<PAGE> 1
AIM WEINGARTEN FUND
ANNUAL REPORT
[AIM LOGO APPEARS HERE] OCTOBER 31, 1997
<PAGE> 2
-----------------------------------------
AIM WEINGARTEN FUND
For shareholders who seek
long-term growth of capital
through investments
primarily in common stocks
of leading U.S. companies
considered by management
to have strong
earnings momentum.
-----------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o The Fund's average annual total returns, including sales charges, for
periods ended 9/30/97 (the most recent calendar quarter-end) are as follows.
For Class A shares, one year, 26.18%; five years, 15.85%; 10 years, 13.44%.
For Class B shares, one year, 27.40%; since inception on 6/15/95, 23.46%.
o Class C shares commenced sales August 4, 1997.
o AIM Weingarten Fund performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, Fund results were computed at net asset value without
reflecting sales charges.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The performance of the Fund's Class B shares will differ from that of
Class A shares due to differences in sales charge structure and class
expenses.
o One-year performance includes reinvested distributions of $2.295 per share
for Class A shares and $2.235 for Class B shares.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
o The Fund's portfolio composition is subject to change, and there is no
assurance the Fund will continue to hold any particular security.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Growth Fund Index represents an average of the
performance of the 30 largest growth mutual funds.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general.
o The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the
performance of 30 large-company stocks.
o The Consumer Price Index (CPI) is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
o The Europe, Australia, Far East (EAFE) Index is a group of unmanaged
securities. The index is compiled by Morgan Stanley Capital International.
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-sized company stock universe.
o An investment cannot be made in any index 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.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
The fiscal year ended October 31 experienced no let-up in
[PHOTO OF the volatility in equity markets, and it closed on an
Charles T. unsettling note. In late October, in the wake of a currency
Bauer, crisis in Southeast Asia, the stock market experienced its
Chairman of first 10% correction since 1991. On Monday, October 27, the
the Board of New York Stock Exchange closed to deal with market
the Fund, volatility for the first time in its history when the Dow
APPEARS HERE] Jones Industrial Average fell 554 points, the index's
largest point decline ever. It is important to note that in
percentage terms, this was a drop of 7.18%, far smaller
than the 22.61% decline that occurred October 19, 1987.
Fortunately, this time the market snapped back, and the Dow
regained 337 points the next day. As of this writing,
markets continue to recover.
Many investment managers, including AIM, had cautioned
that a correction was inevitable, that the relentless rise in benchmarks like
the Dow could not continue. In less than 12 months, the Dow had climbed from
6010 on October 14, 1996, to reach its all-time high of 8259 on August 6, 1997.
When markets become overvalued, no one knows what will precipitate a
decline. No one foresaw that a currency devaluation by Thailand beginning
during the summer would lead to worldwide stock market turmoil.
Despite recent activities, the fiscal year ended October 31 brought
domestic equity investors excellent returns: The Dow was up almost 26%; the
broader S&P 500, more than 32%; the NASDAQ small-cap index, 30.46%.
International investments, while positive, weren't as robust; the EAFE Index
rose 4.63%. On the following pages, your Fund managers discuss how your Fund
performed in this market context and their outlook for the future.
REALISTIC EXPECTATIONS
The 1100-point decline in the Dow between early August and late October was the
latest in a series of market breaks. Between mid-March and mid-April of this
year, for example, the Dow dropped almost 10%.
Many investors, including professional fund managers, have become
accustomed to buying on these market breaks because the market has bounced back
quickly. From its 1997 low of 6391 on April 11, the Dow took less than four
months to rise almost 2000 points to its all-time high.
However, this time could be different. Many investors have developed two
unrealistic expectations: first, a belief that stocks can rise more than 20% a
year indefinitely; and second, confidence that the market always rebounds
swiftly from a decline.
Neither notion is historically correct. History tells us that over the
long term, average annual total return for stocks is about 10%, not 20%. And
those of us who have been in this business for many years remember the bear
market of the 1970s, when the market experienced a series of declines and
recovery was very slow.
