<PAGE> 1
[PHOTO APPEARS HERE]
AIM CONSTELLATION FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1996
<PAGE> 2
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o The Fund's average annual total returns, including sales charges, for
periods ended 9/30/96, the most recent calendar quarter-end, were as
follows: one-year, 4.28% (10.37% excluding sales charges); five years,
18.54%; 10 years, 19.64%.
o AIM Constellation Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed without a sales
charge. When sales charges are included, Fund performance reflects the
maximum 5.50% sales charge.
o 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.
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.
AIM CONSTELLATION FUND
For shareholders
who seek capital appreciation
through investments in
common stocks, with
emphasis on medium-size
and smaller emerging
growth companies.
<PAGE> 3
The Chairman's Letter
Dear Shareholder:
As you may have heard in the financial news, A I M
[PHOTO of Management Group Inc. recently announced a significant
CHARLES T. event in our company's history--an agreement to merge with
BAUER INVESCO PLC, one of the world's largest independent
Chairman of investment management 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
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 Fund's total return of 11.26% 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 13.19%
during that period, versus 9.03% for the Russell 2000 Index and 12.72% for the
S&P 400.
The Fund's long-term performance remains superb. From its inception in
1976 through October 31, 1996, the Fund's annual total return has averaged
18.65%. By contrast, average annual total return for the same period was 13.56%
for the NASDAQ Composite Index and 14.30% for the S&P 500.*
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
semi-conductor 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 ail-
MORNINGSTAR RATINGS
As of 10/31/96
FUNDS IN
EQUITY
PERIOD RATING CATEGORY
------ ------ --------
Overall **** N/A
10 Years ***** 575
5 Years *** 1,031
3 Years *** 1,724
Morningstar's rating system of one (lowest) to five (highest) stars is based on
risk and return ratios for three-, five-, and 10-year periods and considers all
loads, expenses, and fees. Ratings compare funds with similar investment
objectives and represent past performance, which is no guarantee of comparable
future results.
* Data for the S&P 400 and the Russell 2000 indexes are not available for
the 20-year period since the Fund's inception.
See important Fund & index disclosures inside front cover.
2
<PAGE> 5
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.
ments 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.
A second trend has been consolidation. For example, through a series of
strategic acquisitions, portfolio holding Health South 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.
----------------------------
See important Fund & index disclosures inside front cover.
3
<PAGE> 6
LONG-TERM PERFORMANCE
THE AIM CONSTELLATION FUND GROWTH STORY
GROWTH OF A $10,000 INVESTMENT: APRIL 30, 1976-OCTOBER 31, 1996
<TABLE>
<CAPTION>
(In thousands)
AIM Constellation Fund NASDAQ Composite Index S&P 500 Cost of Living Index
<S> <C> <C> <C> <C>
4/30/76 9,443 10,000 10,000 10,000
10/76 9,102 10,030 10,319 10,321
10/77 8,575 10,826 9,681 10,980
10/78 10,329 12,336 10,290 11,961
10/79 15,619 15,045 11,866 13,405
10/80 31,348 21,401 15,676 15,116
10/81 30,638 21,674 15,762 16,649
10/82 29,000 23,604 18,336 17,504
10/83 40,569 30,478 23,449 18,004
10/84 35,867 27,423 24,926 18,770
10/85 39,649 32,475 29,748 19,376
10/86 58,139 40,050 39,608 19,661
10/87 56,748 35,890 42,120 20,553
10/88 69,979 42,458 48,368 21,426
10/89 94,817 50,580 61,075 22,389
10/90 79,482 36,616 56,485 23,797
10/91 141,356 60,277 75,409 24,492
10/92 162,306 67,181 82,896 25,276
10/93 208,732 86,507 95,236 25,971
10/94 224,288 85,311 98,922 26,649
10/95 299,259 115,015 124,995 27,397
10/96 332,949 135,602 155,022 28,128
</TABLE>
Past performance is no guarantee of comparable future results.
<TABLE>
<CAPTION>
4/30/76 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Dividends Reinvested $ 0 155 0 0 0 851 0 0 0 0 0
Capital Gains Reinvested $ 0 0 0 0 0 2,362 2,632 0 2,443 0 0
Total Distributions Reinvested $ 0 155 0 00 0 3,213 2,632 0 2,443 0 0
Total Account Value $ 9,443 8,575 10,329 15,619 31,348 30,638 29,000 40,569 35,867 39,649 58,139
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Dividends Reinvested 0 0 0 101 0 0 0 0 0 0
Capital Gains Reinvested 16,853 23,391 3,903 15,534 0 2,261 0 0 6,370 9,499
Total Distributions Reinvested 16,853 23,391 3,903 15,635 0 2,261 0 0 6,370 9,499
Total Account Value 56,748 69,979 94,817 79,482 141,356 162,306 208,732 224,288 299,259 332,949
</TABLE>
Data shown are as of the Fund's fiscal year-end. Your Fund's total return
includes sales charges, expenses, and management fees. For Fund performance
calculations and descriptions of indexes cited on this page, please refer to
the inside front cover. Source: Towers Data Systems HYPO -- Registered
Trademark --
4
<PAGE> 7
AIM CONSTELLATION FUND VS. BENCHMARK INDEXES
The chart compares your Fund to benchmark indexes. It is important to
understand differences between your Fund and these indexes. An index measures
the performance of a hypothetical portfolio. A market index, such as the S&P
500 or the NASDAQ Composite Index is not managed; therefore there are no sales
charges, expenses, or fees. If you could buy all the securities that make up a
particular index, you would incur expenses that would affect the return on your
investment. Use of these indexes is intended to give you a general idea of how
your Fund performed compared to these benchmarks.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/96. Including sales charges.
