longest in history. Analysts disagree on whether this will continue. Some
consider the stock market overpriced after the huge runup in values the past
two years. But many companies continue to report favorable earnings, even
with a slower rate of growth. Good earnings are the most important
indicator of a stock's future performance.
We have had an unusual four-to-five-year period now when corporate earnings
growth has been above the historic average. This fall, we finally saw
evidence that the rate of growth has slowed. There also has been a trend
back to large-capitalization stocks and away from the smaller-company
stocks the market has favored so far during the 1990s. Such shifts in
market sentiment occur periodically, and no one can predict when they will
happen or how long they will last.
Because no one can predict the future performance of the market, we intend
to remain selective and patient, identifying appropriate holdings for the
Fund's portfolio one security at a time. We remain confident that our
earnings-driven investment practices can continue to produce very attractive
long-term results.
------------------------
. . . we intend to
remain selective
and patient, identifying
appropriate holdings for
the Fund's portfolio
one security at a time.
------------------------
AIM Constellation Fund
19
<PAGE> 22
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
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
</TABLE>
20
C O N S T E L L A T I O N
<PAGE> 23
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-(CONTINUED)
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
</TABLE>
21
C O N S T E L L A T I O N
<PAGE> 24
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION-(CONTINUED)
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS-(CONTINUED)
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
</TABLE>
22
C O N S T E L L A T I O N
<PAGE> 25
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
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
- -----------------------------------------------------------------
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
- -----------------------------------------------------------------
</TABLE>
23
C O N S T E L L A T I O N
<PAGE> 26
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
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
- -----------------------------------------------------------------
<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
AMOUNT
<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
- -----------------------------------------------------------------
</TABLE>
24
C O N S T E L L A T I O N
<PAGE> 27
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
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
- -----------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
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. 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.
(g) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,031,111. Collateralized 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. Collateralized 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.
25
C O N S T E L L A T I O N
<PAGE> 28
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.
26
C O N S T E L L A T I O N
<PAGE> 29
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
27
C O N S T E L L A T I O N
<PAGE> 30
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. 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 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.
28
C O N S T E L L A T I O N
<PAGE> 31
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>
29
C O N S T E L L A T I O N
<PAGE> 32
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding each of the years in the four-year period ended
October 31, 1996 and the period April 8, 1992 (date operations commenced)
through October 31, 1992.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.05 $ 18.49 $ 17.13 $ 13.27 $ 12.29
- ----------------------------------------------------------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss) 0.04 0.02 0.03 -- (0.01)
- ----------------------------------------------------------- -------- -------- ------- ------- -------
Net gains on securities (both realized and unrealized) 2.67 6.06 1.33 3.86 0.99
- ----------------------------------------------------------- -------- -------- ------- ------- -------
Total from investment operations 2.71 6.08 1.36 3.86 0.98
- ----------------------------------------------------------- -------- -------- ------- ------- -------
Less distributions:
Distributions from capital gains (0.75) (0.52) -- -- --
- ----------------------------------------------------------- -------- -------- ------- ------- -------
Net asset value, end of period $ 26.01 $ 24.05 $ 18.49 $ 17.13 $ 13.27
=========================================================== ======== ======== ======= ======= =======
Total return(a) 11.81% 34.09% 7.94% 29.09% 7.97%
=========================================================== ======== ======== ======= ======= =======
Net assets, end of period (000s omitted) $293,035 $138,918 $39,847 $12,338 $ 3,087
=========================================================== ======== ======== ======= ======= =======
Ratio of expenses to average net assets(b) 0.66%(d)(e) 0.66% 0.69% 0.87% 0.91%(g)
=========================================================== ======== ======== ======= ======= =======
Ratio of net investment income (loss) to average net
assets(c) 0.21%(d) 0.18% 0.36% 0.04% (0.12)%(g)
=========================================================== ======== ======== ======= ======= =======
Portfolio turnover rate 58% 45% 79% 70% 62%
=========================================================== ======== ======== ======= ======= =======
Average broker commission rate(f) $ 0.0596 N/A N/A N/A N/A
=========================================================== ======== ======== ======= ======= =======
</TABLE>
(a) For periods less than one year, total return is not annualized.
(b) Ratios of expenses prior to waiver of advisory fees and/or expense
reimbursement were 0.67%, 0.68%, 0.70%, and 1.26% for the years 1996-1994
and 1992, respectively.
(c) Ratios of net investment income prior to waiver of advisory fees and/or
expense reimbursement were 0.20%, 0.16%, 0.35% and (0.47)% for the years
1996-1994 and 1992, respectively.