Nevertheless, there is reason for optimism, including sound fiscal policy
steadily shrinking the federal deficit, stable interest rates, and a strong
economy unharmed by inflation. Despite recent events in Asia, it is difficult
to be pessimistic about the U.S. economy and, indeed, about most of the
developed economies in the world.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have any questions or
comments. Don't forget that automated information about your AIM account is
available 24 hours a day on the AIM Investor Line, 800-246-5463. Or visit our
Web site, at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-----------------------------------------
Despite recent activities,
the fiscal year ended October 31
brought domestic equity investors
excellent returns.
-----------------------------------------
<PAGE> 4
The Managers' Overview
AS MARKET BROADENS, FINANCIAL AND HEALTH-CARE HOLDINGS HELP DELIVER SOLID
RESULTS
A roundtable discussion with the Fund management team for AIM Weingarten Fund
for the fiscal year ended October 31, 1997.
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED OCTOBER 31?
A. We are pleased to report that the Fund performed very well, outpacing its
own long-term averages. Total return for the fiscal year was 26.83% for
Class A shares and 25.78% for Class B shares. Class C shares commenced sales
on August 4, 1997. The latter half of the fiscal year was excellent: For the
six months ended October 31, total return was just over 20%.
Net assets under management grew from $5.31 billion to $6.36 billion
during the fiscal year.
Q. WERE MARKET CONDITIONS MORE FAVORABLE TO THE FUND SINCE YOUR APRIL REPORT TO
SHAREHOLDERS?
A. Yes, during the latter six months of the fiscal year, the market broadened
considerably, producing a much friendlier environment for a well-diversified
mutual fund like AIM Weingarten Fund.
We discussed the "narrow market" in our April 30 report to you. Throughout
1996 and for the first few months of 1997, investors focused on relatively
few large-company stocks sometimes dubbed "the new Nifty Fifty" in reference
to the stocks that dominated the markets back in the 1960s and early 1970s.
During the second half of the fiscal year, especially during the third
calendar quarter of 1997, investors began to look beyond these stocks. For
the first time in a long time the broad market outperformed the narrow
index, a reversal of the pattern we mentioned in our last report.
AIM Weingarten Fund did well in this changed environment. For the third
quarter of this year, the Fund's Class A shares were up 11.9%, beating both
the Russell 1000 and the S&P 500's 7.5% return for the same period.
Q. HOW DO YOU EXPLAIN THIS CHANGE IN MARKET SENTIMENT DURING THE LATTER HALF OF
THE FISCAL YEAR?
A. Many market participants had come to question the high valuations being
placed on a number of very large companies. Some doubted that these firms
could sustain the double-digit earnings growth they'd reported for three
years running, especially after cautions on earnings from such giants as The
Coca-Cola Company and The Gillette Company. And the strong dollar was a
negative for big multinationals and companies that draw a large portion of
their sales from overseas.
Q. DID YOU ALTER THE PORTFOLIO AS MARKET SENTIMENT SHIFTED?
A. Not dramatically. We still tend to be heavily invested in financial stocks,
the health-care sector, and also technology.
The individual stocks we own in these sectors will change over time, but
we think these three sectors have excellent long-term growth potential.
Q. WHAT DO YOU FIND ATTRACTIVE ABOUT FINANCIAL STOCKS?
A. Our holdings in the financial sector, including banks, were up during the
fiscal year, from about 16% of the portfolio to approximately 22%.
Big money-center banks such as Chase Manhattan Corp. and Citicorp outdid
analysts' earnings forecasts. With the economy doing well, interest rates
stable, and demographics leading more and more people into
retirement-oriented investing, financial institutions have prospered.
Another trend has been a wave of mergers and acquisitions, for example the
purchase of investment banker Salomon, Inc. by the big insurance company
Travelers Group, Inc. Firms in this sector want to be capable of offering a
broad range of financial service to clients and of competing in a global
environment.