Since Inception (4/30/76) 18.65%
20 Years 19.38
10 Years 18.40
5 Years 17.35
1 Year 5.14*
*11.26% excluding sales charges
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-84.91%
ADVERTISING/BROADCASTING-1.58%
American Radio Systems
Corp.(a)(b) 650,000 $ 19,825,000
- -----------------------------------------------------------------
CanWest Global Communications
Corp. 2,250,000 23,906,250
- -----------------------------------------------------------------
Chancellor Corp.-Class A(a)(b) 500,000 16,125,000
- -----------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 750,000 54,750,000
- -----------------------------------------------------------------
Infinity Broadcasting
Corp.-Class A(a) 787,500 22,837,500
- -----------------------------------------------------------------
Jacor Communications, Inc.(a) 1,000,000 28,000,000
- -----------------------------------------------------------------
Paxson Communications Corp.(a) 1,000,000 8,875,000
- -----------------------------------------------------------------
True North Communications, Inc. 325,700 7,735,375
- -----------------------------------------------------------------
182,054,125
- -----------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS &
TIRES-0.12%
Mark IV Industries, Inc. 656,250 14,191,406
- -----------------------------------------------------------------
BANKING-0.55%
Bank of Boston Corp. 1,000,000 64,000,000
- -----------------------------------------------------------------
BIOTECHNOLOGY-0.73%
AMGEN Inc.(a) 1,000,000 61,312,500
- -----------------------------------------------------------------
Guidant Corp. 500,000 23,062,500
- -----------------------------------------------------------------
84,375,000
- -----------------------------------------------------------------
BUSINESS SERVICES-0.90%
AccuStaff, Inc.(a) 500,000 13,375,000
- -----------------------------------------------------------------
APAC Teleservices, Inc.(a) 200,000 9,225,000
- -----------------------------------------------------------------
Career Horizons, Inc.(a) 350,000 14,218,750
- -----------------------------------------------------------------
Corrections Corporation of
America 100,100 2,602,600
- -----------------------------------------------------------------
CUC International, Inc.(a) 900,000 22,050,000
- -----------------------------------------------------------------
Equifax, Inc. 500,000 14,875,000
- -----------------------------------------------------------------
HealthCare COMPARE Corp.(a) 493,900 21,731,600
- -----------------------------------------------------------------
Paychex, Inc. 100,000 5,700,000
- -----------------------------------------------------------------
103,777,950
- -----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.52%
Airgas, Inc.(a) 1,857,400 42,023,675
- -----------------------------------------------------------------
IMC Global, Inc. 500,000 18,750,000
- -----------------------------------------------------------------
60,773,675
- -----------------------------------------------------------------
COMPUTER MINI/PCS-2.77%
Compaq Computer Corp.(a) 1,350,000 93,993,750
- -----------------------------------------------------------------
Dell Computer Corp.(a) 900,000 73,237,500
- -----------------------------------------------------------------
Rational Software Corp.(a) 1,050,000 40,293,750
- -----------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,850,000 112,850,000
- -----------------------------------------------------------------
320,375,000
- -----------------------------------------------------------------
COMPUTER NETWORKING-5.83%
ACT Networks, Inc.(a)(b) 500,000 17,125,000
- -----------------------------------------------------------------
Ascend Communications, Inc.(a) 1,486,800 97,199,550
- -----------------------------------------------------------------
Auspex Systems, Inc.(a) 311,700 3,194,925
- -----------------------------------------------------------------
Cabletron Systems, Inc.(a) 1,000,000 62,375,000
- -----------------------------------------------------------------
Cascade Communications Corp.(a) 1,500,000 108,937,500
- -----------------------------------------------------------------
Cisco Systems, Inc.(a) 2,500,000 154,687,500
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
FORE Systems, Inc.(a) 1,650,000 $ 65,587,500
- -----------------------------------------------------------------
Shiva Corp.(a) 212,400 8,708,400
- -----------------------------------------------------------------
Sync Research, Inc.(a)(b) 500,000 6,625,000
- -----------------------------------------------------------------
3Com Corp.(a) 2,000,000 135,250,000
- -----------------------------------------------------------------
Xircom, Inc.(a) 662,200 13,409,550
- -----------------------------------------------------------------
673,099,925
- -----------------------------------------------------------------
COMPUTER PERIPHERALS-1.39%
Adaptec, Inc.(a) 500,000 30,437,500
- -----------------------------------------------------------------
American Power Conversion
Corp.(a) 563,300 12,040,537
- -----------------------------------------------------------------
Microchip Technology, Inc.(a) 1,000,050 36,251,812
- -----------------------------------------------------------------
U.S. Robotics Corp.(a) 1,300,000 81,737,500
- -----------------------------------------------------------------
160,467,349
- -----------------------------------------------------------------
COMPUTER
SOFTWARE/SERVICES-12.85%
Affiliated Computer Services,
Inc.(a) 245,600 13,508,000
- -----------------------------------------------------------------
BISYS Group, Inc. (The)(a) 463,200 17,254,200
- -----------------------------------------------------------------
BMC Software, Inc.(a) 1,000,000 83,000,000
- -----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 500,000 18,250,000
- -----------------------------------------------------------------
Ceridian Corp.(a) 1,000,000 49,625,000
- -----------------------------------------------------------------
Computer Associates
International, Inc. 1,875,000 110,859,375
- -----------------------------------------------------------------
Computer Sciences Corp.(a) 700,000 51,975,000
- -----------------------------------------------------------------
Compuware Corp.(a) 1,000,000 52,750,000
- -----------------------------------------------------------------
CSG Systems International,
Inc.(a) 510,000 8,542,500
- -----------------------------------------------------------------
DST Systems, Inc.(a) 1,000,000 30,750,000
- -----------------------------------------------------------------
Electronic Arts, Inc.(a) 850,000 31,875,000
- -----------------------------------------------------------------
First Data Corp. 600,000 47,850,000
- -----------------------------------------------------------------
HBO & Co. 1,000,000 60,125,000
- -----------------------------------------------------------------
HPR, Inc.(a) 500,000 7,000,000
- -----------------------------------------------------------------
IDX Systems Corp.(a) 306,900 9,053,550
- -----------------------------------------------------------------
Integrated Systems, Inc.(a) 428,700 11,574,900
- -----------------------------------------------------------------
Intuit, Inc.(a) 750,000 20,250,000
- -----------------------------------------------------------------
McAfee Associates, Inc.(a) 1,524,200 69,351,100
- -----------------------------------------------------------------
Metromail Corp. 500,000 9,187,500
- -----------------------------------------------------------------
Microsoft Corp.(a) 2,000,000 274,500,000
- -----------------------------------------------------------------
National Data Corp. 600,000 24,675,000
- -----------------------------------------------------------------
Network General Corp.(a)(b) 2,185,000 52,713,125
- -----------------------------------------------------------------
Oracle Corp.(a) 2,499,950 105,779,134
- -----------------------------------------------------------------
Parametric Technology Corp.(a) 2,400,000 117,300,000
- -----------------------------------------------------------------
Physician Computer Network,
Inc.(a) 1,500,000 13,406,250
- -----------------------------------------------------------------
Pure Atria Corp.(a) 57,700 1,572,325
- -----------------------------------------------------------------
Sterling Commerce, Inc.(a) 1,696,300 47,708,438
- -----------------------------------------------------------------
Sterling Software, Inc.(a) 500,000 16,250,000
- -----------------------------------------------------------------
Structural Dynamics Research
Corp.(a) 1,100,000 19,525,000
- -----------------------------------------------------------------
SunGard Data Systems Inc.(a) 530,000 22,657,500
- -----------------------------------------------------------------
Synopsys, Inc.(a) 1,500,000 67,500,000
- -----------------------------------------------------------------
Tecnomatix Technologies Ltd.(a) 329,500 5,725,063