(d) After waiver of advisory fees. Ratios are based on average net assets of
$212,576,688.
(e) Ratios include indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have remained the same.
(f) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(g) Annualized.
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.
30
C O N S T E L L A T I O N
<PAGE> 33
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.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
31
C O N S T E L L A T I O N
<PAGE> 34
Directors & Officers
<TABLE>
<CAPTION>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
11 Greenway Plaza
Charles T. Bauer Charles T. Bauer Suite 1919
Chairman and Chief Executive Officer Chairman Houston, TX 77046
A I M Management Group Inc.
Robert H. Graham INVESTMENT ADVISOR
Bruce L. Crockett President A I M Advisors, Inc.
Formerly Director, President, and 11 Greenway Plaza
Chief Executive Officer John J. Arthur Suite 1919
COMSAT Corporation Senior Vice President and Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Institutional Fund
Cortland Trust Inc. Services, Inc.
Scott G. Lucas 11 Greenway Plaza
Carl Frischling Senior Vice President Suite 1919
Partner Houston, TX 77046
Kramer, Levin, Naftalis & Frankel Carol F. Relihan
Senior Vice President and Secretary CUSTODIAN
Robert H. Graham State Street Bank & Trust Company
President and Chief Operating Officer Jonathan C. Schoolar 225 Franklin Street
A I M Management Group Inc. Senior Vice President Boston, MA 02110
John F. Kroeger Melville B. Cox COUNSEL TO THE FUND
Formerly Consultant Vice President Ballard Spahr
Wendell & Stockel Associates, Inc. Andrews & Ingersoll
Dana R. Sutton 1735 Market Street
Lewis F. Pennock Vice President and Assistant Treasurer Philadelphia, PA 19103
Attorney
P. Michelle Grace COUNSEL TO THE DIRECTORS
Ian W. Robinson Assistant Secretary Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive 919 Third Avenue
Vice President and David L. Kite New York, NY 10022
Chief Financial Officer Assistant Secretary
Bell Atlantic Management DISTRIBUTOR
Services, Inc. Nancy L. Martin Fund Management Company
Assistant Secretary 11 Greenway Plaza
Louis S. Sklar Suite 1919
Executive Vice President Ofelia M. Mayo Houston, TX 77046
Hines Interests Assistant Secretary
Limited Partnership AUDITORS
Kathleen J. Pflueger KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
Samuel D. Sirko Houston, TX 77002
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Constellation Fund distributed long-term capital gains of $0.752 per share
during its tax year ended October 31, 1996.
AIM Constellation Fund
32
<PAGE> 35
AIM WEINGARTEN FUND
For shareholders who seek long-term growth of capital through investments
primarily in common stocks of leading U.S. companies considered by management
to have strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Weingarten Fund Institutional Class performance figures are historical
and reflect reinvestment of all distributions and changes in net asset value.
o One-year results include reinvested distributions of $2.706 per share.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
o The Fund's portfolio composition is subject to change, and there is no
assurance the Fund will continue to hold any particular security.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN REPORT:
o Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Growth Fund Index represents an average of
the performance of the 30 largest growth mutual funds.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Dow Jones
Industrial Average (DJIA) is an unmanaged composite of the performance of 30
large-company stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
1 Year 15.34%
3 Years 15.71
5 Years 12.08
Inception (10/08/91) 12.72
================================================================================
GROWTH OF A $10,000 INVESTMENT
Past performance is no guarantee of comparable future results.
<TABLE>
<CAPTION>
==============================================================================================================================
AIM WEINGARTEN FUND, INSTITUTIONAL LIPPER GROWTH FUND INDEX STANDARD & POOR'S 500 STOCK INDEX
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10/8/91 $10,000 $10,000 $10,000
10/31/91 10,368 10,165 10,310
10/31/92 11,110 10,959 11,333
10/31/93 11,836 13,039 13,020
10/31/94 12,354 13,306 13,524
10/31/95 15,898 16,496 17,089
10/31/96 18,337 19,289 21,194
==============================================================================================================================
</TABLE>
AIM Weingarten Fund
33
<PAGE> 36
The Managers' Overview
FUND RECORD OF SOLID
RESULTS CONTINUES
A roundtable discussion with the Fund management team for AIM Weingarten Fund
for the fiscal year ended October 31, 1996.
- --------------------------------------------------------------------------------
Q. HOW DID AIM WEINGARTEN FUND PERFORM DURING THE FISCAL YEAR?
A. Total return for the Institutional Class was 15.34%. During the fiscal
year, the Fund paid distributions of $2.706 per share. Net assets of the
Institutional Class stood at $60.5 million at the close of the fiscal year.