Q. WHAT TRENDS AFFECTED THE HEALTH-CARE PORTION OF THE PORTFOLIO?
A. Growth in size of the companies that deliver patient care has limited the
ability of any one industry participant to dictate prices or other business
terms to any other participant. We dropped a couple of HMOs from the
portfolio while increasing our investment in instruments/products makers.
The medical instruments and products industry faces an improved business
environment because of the FDA's move toward more rapid approval of drugs
and medical devices. One of our larger holdings in this field, Becton
Dickinson and Company, reported record earnings for 1997. Becton Dickinson
and Company recently began to market a first-of-a-kind at-home blood-sugar
testing kit for diabetics.
The health-care sector composed about 15% of the portfolio at the close of
the fiscal year, about the same as a year ago and six months ago.
================================================================================
Net Assets
- --------------------------------------------------------------------------------
$5.31 $6.36
billion billion
10/31/96 10/31/97
================================================================================
See important fund and index disclosures inside front cover.
2
<PAGE> 5
----------------------------------
As of the third quarter of
1997, earnings for S&P 500
companies were up more than
12% year over year.
----------------------------------
Q. WHY DO YOU STILL HAVE LARGE HOLDINGS IN TECHNOLOGY?
A. Our holdings in the technology sector have been reduced somewhat.
Pricing pressures in computers and semiconductors are tough. You can now
buy a meaningful personal computer for $1,000, which strains profit margins.
Even Intel Corp., while remaining the industry flagship, has been feeling
the pressure: While everyone upgraded to the Pentium chip when it was
introduced, people aren't moving that readily to the Pentium's successor.
In semiconductors, we still lean toward companies like Texas Instruments
Inc., makers of high-value, specialized products that enjoy a competitive
edge over makers of commodity products. And we still hold computer makers
like Dell Computer Corp. and Compaq Computer Corp., which continue to grow
and capture more market share.
Q. WHAT TRENDS ARE AFFECTING THE TECH SECTOR?
A. We expect the computer software and services industry to profit from the
so-called "millennium" problem. The special skills needed to reprogram older
computers to recognize the year 2000 already are in demand.
Another bright spot in the sector's future is Europe's migration to a
common currency, which also will require large investments in information
technology. In software, we own such market leaders as Microsoft Corp. and
BMC Software, Inc.
Despite its volatility and potential negative effects of the recent
turmoil in Asia, we still think the technology sector's long-term growth
prospects are excellent and will continue to seek out individual companies
whose earnings performance justifies our investment. For example, while not
included in the technology sector, retailers of computers have been doing
well recently. We added CompUSA, Inc. to the portfolio since our last
report.
Q. DO YOU OWN MANY RETAILERS OTHER THAN THE TECH SELLERS?
A. Discount stores selling brand-name merchandise at reduced prices--companies
like Consolidated Stores Corp., which operates closeout shops--have been
very attractive. Other discounters in the portfolio include Family Dollar
Stores, Inc.; this rapidly growing chain reports much better profit margins
than the retail industry in general.
The outlook for retailers remains good. Since many are domestically
focused, they could become even more attractive to investors concerned about
the impact of currency turmoil in foreign markets.
Q. WHAT IS YOUR OUTLOOK ON THE ECONOMY FOR THE NEAR FUTURE?
A. There are a few cautionary signs: a tight labor market that could put
inflationary pressure on wages, a drop in consumer confidence measured by
The Conference Board, a slip in new vehicle sales. Nevertheless, there is
much evidence of a favorable economic environment. Inflation is so well
controlled that many economy watchers are more concerned about deflation.
Because of monetary turmoil and market declines overseas, few expect a rate
hike by the Federal Reserve, at least for the short term. And finally,
corporate earnings continue to grow. As of the third quarter of 1997,
earnings for S&P 500 companies were up more than 12% year over year.