- -----------------------------------------------------------------
Transition Systems, Inc.(a) 33,300 316,350
- -----------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Wind River Systems(a) 300,000 $ 12,750,000
- -----------------------------------------------------------------
1,485,159,310
- -----------------------------------------------------------------
CONGLOMERATES-0.63%
Corning, Inc. 1,000,000 38,750,000
- -----------------------------------------------------------------
Tyco International Ltd. 411,982 20,444,606
- -----------------------------------------------------------------
U.S. Industries, Inc.(a) 500,000 13,500,000
- -----------------------------------------------------------------
72,694,606
- -----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.04%
AMETEK, Inc. 200,000 3,975,000
- -----------------------------------------------------------------
Berg Electronics Corp.(a) 500,000 14,125,000
- -----------------------------------------------------------------
BMC Industries, Inc. 500,000 14,812,500
- -----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 450,000 10,068,750
- -----------------------------------------------------------------
Methode Electronics, Inc.-Class
A 450,000 8,775,000
- -----------------------------------------------------------------
Molex, Inc.-Class A 234,375 7,587,890
- -----------------------------------------------------------------
SCI Systems, Inc.(a) 500,000 24,875,000
- -----------------------------------------------------------------
Symbol Technologies, Inc.(a) 600,000 26,925,000
- -----------------------------------------------------------------
Thermo Instrument Systems,
Inc.(a) 300,000 9,075,000
- -----------------------------------------------------------------
120,219,140
- -----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.11%
Imperial Credit Industries,
Inc.(a) 700,000 12,687,500
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-4.20%
Aames Financial Corp. 309,100 13,793,587
- -----------------------------------------------------------------
Beneficial Corp. 400,000 23,400,000
- -----------------------------------------------------------------
Capital One Financial Corp. 1,500,000 46,687,500
- -----------------------------------------------------------------
Cityscape Financial Corp.(a) 474,300 12,213,225
- -----------------------------------------------------------------
Concord EFS, Inc.(a) 97,100 2,815,900
- -----------------------------------------------------------------
Credit Acceptance Corp.(a) 1,128,800 30,477,600
- -----------------------------------------------------------------
First USA, Inc. 400,000 23,000,000
- -----------------------------------------------------------------
Green Tree Financial Corp. 2,150,000 85,193,750
- -----------------------------------------------------------------
Household International, Inc. 650,000 57,525,000
- -----------------------------------------------------------------
MBNA Corp. 1,500,000 56,625,000
- -----------------------------------------------------------------
Money Store, Inc. (The) 1,250,000 32,187,500
- -----------------------------------------------------------------
Olympic Financial Ltd.(a) 1,431,200 22,720,300
- -----------------------------------------------------------------
PMT Services, Inc.(a) 553,500 11,070,000
- -----------------------------------------------------------------
Southern Pacific Funding
Corp.(a) 116,100 3,657,150
- -----------------------------------------------------------------
Student Loan Marketing
Association 450,000 37,237,500
- -----------------------------------------------------------------
SunAmerica, Inc. 700,000 26,250,000
- -----------------------------------------------------------------
484,854,012
- -----------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.17%
Washington Mutual, Inc. 458,400 19,367,400
- -----------------------------------------------------------------
FOOD/PROCESSING-0.25%
Richfood Holdings, Inc. 1,182,100 28,518,163
- -----------------------------------------------------------------
FUNERAL SERVICES-0.96%
Service Corp. International 3,000,000 85,500,000
- -----------------------------------------------------------------
Stewart Enterprises, Inc.-Class
A 750,000 25,687,500
- -----------------------------------------------------------------
111,187,500
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FURNITURE-0.26%
Leggett & Platt, Inc. 1,000,000 $ 29,875,000
- -----------------------------------------------------------------
GAMING-0.75%
GTECH Holdings Corp.(a) 750,000 22,125,000
- -----------------------------------------------------------------
International Game Technology 1,875,000 39,609,375
- -----------------------------------------------------------------
Trump Hotels & Casino Resorts,
Inc.(a)(b) 1,540,800 24,460,200
- -----------------------------------------------------------------
86,194,575
- -----------------------------------------------------------------
HOMEBUILDING-0.06%
Oakwood Homes Corp. 250,000 6,625,000
- -----------------------------------------------------------------
HOTELS/MOTELS-1.40%
Doubletree Corp.(a) 652,800 26,479,200
- -----------------------------------------------------------------
HFS, Inc.(a) 1,200,000 87,900,000
- -----------------------------------------------------------------
Promus Hotel Corp.(a) 650,000 20,637,500
- -----------------------------------------------------------------
Sun International Hotels Ltd.(a) 560,300 26,474,175
- -----------------------------------------------------------------
161,490,875
- -----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.64%
Compdent Corp.(a)(b) 700,000 24,062,500
- -----------------------------------------------------------------
Conseco, Inc. 500,000 26,750,000
- -----------------------------------------------------------------
RISCORP, Inc.-Class A(a) 172,300 861,500
- -----------------------------------------------------------------
United Companies Financial Corp. 750,000 22,406,250
- -----------------------------------------------------------------
74,080,250
- -----------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-1.02%
CapMAC Holdings Inc.(b) 850,000 28,368,750
- -----------------------------------------------------------------
MGIC Investment Corp. 1,250,000 85,781,250
- -----------------------------------------------------------------
Progressive Corp. 44,900 3,086,875
- -----------------------------------------------------------------
117,236,875
- -----------------------------------------------------------------
LEISURE & RECREATION-0.98%
Callaway Golf Co. 1,250,000 38,281,250
- -----------------------------------------------------------------
Harley-Davidson, Inc. 1,000,000 45,125,000
- -----------------------------------------------------------------
Mattel, Inc. 625,000 18,046,875
- -----------------------------------------------------------------
Speedway Motorsports, Inc.(a) 511,200 11,693,700
- -----------------------------------------------------------------
113,146,825
- -----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.35%
Pentair, Inc. 500,000 12,625,000
- -----------------------------------------------------------------
Thermo Electron Corp.(a) 750,000 27,375,000
- -----------------------------------------------------------------
40,000,000
- -----------------------------------------------------------------
MEDICAL (DRUGS)-1.51%
Cardinal Health, Inc. 1,400,000 109,900,000
- -----------------------------------------------------------------
Curative Technologies, Inc.(a) 265,000 6,028,750
- -----------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 250,000 8,625,000
- -----------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 750,000 21,843,750
- -----------------------------------------------------------------
Jones Medical Industries, Inc. 402,350 17,502,225
- -----------------------------------------------------------------
Parexel International Corp.(a) 217,100 10,637,900
- -----------------------------------------------------------------
174,537,625
- -----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-7.66%
American HomePatient Inc.(a)(b) 750,000 17,812,500
- -----------------------------------------------------------------
American Medical Response,
Inc.(a) 300,000 9,000,000
- -----------------------------------------------------------------
American Oncology Resources,
Inc.(a) 336,900 2,695,200
- -----------------------------------------------------------------
Apria Healthcare Group,
Inc.(a)(b) 1,750,000 33,468,750
- -----------------------------------------------------------------
ClinTrials Research Inc.(a) 243,300 9,032,513
- -----------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Columbia/HCA Healthcare Corp. 2,625,000 $ 93,843,750
- -----------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 1,000,000 22,875,000
- -----------------------------------------------------------------
Health Care and Retirement
Corp.(a) 2,250,000 55,406,250
- -----------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 2,999,987 65,999,714