Q. HOW WOULD YOU DESCRIBE MARKET CONDITIONS DURING THE REPORTING PERIOD?P
A. Financial markets produced very good returns but were quite volatile.
For example, the widely followed Dow Jones Industrial Average (DJIA) rose a
dramatic 20% during the first 10 months of 1996, but it was hardly a smooth
ride up. Trading curbs were triggered often on the New York Stock Exchange
because there was so much intraday volatility in stock prices. And between
July 1 and 15, the DJIA lost 7% of its value when unexpectedly strong
employment figures heightened fears of inflation.
But toward the end of the fiscal year, data suggested what some have
called a "Goldilocks economy"--not too hot, not too cold. The DJIA recouped
its losses and by October 14 had passed the 6,000 level. However, market
participants became more cautious. There was a "flight to quality," with
investors favoring steady-growing blue-chip stocks over more volatile, less
well-known small-company stocks.
Q. DID ANY SIGNIFICANT INVESTMENT PATTERNS EMERGE IN THE PORTFOLIO DURING THIS
PERIOD?
A. Our stock selection process focuses on one security at a time. Nevertheless,
trends appear when you step back and look at the portfolio as a whole, with
health care, technology, and selected retailers as major components.
Q. WHAT KINDS OF HEALTH-CARE STOCKS HAVE YOU FOUND ATTRACTIVE?
A. Three groups of stocks--drug makers, patient care providers, and makers of
medical instruments and devices--together add up to almost 15% of net assets.
Drug makers account for 7.69% of the portfolio. One driving force here
has been increased use of prescription drugs by Medicare recipients enrolled
in managed care; such holdings as Bristol-Myers Squibb and SmithKline Beecham
reported increased earnings.
Hospitals and other patient care providers represent another 3.6% of the
portfolio. Large holdings here include Columbia/HCA Healthcare, a leader of
the consolidation wave sweep ing this industry; and HealthSouth Corp., which
operates outpatient surgery and rehabilitation centers.
A number of compelling factors suggest further growth for the
health-care industry. An aging population is bound to produce continued
demand. A new federal entitlement initiative in the health-care area seems
unlikely, which means a steady, more certain environment in the industry.
Additionally, health-care companies have made enormous strides in cost
control and increased efficiency through consolidation in recent years.
Q. HOW HAVE YOU MANAGED THE TECHNOLOGY PORTION OF THE PORTFOLIO IN THE FACE OF
MARKET VOLATILITY?
A. Many technology stocks tend to be volatile, and many had steep declines
late in 1995 and during the July sell-off. Fund performance suffered, and our
large positions in technology are the main reason the Fund underperformed the
S&P 500 for the reporting period. But a number of these stocks already have
started to rebound, and trends favor certain kinds of technology companies
over others.
For example, while commodity-type semiconductor producers are suffering
from overcapacity and an inability to raise prices, that helps personal
computer makers like Compaq and Dell, whose component costs decrease as a
result. Personal computer makers are anticipating a good Christmas season. PC
makers constitute approximately 3% of the Fund's portfolio. And companies
that help others network PCs into more sophisticated information systems are
doing well.
Overall, we are optimistic about the technology sector. The cream of the
technology companies, like Intel and Microsoft, are still going strong. And
new products like Windows NT from Microsoft, the Pentium Pro chip from
AIM Weingarten Fund
34
<PAGE> 37
The Managers' Overview
================================================================================
PORTFOLIO HOLDINGS
As of 10/31/96
<TABLE>
<CAPTION>
<S> <C>
Top 10 Industries Top 10 Common Stock Holdings
1. Computer Software/Services 1. Student Loan Marketing Association
2. Medical (Drugs) 2. Intel Corp.
3. Retail (Stores) 3. Pep Boys-Manny, Moe & Jack
4. Telecommunications 4. ADC Telecommunications, Inc.
5. Finance (Consumer Credit) 5. Loews Corp.
6. Computer Networking 6. Conseco, Inc.
7. Insurance (Multi-Line Property) 7. Cisco Systems, Inc.
8. Medical (Patient Services) 8. 3Com Corp.
9. Medical (Instruments/Products) 9. Philip Morris Companies, Inc.
10. Computers MINI/PCs 10. Federal National Mortgage Association
================================================================================
</TABLE>
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
Intel, and the next generation of modems should fuel another upgrade cycle for
corporations.
Q. WHAT MAKES THE RETAIL SECTOR ATTRACTIVE?
A. Many analysts are predicting a good Christmas season and New Year for
retailers. Consumer confidence is high, buoyed by low unemployment and the
absence of inflation.