Q. WHAT IS YOUR OUTLOOK FOR THE EQUITY MARKETS?
A. Earnings remain key to market performance, and earnings look as if they may
be coming down to more normal levels. Earnings for the companies in the S&P
500 have been very high: 20%-plus for three years in a row. As we just
mentioned, the most recent figure is about 12%. This is much closer to the
historical norm, which is about 8%. With interest rates stable, investors
will focus more on earnings and we believe AIM Weingarten Fund is
well-positioned for this market.
PORTFOLIO HOLDINGS
As of 10/31/97
<TABLE>
<CAPTION>
=========================================================================================================
TOP 10 INDUSTRIES TOP 10 HOLDINGS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Electrical Equipment 4.32% 1. Chase Manhattan Corp. 1.44%
2. Financial (Diversified) 4.25 2. Service Corp. International 1.33
3. Health Care (Diversified) 3.68 3. General Electric Co. 1.24
4. Computers (Software & Services) 3.68 4. International Business 1.15
Machines Corp.
5. Health Care 3.25 5. Philips Electronics N.V.-ADR 1.10
(Medical Products & Supplies) New York Shares
6. Health Care 3.14 6. Merck & Co., Inc. 1.05
(Drugs--Major Pharmaceuticals)
7. Electronics (Semiconductors) 3.05 7. Microsoft Corp. 1.02
8. Consumer Finance 2.87 8. Compaq Computer Corp. 1.00
9. Oil & Gas (Drilling & Equipment) 2.84 9. Warner-Lambert Co. 0.99
10. Computer (Hardware) 2.81 10. SLM Holding Corp. 0.99
TOTAL NUMBER OF HOLDINGS: 246
Please keep in mind that the Fund's portfolio composition is subject to change and there is no guarantee
it will continue to hold any particular security. Machines Corp.
=========================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
The AIM Weingarten Fund Growth Story
GROWTH OF A $10,000 INVESTMENT: JUNE 17, 1969-OCTOBER 31, 1997
AIM WEINGARTEN FUND CLASS A SHARES VS. BENCHMARK INDEXES
The chart compares your Fund's Class A shares to indexes. It is important to
understand differences between your fund and these indexes. An index measures
performance of a hypothetical portfolio. A market index, such as the Standard &
Poor's 500, is not managed, incurring no sales charges, expenses or fees. If
you could buy all the securities that make up an index, you would incur
expenses that would affect your investment's return. An index of funds, such as
the Lipper Growth Fund Index, includes a number of mutual funds grouped by
investment objective. Each of those funds interprets that objective
differently, and each employs a different management style and investment
strategy. Use of these indexes is intended to give you a general idea of how
your Fund performed compared to these benchmarks.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/97. Including sales charges.
- --------------------------------------------------------------------------------
A SHARES
10 Years 15.97%
5 Years 14.21
1 Year 19.83
B SHARES
Since Inception (6/15/95) 20.06%
1 Year 20.78
C SHARES
Since inception 8/4/97 -3.12%
================================================================================
<TABLE>
<CAPTION>
=================================================================================================================================
6/17/69 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1989 1981
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Dividends Reinvested $ 0 38 58 0 0 0 0 54 0 98 208 166 237
Capital Gains Reinvested $ 0 57 0 0 1344 0 0 0 0 0 0 3483 5381
Total Distributions Reinvested $ 0 95 58 0 1344 0 0 54 0 98 208 3649 5618
Total Account Value $ 9416 8321 11486 14252 12910 8113 10274 10507 12927 15588 21780 40449 40792
=================================================================================================================================
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
================================================================
LIPPER
AIM GROWTH CONSUMER
WEINGARTEN FUND PRICE
DATE FUND S&P 500 INDEX INDEX
(IN THOUSANDS)
- ----------------------------------------------------------------
<C> <C> <C> <C> <C>
6/17/69 9440 10000 10000 10000
10/31/69 9416 10090 10495 10191
10/70 8231 8970 8293 10765
10/71 11486 10479 10426 11175
10/72 14252 12771 12908 115574