- -----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 3,071,000 115,162,500
- -----------------------------------------------------------------
Lincare Holdings, Inc.(a) 1,000,000 37,500,000
- -----------------------------------------------------------------
Manor Care, Inc. 1,000,000 39,250,000
- -----------------------------------------------------------------
MedPartners, Inc.(a) 800,000 16,900,000
- -----------------------------------------------------------------
OccuSystems, Inc.(a) 430,000 11,771,250
- -----------------------------------------------------------------
OrNda HealthCorp(a) 2,000,000 54,500,000
- -----------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 524,200 7,535,375
- -----------------------------------------------------------------
Oxford Health Plans, Inc.(a) 1,498,600 68,186,300
- -----------------------------------------------------------------
PhyCor, Inc.(a) 1,050,000 32,550,000
- -----------------------------------------------------------------
Physicians Resource Group,
Inc.(a) 500,000 13,500,000
- -----------------------------------------------------------------
Quorum Health Group, Inc.(a) 600,000 16,200,000
- -----------------------------------------------------------------
Tenet Healthcare Corp.(a) 2,250,000 46,968,750
- -----------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 550,000 21,450,000
- -----------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 1,350,000 33,750,000
- -----------------------------------------------------------------
Vencor, Inc.(a) 2,000,000 59,250,000
- -----------------------------------------------------------------
884,607,852
- -----------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-4.32%
Advanced Technology
Laboratories, Inc.(a) 650,000 19,825,000
- -----------------------------------------------------------------
Boston Scientific Corp.(a) 1,014,552 55,166,265
- -----------------------------------------------------------------
CardioThoracic Systems, Inc.(a) 250,000 4,750,000
- -----------------------------------------------------------------
Dentsply International, Inc. 550,000 23,168,750
- -----------------------------------------------------------------
Gulf South Medical Supply,
Inc.(a)(b) 1,160,400 25,528,800
- -----------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 1,000,000 39,250,000
- -----------------------------------------------------------------
Invacare Corp. 885,200 24,785,600
- -----------------------------------------------------------------
Medtronic, Inc. 500,000 32,187,500
- -----------------------------------------------------------------
Nellcor Puritan Bennett, Inc.(a) 500,000 9,750,000
- -----------------------------------------------------------------
Omnicare, Inc. 2,000,000 54,500,000
- -----------------------------------------------------------------
Physician Sales & Service,
Inc.(a) 750,000 15,937,500
- -----------------------------------------------------------------
Quintiles Transnational Corp.(a) 500,000 32,875,000
- -----------------------------------------------------------------
Spine-Tech, Inc.(a) 57,600 1,454,400
- -----------------------------------------------------------------
St. Jude Medical, Inc.(a) 780,200 30,817,900
- -----------------------------------------------------------------
Steris Corp.(a) 825,000 31,143,750
- -----------------------------------------------------------------
Sybron International Corp.(a) 2,000,000 58,250,000
- -----------------------------------------------------------------
Target Therapeutics, Inc.(a) 225,000 8,325,000
- -----------------------------------------------------------------
US Surgical Corp. 750,000 31,406,250
- -----------------------------------------------------------------
499,121,715
- -----------------------------------------------------------------
OFFICE PRODUCTS-0.52%
Avery Dennison Corp. 300,000 19,762,500
- -----------------------------------------------------------------
Reynolds & Reynolds Co.-Class A 1,517,100 40,013,513
- -----------------------------------------------------------------
59,776,013
- -----------------------------------------------------------------
OIL & GAS (DRILLING)-0.35%
Reading & Bates Corp.(a) 1,400,000 40,250,000
- -----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.52%
Burlington Resources, Inc. 750,000 37,781,250
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-(CONTINUED)
Transocean Offshore Inc. 350,000 $ 22,137,500
- -----------------------------------------------------------------
59,918,750
- -----------------------------------------------------------------
OIL & GAS (SERVICES)-0.52%
Camco International, Inc. 613,700 23,780,875
- -----------------------------------------------------------------
Global Marine, Inc.(a) 2,000,000 36,750,000
- -----------------------------------------------------------------
60,530,875
- -----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-2.18%
Baker Hughes, Inc. 1,000,000 35,625,000
- -----------------------------------------------------------------
Cooper Cameron Corp.(a) 27,500 1,756,563
- -----------------------------------------------------------------
Diamond Offshore Drilling,
Inc.(a) 1,000,000 60,875,000
- -----------------------------------------------------------------
ENSCO International, Inc.(a) 750,000 32,437,500
- -----------------------------------------------------------------
Marine Drilling Co., Inc.(a) 2,000,000 27,750,000
- -----------------------------------------------------------------
Pride Petroleum Services,
Inc.(a) 518,700 9,077,250
- -----------------------------------------------------------------
Rowan Co., Inc.(a) 1,300,000 29,087,500
- -----------------------------------------------------------------
Smith International, Inc.(a) 750,000 28,500,000
- -----------------------------------------------------------------
Varco International, Inc.(a) 1,326,100 26,190,475
- -----------------------------------------------------------------
251,299,288
- -----------------------------------------------------------------
POLLUTION CONTROL-0.51%
United Waste Systems, Inc.(a) 592,200 20,356,875
- -----------------------------------------------------------------
US Filter Corp.(a) 206,000 7,107,000
- -----------------------------------------------------------------
USA Waste Services, Inc.(a) 1,000,000 32,000,000
- -----------------------------------------------------------------
59,463,875
- -----------------------------------------------------------------
PUBLISHING-0.28%
Gartner Group, Inc.(a) 608,200 18,702,150
- -----------------------------------------------------------------
Times Mirror Co. (The) 300,000 13,875,000
- -----------------------------------------------------------------
32,577,150
- -----------------------------------------------------------------
RESTAURANTS-1.30%
Apple South, Inc. 500,000 5,875,000
- -----------------------------------------------------------------
Applebee's International, Inc. 843,600 20,562,750
- -----------------------------------------------------------------
Brinker International, Inc.(a) 1,400,000 23,800,000
- -----------------------------------------------------------------
Cracker Barrel Old Country
Store, Inc. 500,000 10,187,500
- -----------------------------------------------------------------
Lone Star Steakhouse & Saloon,
Inc.(a) 1,250,000 32,031,250
- -----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 750,000 17,390,625
- -----------------------------------------------------------------
Planet Hollywood International,
Inc.-Class A(a) 750,000 15,562,500
- -----------------------------------------------------------------
Starbucks Corp.(a) 750,000 24,375,000
- -----------------------------------------------------------------
149,784,625
- -----------------------------------------------------------------
RETAIL (FOOD & DRUG)-3.13%
American Stores Co. 1,000,000 41,375,000
- -----------------------------------------------------------------
Eckerd Corp.(a) 1,262,800 35,042,700
- -----------------------------------------------------------------
Kroger Co. (The)(a) 1,200,000 53,550,000
- -----------------------------------------------------------------
Revco D.S., Inc.(a) 1,000,000 30,125,000
- -----------------------------------------------------------------
Safeway, Inc.(a) 2,000,000 85,750,000
- -----------------------------------------------------------------
Thrifty PayLess Holdings,
Inc.(a) 1,513,800 32,357,475
- -----------------------------------------------------------------
Vons Companies, Inc. (The) 1,500,000 83,062,500
- -----------------------------------------------------------------
361,262,675
- -----------------------------------------------------------------
RETAIL (STORES)-10.61%
AutoZone, Inc.(a) 1,500,000 38,437,500
- -----------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 1,000,000 25,250,000
- -----------------------------------------------------------------
Boise Cascade Office Products
Corp.(a) 293,100 5,568,900