Our investment focus, however, emphasizes individual companies instead
of sectors. One retailer we found attractive is Pep Boys--full name Pep
Boys-Manny, Moe & Jack--the auto parts chain. The company has been expanding
beyond just parts selling into performing maintenance for vehicle fleets and
reconditioning cars for auto rental firms. Another example is Toys R Us,
which made a brilliant move earlier this year when it took over Baby
Superstore, Inc. Essentially, Toys R Us eliminated its biggest and best
competitor in baby gear by buying it.
Q. WHAT IS YOUR MARKET OUTLOOK FOR THE NEAR TERM?
A. The bull market for stocks marked its sixth year in October, making it the
longest in history. Analysts disagree on whether this will continue, and
no one can know for sure.
We have had an unusual four-to-five-year period now when earnings growth
has been above the historic average. We've been anticipating a change and
this fall, we finally saw evidence that the rate of growth of corporate
earnings has slowed. Over the long haul, we believe this will be good for
those steady companies like Gillette or Procter & Gamble that don't get big
bumps from cyclical surges but over time outdo the market averages.
We also see a trend back toward large-capitalization stocks.
Smaller-company stocks have been favored by the market for most of the 1990s,
but we no longer see any great advantage to them. For the price you pay for
them, we don't think small-company stocks are producing a dramatic edge in
earnings growth compared to large-company stocks. We are not saying
small-company stocks are a bad investment, just that they may not continue to
outdo large-company stocks in the foreseeable future. That is why we think a
diversified equity portfolio ought to contain both types of stocks.
Some observers consider the stock market overpriced after the huge runup
in values the past two years. We certainly don't think the market is
undervalued, but many companies continue to report favorable earnings, even
with a slower rate of growth. Good earnings are the most important indicator
of a stock's future performance. By that criterion, the stock market remains
a good place to invest.
-------------------------------------
Our stock selection
process focuses on one security
at a time. Nevertheless,
trends appear when you step back
and look at the portfolio
as a whole.
-------------------------------------
AIM Weingarten Fund
35
<PAGE> 38
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
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
FORE Systems, Inc.(a) 525,000 $ 20,868,750
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
</TABLE>
36
W E I N G A R T E N
<PAGE> 39
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT)-1.59%
Bear Stearns Companies Inc. 535,720 $ 12,656,385
- ----------------------------------------------------------------
Charles Schwab Corp. 342,100 8,552,500
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(CONTINUED)
Travelers Group, Inc. 800,000 $ 43,400,000
- ----------------------------------------------------------------
260,054,164
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
</TABLE>
37
W E I N G A R T E N
<PAGE> 40
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NATURAL GAS PIPELINE-(CONTINUED)
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
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
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
- ----------------------------------------------------------------
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 MARKET
AMOUNT VALUE
<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>
38
W E I N G A R T E N
<PAGE> 41
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<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
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
TDK Corp.
(Electronic Components/
Miscellaneous) 356,000 $ 20,886,917
- ----------------------------------------------------------------
74,731,165
- ----------------------------------------------------------------
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>
39
W E I N G A R T E N
<PAGE> 42
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.
40
W E I N G A R T E N
<PAGE> 43
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.
41
W E I N G A R T E N
<PAGE> 44
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.
42
W E I N G A R T E N
<PAGE> 45
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 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
43
W E I N G A R T E N
<PAGE> 46
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 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
44
W E I N G A R T E N
<PAGE> 47
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>
45
W E I N G A R T E N
<PAGE> 48
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.