- -----------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
CDW Computer Centers, Inc.(a) 650,000 $ 40,909,373
- -----------------------------------------------------------------
Claire's Stores, Inc. 400,000 6,800,000
- -----------------------------------------------------------------
CompUSA, Inc.(a) 1,000,000 46,250,000
- -----------------------------------------------------------------
Consolidated Stores Corp.(a) 1,600,000 61,800,000
- -----------------------------------------------------------------
Corporate Express, Inc.(a) 1,090,000 35,561,250
- -----------------------------------------------------------------
Dayton Hudson Corp. 1,500,000 51,937,500
- -----------------------------------------------------------------
Dillard Department Stores, Inc. 500,000 15,875,000
- -----------------------------------------------------------------
Dollar General Corp. 1,087,093 30,166,830
- -----------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 600,000 22,650,000
- -----------------------------------------------------------------
Finish Line, Inc. (The) Class
A(a) 422,700 17,964,750
- -----------------------------------------------------------------
Gap, Inc. (The) 1,000,000 29,000,000
- -----------------------------------------------------------------
Global DirectMail Corp.(a) 700,000 34,475,000
- -----------------------------------------------------------------
Gymboree Corp.(a)(b) 1,447,000 45,218,750
- -----------------------------------------------------------------
Home Depot, Inc. 100,000 5,475,000
- -----------------------------------------------------------------
Jones Apparel Group, Inc.(a) 600,000 18,750,000
- -----------------------------------------------------------------
Kohl's Corp.(a) 838,600 30,189,600
- -----------------------------------------------------------------
Lowe's Co., Inc. 1,000,000 40,375,000
- -----------------------------------------------------------------
Men's Wearhouse, Inc.
(The)(a)(b) 1,075,050 22,172,906
- -----------------------------------------------------------------
Meyer (Fred), Inc.(a) 700,000 24,587,500
- -----------------------------------------------------------------
Micro Warehouse, Inc.(a) 1,250,000 28,750,000
- -----------------------------------------------------------------
Neiman Marcus Group, Inc.
(The)(a) 300,000 9,787,500
- -----------------------------------------------------------------
Oakley, Inc.(a) 2,000,000 29,750,000
- -----------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 1,250,000 43,750,000
- -----------------------------------------------------------------
Petco Animal Supplies,
Inc.(a)(b) 675,000 15,862,500
- -----------------------------------------------------------------
PETsMART, Inc.(a) 2,000,000 54,000,000
- -----------------------------------------------------------------
Ross Stores, Inc. 437,200 18,143,800
- -----------------------------------------------------------------
Saks Holdings, Inc.(a) 272,900 9,551,500
- -----------------------------------------------------------------
Sports Authority, Inc. (The)(a) 1,500,000 36,375,000
- -----------------------------------------------------------------
Staples, Inc.(a) 4,000,000 74,500,000
- -----------------------------------------------------------------
Sunglass Hut International,
Inc.(a) 628,900 5,581,489
- -----------------------------------------------------------------
Tech Data Corp.(a) 1,500,000 38,625,000
- -----------------------------------------------------------------
Tiffany & Co. 758,900 28,079,300
- -----------------------------------------------------------------
TJX Companies, Inc. 750,000 30,000,000
- -----------------------------------------------------------------
Toys "R" Us, Inc.(a) 2,000,000 67,750,000
- -----------------------------------------------------------------
Viking Office Products, Inc.(a) 2,500,000 72,812,500
- -----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 500,000 13,750,000
- -----------------------------------------------------------------
1,226,483,448
- -----------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.08%
Input/Output, Inc.(a) 300,000 8,925,000
- -----------------------------------------------------------------
SEMICONDUCTORS-2.68%
Altera Corp.(a) 750,000 46,500,000
- -----------------------------------------------------------------
Intel Corp. 2,200,000 241,725,000
- -----------------------------------------------------------------
Solectron Corp.(a) 300,000 16,050,000
- -----------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 150,000 4,781,250
- -----------------------------------------------------------------
309,056,250
- -----------------------------------------------------------------
SHOES & RELATED APPAREL-1.08%
Nike, Inc.-Class B 1,000,000 58,875,000
- -----------------------------------------------------------------
Nine West Group, Inc.(a) 1,100,000 54,862,500
- -----------------------------------------------------------------
Wolverine World Wide, Inc. 450,000 11,137,500
- -----------------------------------------------------------------
124,875,000
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-5.33%
ACC Corp. 358,350 $ 15,229,875
- -----------------------------------------------------------------
ADC Telecommunications, Inc.(a) 1,500,000 102,562,500
- -----------------------------------------------------------------
Allen Group, Inc. 596,700 9,472,613
- -----------------------------------------------------------------
Andrew Corp.(a) 1,750,000 85,312,500
- -----------------------------------------------------------------
Aspect Telecommunications
Corp.(a) 550,000 32,725,000
- -----------------------------------------------------------------
Billing Information Concepts(a) 400,000 10,450,000
- -----------------------------------------------------------------
Frontier Corp. 1,000,000 29,000,000
- -----------------------------------------------------------------
MCI Communications Corp. 2,000,000 50,250,000
- -----------------------------------------------------------------
PairGain Technologies, Inc.(a) 1,366,100 94,090,138
- -----------------------------------------------------------------
PictureTel Corp.(a) 500,000 13,500,000
- -----------------------------------------------------------------
Premiere Technologies, Inc.(a) 50,300 817,375
- -----------------------------------------------------------------
Premisys Communications, Inc.(a) 500,000 25,000,000
- -----------------------------------------------------------------
QUALCOMM, Inc.(a) 600,000 23,850,000
- -----------------------------------------------------------------
Tellabs, Inc.(a) 800,000 68,100,000
- -----------------------------------------------------------------
U.S. Long Distance Corp.(a) 343,300 2,875,138
- -----------------------------------------------------------------
United States Satellite
Broadcasting
Company, Inc.(a) 412,100 6,645,112
- -----------------------------------------------------------------
Western Wireless Corp.-Class
A(a)(b) 550,000 9,075,000
- -----------------------------------------------------------------
WorldCom, Inc.(a) 1,500,000 36,562,500
- -----------------------------------------------------------------
615,517,751
- -----------------------------------------------------------------
TELEPHONE-0.23%
Century Telephone Enterprises,
Inc. 55,700 1,789,363
- -----------------------------------------------------------------
Cincinnati Bell, Inc. 500,000 24,687,500
- -----------------------------------------------------------------
26,476,863
- -----------------------------------------------------------------
TEXTILES-1.78%
Designer Holdings Ltd.(a) 250,000 4,781,250
- -----------------------------------------------------------------
Liz Claiborne, Inc. 1,250,000 52,812,500
- -----------------------------------------------------------------
Nautica Enterprises, Inc.(a) 1,200,000 36,900,000
- -----------------------------------------------------------------
Russell Corp. 1,000,000 28,375,000
- -----------------------------------------------------------------
Tommy Hilfiger Corp.(a) 1,000,000 52,000,000
- -----------------------------------------------------------------
Unifi, Inc. 978,600 30,458,926
- -----------------------------------------------------------------
205,327,676
- -----------------------------------------------------------------
TRANSPORTATION
(MISCELLANEOUS)-0.16%
AirNet Systems, Inc.(a) 560,000 7,280,000
- -----------------------------------------------------------------
Rural/Metro Corp.(a) 300,000 10,950,000
- -----------------------------------------------------------------
18,230,000
- -----------------------------------------------------------------
TRUCKING-0.10%
USFreightways Corp. 550,000 12,031,250
- -----------------------------------------------------------------
Total Domestic Common Stocks 9,806,505,142
- -----------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-3.85%
CANADA-0.73%
Agrium, Inc. (Chemicals) 891,100 11,918,463
- -----------------------------------------------------------------
Newbridge Networks Corp.
(Computer Networking)(a) 1,500,000 47,437,500
- -----------------------------------------------------------------
Potash Corp. of Saskatchewan
Inc. (Metals-Miscellaneous) 350,000 24,806,250
- -----------------------------------------------------------------
84,162,213
- -----------------------------------------------------------------
FRANCE-0.12%
Roussel-Uclaf (Medical-Drugs) 50,580 13,385,768
- -----------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
IRELAND-0.50%
CBT Group PLC-ADR (Computer
Software/Services)(a) 49,400 $ 2,717,000
- -----------------------------------------------------------------
Elan Corp. PLC-ADR
(Medical-Drugs)(a) 2,000,000 55,500,000
- -----------------------------------------------------------------
58,217,000
- -----------------------------------------------------------------
ISRAEL-0.30%
ECI Telecommunications Ltd.
Designs (Computer
Networking)(a) 1,250,000 25,000,000
- -----------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 225,000 9,421,875
- -----------------------------------------------------------------
34,421,875
- -----------------------------------------------------------------
ITALY-0.30%
Fila Holding S.p.A.-ADR
(Retail/Stores) 425,000 30,600,000
- -----------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 1,074,000 2,214,550
- -----------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 1,074,000 2,401,456
- -----------------------------------------------------------------
35,216,006
- -----------------------------------------------------------------
NETHERLANDS-0.54%
Baan Co. N.V. (Computer
Software/Services)(a) 800,000 29,600,000
- -----------------------------------------------------------------
Gucci Group NV-ADR (Textiles) 385,000 26,565,000
- -----------------------------------------------------------------
Ver Ned Uitgever Bezit
(Publishing) 328,500 5,963,223
- -----------------------------------------------------------------
62,128,223
- -----------------------------------------------------------------
SWEDEN-0.54%
Telefonaktiebolaget LM
Ericsson-ADR
(Telecommunications) 2,250,000 62,156,250
- -----------------------------------------------------------------
SWITZERLAND-0.05%
Ciba-Geigy AG (Chemicals) 5,000 6,159,018
- -----------------------------------------------------------------
UNITED KINGDOM-0.77%
Burton Group PLC (Retail-Stores) 2,700,000 6,558,838
- -----------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 1,937,500 76,773,438
- -----------------------------------------------------------------
Granada Group PLC (Leisure &
Recreation) 390,000 5,608,154
- -----------------------------------------------------------------
88,940,430
- -----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 444,786,783
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE
BONDS-0.07%
FINANCE (CONSUMER CREDIT)-0.07%
Cityscape Financial Corp., Conv.
Sub. Deb.
6.00%, 05/01/06
(Acquired 08/06/96-08/29/96;
Cost $10,090,613)(c) $ 7,815,000 $ 8,252,260
- -----------------------------------------------------------------
Total Convertible Corporate Bonds 8,252,260
- -----------------------------------------------------------------
REPURCHASE AGREEMENTS-5.65%(d)
Daiwa Securities America Inc.,
5.53%, 11/01/96(e) 38,201,444 38,201,444
- -----------------------------------------------------------------
SBC Capital Markets Inc.,
5.55%, 11/01/96(f) 179,000,000 179,000,000
- -----------------------------------------------------------------
Smith Barney Shearson Inc.,
5.60%, 11/01/96(g) 173,000,000 173,000,000
- -----------------------------------------------------------------
UBS Securities Inc., 5.60%,
11/01/96(h) 262,043,993 262,003,237
- -----------------------------------------------------------------
Total Repurchase Agreements 652,204,681
- -----------------------------------------------------------------
U.S. TREASURY SECURITIES-5.42%
U.S. TREASURY BILLS-5.42%(i)
5.18%, 12/26/96(j) 208,115,000 206,624,896
- -----------------------------------------------------------------
5.05%, 01/02/97(j) 387,710,000 384,542,409
- -----------------------------------------------------------------
4.53%, 02/06/97 35,000,000 34,536,950
- -----------------------------------------------------------------
Total U.S. Treasury
Securities 625,704,255
- -----------------------------------------------------------------
TOTAL INVESTMENTS-99.90% 11,537,453,121
- -----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.10% 11,087,841
- -----------------------------------------------------------------
NET ASSETS-100.00% $ 11,548,540,962
=================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has never owned enough of the outstanding voting securities of any
issuer to have control (as defined in the Investment Company Act of 1940) of
that issuer. The aggregate market value of these securities as of October
31, 1996 was $358,443,781 which represented 3.10% of the Fund's net assets.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of this security has been determined in
accordance with procedures established by the Board of Directors. The market
value of this security at October 31, 1996 was $8,252,260, which represents
0.07% of net assets.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collaterized by $733,115,000 U.S. Treasury obligations, 0% to
10.375% due 11/15/96 to 08/15/23.
(f) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collaterized by $691,506,000 U.S. Treasury obligations 0% to
9.125% due 11/30/96 to 10/31/01.
(g) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,031,111. Collaterized by $254,910,124 U.S. Treasury obligations, 0% to
9.50% due 11/15/96 to 09/01/34.