46
W E I N G A R T E N
<PAGE> 49
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1996 and the period October 8, 1991 (date operations commenced)
through October 31, 1991.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.48 $ 17.94 $ 17.69 $ 16.73 $ 15.77 $15.15
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income 0.17 0.10 0.17 0.16 0.14 0.01
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) 2.52 4.35 0.58 0.93 0.99 0.61
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Total from investment operations 2.69 4.45 0.75 1.09 1.13 0.62
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income -- (0.13) (0.17) (0.13) (0.08) --
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Distributions from net realized capital gains (2.71) (1.78) (0.33) -- (0.09) --
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Total distributions (2.71) (1.91) (0.50) (0.13) (0.17) --
- ------------------------------------------------------------ ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 20.46 $ 20.48 $ 17.94 $ 17.69 $ 16.73 $15.77
============================================================ ======= ======= ======= ======= ======= ======
Total return(a) 15.34% 28.69% 4.37% 6.53% 7.16% 4.09%
============================================================ ======= ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $60,483 $54,332 $40,486 $39,821 $16,519 $3,926
============================================================ ======= ======= ======= ======= ======= ======
Ratio of expenses to average net assets(b) 0.65%(d)(e) 0.70% 0.65% 0.78% 0.82% 0.90%(g)
============================================================ ======= ======= ======= ======= ======= ======
Ratio of net investment income to average net assets(c) 0.80%(d) 0.45% 1.00% 0.97% 0.91% 1.00%(g)
============================================================ ======= ======= ======= ======= ======= ======
Portfolio turnover rate 159% 139% 136% 109% 37% 46%
============================================================ ======= ======= ======= ======= ======= ======
Average broker commission rate(f) $0.0615 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)(h) -- $ 6 -- -- -- --
============================================================ ======= ======= ======= ======= ======= ======
Average number of shares outstanding during the period
(000s omitted)(h) 2,908 2,526 2,256 1,826 707 249
============================================================ ======= ======= ======= ======= ======= ======
Average amount of debt per share during the period -- $0.0024 -- -- -- --
============================================================ ======= ======= ======= ======= ======= ======
</TABLE>
(a) For periods less than one year, total return is not annualized.
(b) Ratios of expenses prior to waiver of advisory fees were 0.68%, 0.72%,
0.68%, 0.81%, and 0.84% for the years 1996-1992, respectively.
(c) Ratios of net investment income prior to waiver of advisory fees were 0.77%,
0.43%, 0.98%, 0.94%, and 0.89% for the years 1996-1992, respectively.
(d) After waiver of advisory fees. Ratios are based on average net assets of
$56,025,662.
(e) Ratios include indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have remained the same.
(f) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
(g) Annualized.
(h) 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.
47
W E I N G A R T E N
<PAGE> 50
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.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
48
W E I N G A R T E N
<PAGE> 51
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
11 Greenway Plaza
Charles T. Bauer Charles T. Bauer Suite 1919
Chairman and Chief Executive Officer Chairman Houston, TX 77046
A I M Management Group Inc.
Robert H. Graham INVESTMENT ADVISOR
Bruce L. Crockett President A I M Advisors, Inc.
Formerly Director, President, and 11 Greenway Plaza
Chief Executive Officer John J. Arthur Suite 1919
COMSAT Corporation Senior Vice President and Treasurer Houston, TX 77046
Owen Daly II Gary T. Crum TRANSFER AGENT
Director Senior Vice President A I M Institutional Fund
Cortland Trust Inc. Services, Inc.
Scott G. Lucas 11 Greenway Plaza
Carl Frischling Senior Vice President Suite 1919
Partner Houston, TX 77046
Kramer, Levin, Naftalis & Frankel Carol F. Relihan
Senior Vice President and Secretary CUSTODIAN
Robert H. Graham State Street Bank & Trust Company
President and Chief Operating Officer Jonathan C. Schoolar 225 Franklin Street
A I M Management Group Inc. Senior Vice President Boston, MA 02110
John F. Kroeger Melville B. Cox COUNSEL TO THE FUND
Formerly Consultant Vice President Ballard Spahr
Wendell & Stockel Associates, Inc. Andrews & Ingersoll
Dana R. Sutton 1735 Market Street
Lewis F. Pennock Vice President and Assistant Treasurer Philadelphia, PA 19103
Attorney
P. Michelle Grace COUNSEL TO THE DIRECTORS
Ian W. Robinson Assistant Secretary Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive 919 Third Avenue
Vice President and David L. Kite New York, NY 10022
Chief Financial Officer Assistant Secretary
Bell Atlantic Management DISTRIBUTOR
Services, Inc. Nancy L. Martin Fund Management Company
Assistant Secretary 11 Greenway Plaza
Louis S. Sklar Suite 1919
Executive Vice President Ofelia M. Mayo Houston, TX 77046
Hines Interests Assistant Secretary
Limited Partnership AUDITORS
Kathleen J. Pflueger KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
Samuel D. Sirko Houston, TX 77002
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Weingarten Fund Institutional Class paid ordinary dividends in the amount
of $1.266 per share to shareholders during its tax year ended October 31, 1996.
Of this amount 11% is eligible for the dividends received deduction for
corporations. The Fund also distributed long-term capital gains of $1.44 per
share during its tax year ended October 31, 1996.
AIM Weingarten Fund
49
<PAGE> 52
[LOGO APPEARS HERE]
---------------
BULK RATE
Fund Management Company U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, Texas 77046-1188 Houston, TX
Permit No. 1919
---------------