(h) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$300,046,667. Collaterized by $609,995,215 U.S. Government agency
obligations 0% to 11.00% due 05/01/09 to 03/01/33.
(i) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(j) A portion of the principal balance was pledged as collateral to cover margin
requirements for open future contracts. See Note 6.
Abbreviations:
ADR-American Depository Receipt
Conv.-Convertible
Deb.-Debentures
Sub.-Subordinated
See Notes to Financial Statements.
10
<PAGE> 13
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.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (25,042,610) $ (16,016,980)
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and futures contracts 394,119,929 237,427,697
- --------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and futures contracts 672,745,646 1,307,034,097
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,041,822,965 1,528,444,814
- --------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment securities:
Class A (233,242,373) (107,823,749)
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (4,789,469) (1,218,145)
- --------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 3,470,281,071 1,878,176,040
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 135,200,711 75,813,810
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 4,409,272,905 3,373,392,770
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 7,139,268,057 3,765,875,287
- --------------------------------------------------------------------------------------------------------------------------
End of period $11,548,540,962 $7,139,268,057
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 8,408,805,783 $4,828,771,443
- --------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (124,538) (54,010)
- --------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities, foreign currencies
and futures contracts 388,200,602 231,637,155
- --------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign currencies and futures
contracts 2,751,659,115 2,078,913,469
- --------------------------------------------------------------------------------------------------------------------------
$11,548,540,962 $7,139,268,057
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six diversified portfolios:
AIM Constellation Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM
Capital Development Fund, AIM Charter Fund and AIM Weingarten Fund. The Fund
currently offers two different classes of shares: the Class A shares and the
Institutional Class. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to seek capital appreciation.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange is valued at
its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Debt obligations that are issued or
guaranteed by the U.S. Treasury are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically authorized
by the Board of Directors of the Company. Short-term obligations having 60
days or less to
12
<PAGE> 15
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
13
<PAGE> 16
expenses of $12,505 from pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction of Fund's total expenses of $144,866 during the year ended October 31,
1996.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Company has
adopted a Plan pursuant to Rule 12b-l under the 1940 Act (the "Plan"), with
respect to the Class A shares, whereby the Fund pays AIM Distributors an annual
rate of 0.30% of the Class A shares average daily net assets as compensation for
services related to the sales and distribution of the Class A shares. The Plan
provides that payments to dealers and financial institutions that provide
continuing personal shareholder services to their customers who purchase and own
shares of the Class A shares, in amounts of up to 0.25% of the average net
assets of the Class A shares attributable to the customers of such dealers or
financial institutions, may be characterized as a service fee. The Plan also
provides that payments in excess of service fees are characterized as an asset-
based sales charge under the Plan. The Plan also imposes a cap on the total
amount of sales charges, including asset-based sales charges, that may be paid
by the Company with respect to the Fund's Class A shares. During the year ended
October 31, 1996, the Class A shares paid AIM Distributors $27,788,170 as
compensation under the Plan.
AIM Distributors received commissions of $19,558,836 from Class A capital
stock transactions during the year ended October 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Capital, AIM Distributors, AFS,
AIFS and FMC.
During the year ended October 31, 1996 the Fund paid legal fees of $21,521 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTOR'S FEES
Director's fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $83,000,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1996 was
$7,936,731,509 and $5,239,321,023, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1996, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $3,001,882,643
- -------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (273,922,974)
- -------------------------------------------------------
Net unrealized appreciation of
investment securities $2,727,959,669
=======================================================
</TABLE>
Cost of investments for tax purposes is $8,809,493,452.
NOTE 6-FUTURES CONTRACT
On October 31, 1996, $25,487,000 par value U.S. Treasury obligations were
pledged as collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at October 31, 1996:
(Contracts--$500 times index/delivery month/commitment)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
<S> <C>
S&P 500 Index/1,835 contracts/Dec.
96/Buy $ 20,302,845
=======================================================
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the capital stock outstanding for the years ended October 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 282,903,859 $ 6,791,107,589 214,014,863 $ 4,411,919,689
- ---------------------------------------------------------------------------------
Institutional
Class 7,711,696 189,568,037 5,036,915 105,368,663
- ---------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 10,007,849 218,670,843 6,006,043 99,940,399
- ---------------------------------------------------------------------------------
Institutional
Class 200,095 4,444,113 60,580 1,019,563
- ---------------------------------------------------------------------------------
Reacquired:
Class A (146,642,433) (3,539,497,361) (128,002,913) (2,633,684,048)
- ---------------------------------------------------------------------------------
Institutional
Class (2,422,264) (58,811,439) (1,476,157) (30,574,416)
- ---------------------------------------------------------------------------------
151,758,802 $ 3,605,481,782 95,639,331 $ 1,953,989,850
=================================================================================
</TABLE>
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
14
<PAGE> 17
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the eight-year period ended October 31,
1996, the ten months ended October 31, 1988, and the year ended December 31,
1987.(a)
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
----------- ---------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72 $ 6.59 $ 9.40
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Income from investment
operations:
Net investment income (loss) (0.06) (0.05) (0.02) (0.04) (0.04) (0.03) (0.03)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Net gains (losses) on
securities (both realized
and unrealized) 2.60 5.95 1.29 3.83 1.76 5.16 (1.23)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Total from investment
operations 2.54 5.90 1.27 3.79 1.72 5.13 (1.26)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net
investment income -- -- -- -- -- -- (0.01)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Distributions from capital
gains (0.75) (0.52) -- -- (0.19) -- (1.54)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Total distributions (0.75) (0.52) -- -- (0.19) -- (1.55)
- -------------------------------- ----------- ---------- ---------- ---------- -------- -------- -------
Net asset value, end of period $ 25.48 $ 23.69 $ 18.31 $ 17.04 $ 13.25 $ 11.72 $ 6.59
================================ =========== ========== ========== ========== ======== ======== =======
Total return(c) 11.26% 33.43% 7.45% 28.60% 14.82% 77.85% (16.17)%
================================ =========== ========== ========== ========== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $11,255,506 $7,000,350 $3,726,029 $2,756,497 $966,472 $342,835 $83,304
================================ =========== ========== ========== ========== ======== ======== =======
Ratio of expenses to average net
assets(d) 1.14%(e)(f) 1.16% 1.20% 1.22% 1.21% 1.35% 1.37%
================================ =========== ========== ========== ========== ======== ======== =======
Ratio of net investment income
(loss) to average net
assets(g) (0.27)%(e) (0.32)% (0.15)% (0.31)% (0.42)% (0.41)% (0.44)%
================================ =========== ========== ========== ========== ======== ======== =======
Portfolio turnover rate 58% 45% 79% 70% 62% 109% 192%
================================ =========== ========== ========== ========== ======== ======== =======
Average broker commission
rate(i) $ 0.0596 N/A N/A N/A N/A N/A N/A
================================ =========== ========== ========== ========== ======== ======== =======
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) -- -- -- -- -- -- --
================================ =========== ========== ========== ========== ======== ======== =======
Average amount of debt
outstanding during the period
(000s omitted)(j) -- -- -- -- -- -- $ 2,344
================================ =========== ========== ========== ========== ======== ======== =======
Average amount of shares
outstanding during the period
(000s omitted)(j) 381,030 244,731 182,897 124,101 55,902 21,205 11,397
================================ =========== ========== ========== ========== ======== ======== =======
Average amount of debt per share
during the period -- -- -- -- -- -- $ 0.21
================================ =========== ========== ========== ========== ======== ======== =======
<CAPTION>
DECEMBER 31,
1989 1988(b) 1987
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 7.34 $ 6.35 $ 10.58
- -------------------------------- ------- ------- --------
Income from investment
operations:
Net investment income (loss) 0.01 (0.03) (0.05)
- -------------------------------- ------- ------- --------
Net gains (losses) on
securities (both realized
and unrealized) 2.46 1.02 0.36
- -------------------------------- ------- ------- --------
Total from investment
operations 2.47 0.99 0.31
- -------------------------------- ------- ------- --------
Less distributions:
Dividends from net
investment income -- -- --
- -------------------------------- ------- ------- --------
Distributions from capital
gains (0.41) -- (4.54)
- -------------------------------- ------- ------- --------
Total distributions (0.41) -- (4.54)
- -------------------------------- ------- ------- --------
Net asset value, end of period $ 9.40 $ 7.34 $ 6.35
================================ ======= ======= ========
Total return(c) 35.50% 15.59% 2.85%
================================ ======= ======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $74,731 $78,272 $ 71,418
================================ ======= ======= ========
Ratio of expenses to average net
assets(d) 1.36% 1.30%(h) 1.11%
================================ ======= ======= ========
Ratio of net investment income
(loss) to average net
assets(g) 0.07% (0.57) (0.41)%
================================ ======= ======= ========
Portfolio turnover rate 149% 131% 135%
================================ ======= ======= ========
Average broker commission
rate(i) N/A N/A N/A
================================ ======= ======= ========
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) $ 9,610 $ 5,266 $ 109
================================ ======= ======= ========
Average amount of debt
outstanding during the period
(000s omitted)(j) $ 2,609 $ 2,148 $ 2,366
================================ ======= ======= ========
Average amount of shares
outstanding during the period
(000s omitted)(j) 10,050 10,845 9,668
================================ ======= ======= ========
Average amount of debt per share
during the period $ 0.26 $ 0.20 $ 0.24
================================ ======= ======= ========
(a) Per share information has been restated to reflect a 2 for 1 stock split, effected in the form of a dividend, on June 19,
1987.
(b) The Fund changed investment advisors on September 30, 1988.
(c) Does not deduct sales charges and for periods less than one year, total returns are not annualized.
(d) Ratios of expenses prior to waiver of advisory fees are 1.16%, 1.18% and 1.21% for the years 1996-1994, respectively.
(e) Ratios are based on average net assets of $9,262,723,318.
(f) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses, the ratio of expenses to average net assets would
have remained the same.
(g) Ratios of net investment income (loss) prior to waiver of advisory fees are (0.29)%, (0.34)% and (0.16)% for the years
1996-1994, respectively.
(h) Annualized.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October 31, 1996.
(j) Averages computed on a daily basis.
</TABLE>
15
<PAGE> 18
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
16
<PAGE> 19
<TABLE>
<S> <C> <C>
DIRECTORS & OFFICERS OFFICERS OFFICE OF THE FUND
Board of Directors Charles T. Bauer 11 Greenway Plaza
Charles T. Bauer Chairman Suite 1919
Chairman and Chief Executive Officer Houston, TX 77046
A I M Management Group Inc. Robert H. Graham
President INVESTMENT ADVISOR
Bruce L. Crockett A I M Advisors, Inc.
Formerly Director, President, and Chief John J. Arthur 11 Greenway Plaza
Executive Officer Senior Vice President and Treasurer Suite 1919
COMSAT Corporation Houston, TX 77046
Gary T. Crum
Owen Daly II Senior Vice President TRANSFER AGENT
Director A I M Fund Services, Inc.
Cortland Trust Inc. Scott G. Lucas P.O. Box 4739
Senior Vice President Houston, TX 77210-4739
Carl Frischling
Partner Carol F. Relihan CUSTODIAN
Kramer, Levin, Naftalis & Frankel Senior Vice President and Secretary State Street Bank & Trust
225 Franklin Street
Robert H. Graham Jonathan C. Schoolar Boston, MA 02110
President and Chief Operating Officer Senior Vice President
A I M Management Group Inc. COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
John F. Kroeger Vice President Andrews & Ingersoll
Formerly Consultant 1735 Market Street
Wendell & Stockel Associates, Inc. Dana R. Sutton Philadelphia, PA 19103
Vice President and Assistant Treasurer
Lewis F. Pennock COUNSEL TO THE DIRECTORS
Attorney P. Michelle Grace Kramer, Levin, Naftalis & Frankel
Assistant Secretary 919 Third Avenue
Ian W. Robinson New York, NY 10022
Consultant; Formerly Executive David L. Kite
Vice President and Assistant Secretary DISTRIBUTOR
Chief Financial Officer A I M Distributors, Inc.
Bell Atlantic Management Nancy L. Martin 11 Greenway Plaza
Services, Inc. Assistant Secretary Suite 1919
Houston, TX 77046
Louis S. Sklar Ofelia M. Mayo
Executive Vice President Assistant Secretary AUDITORS
Hines Interests KPMG Peat Marwick LLP
Limited Partnership Kathleen J. Pflueger 700 Louisiana
Assistant Secretary NationsBank Bldg.
Houston, TX 77002
Samuel D. Sirko
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.
<PAGE> 20
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS -- Registered
Trademark --
[Photo of AGGRESSIVE GROWTH
11 Greenway Plaza AIM Aggressive Growth Fund*
appears here] AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has *AIM Aggressive Growth Fund was closed
provided leadership in the mutual fund to new investors on July 18, 1995. For
industry since 1976 and currently more complete information about any AIM
manages approximately $60 billion in Fund(s), including sales charges and
assets for more than 3.5 million expenses, ask your financial consultant
shareholders, including individual or securities dealer for a free
investors, corporate clients, and prospectus(es). Please read the
financial institutions. The AIM Family prospectus(es) carefully before you
of Funds -- Registered Trademark -- invest or send money.
is distributed nationwide, and AIM
today ranks among the nation's top 15
mutual fund companies in assets under
management, according to Lipper
Analytical Services, Inc.
</TABLE>
[AIM LOGO APPEARS HERE] ---------------
A I M Distributors, Inc. BULK RATE
11 Greenway Plaza, Suite 1919 U.S. POSTAGE
Houston, TX 77046 PAID
HOUSTON, TX
Permit No. 1919
---------------