10/73 12910 12766 11878 12459
10/74 8113 9096 7597 13962
10/75 10274 11467 9311 15000
10/76 10507 13768 10681 15820
10/77 12927 12917 10325 16831
10/78 15588 13729 11599 18333
10/79 21780 15831 14306 20546
10/80 40449 20915 20539 23169
10/81 40792 21029 20710 25519
10/82 46299 24463 23894 26831
10/83 65474 31285 30474 27596
10/84 63091 33256 29783 28770
10/85 75468 39689 35261 29699
10/86 107220 52844 45589 30137
10/87 113346 56196 45974 31503
10/88 127855 64533 52984 32842
10/89 172770 81486 66366 34317
10/90 165806 75635 57852 36475
10/91 240228 100610 81831 37541
10/92 256684 110599 88217 38743
10/93 272524 127063 104963 39809
10/94 282781 131980 107109 40847
10/95 362527 166767 132790 41995
10/96 416215 206830 155281 43251
10/97 527890 273232 199408 44044
================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================================
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
102 0 205 4161 789 958 127 1558 898 1338 1029 1347 1701 1079 0 1237
5204 0 14466 0 4778 24445 9741 0 8919 3123 1344 0 5081 28215 48254 46074
5306 0 14671 467 5567 25403 9868 1558 9817 4461 2363 1347 6782 29294 48254 47311
46299 65471 63091 75468 107220 113346 127855 172770 165806 240228 256684 272524 282781 362527 416215 527890
=================================================================================================================================
</TABLE>
Data shown are as of the Fund's fiscal year-end. Class A shares' total
return includes sales charges, expenses, and management fees. The
performance of Class B and Class C shares will differ from that of Class A
shares due to differing fees and expenses. For Fund performance calculations
and descriptions of indexes cited on this page, please refer to the inside
front cover. Source: Towers Data Systems HYPO--Registered Trademark--.
5
<PAGE> 8
FOR CONSIDERATION
1987-1997: BLACK MONDAY 10 YEARS LATER
As we look back on October 19, 1987, with 20/20 hindsight, comparisons of
today's market conditions inevitably arise.
THEN VS. NOW
While some market conditions may appear hauntingly familiar--a long bull
market, a high-valued market, an August peak and dip--most experts see more
positive indications than omens of disaster.
For one, inflation today is comparatively tame. The last time the Federal
Reserve raised interest rates was at its March 25, 1997, meeting, when it
increased the targeted federal funds rate 25 basis points (A basis point is one
one-hundreth of 1%.) Today's discount rate has remained at 5% since January
1996. Ten years ago, interest rates were higher and rising. On September 3,
1987, the Fed raised its discount rate from 5.5% to 6%. On the same day, the
bank prime lending rate rose from 8.25% to 8.75%, jumping to 9.25% five weeks
later. Today's prime rate remains at 8.5%. Another positive sign today is
corporate earnings, which continue to deliver pleasant news. With the nation's
economy perking along nicely, few see reason to fear a similar debacle.
WHAT REALLY CAUSED THE 1987 CRASH?
Throughout 1987 many felt that the market was due for a correction. Stock
valuations were high, which by itself might not be bad, but the justifications
for high valuations were faltering one-by-one. Inflation was heating up. The
Fed was raising interest rates. The 30-year Treasury-bond yield was above 10%.
Foreign currencies were getting bashed. Rising interest rates alone might have
triggered a correction of 10% or more.
What turned a seemingly normal market correction into the Crash of '87 was
portfolio insurance, the latest fad back then. Here's how portfolio insurance
works: Price movements automatically trigger computerized buy or sell orders
for progressively larger portions of a portfolio. In a rising market, the
computer programs bought, and if the market fell, they sold. For example, if
the market fell 1%, these computer programs might sell 10% of a portfolio. As
the market dipped, the programs all started dumping stocks, which caused a
cascading effect: the more the market fell, the more the programs sold.
Portfolio insurance was immediately discredited and abandoned.
AIM'S DISCIPLINE:
FOLLOW THE EARNINGS
Many people thought the 1987 Crash would break the earnings cycle, but
corporate earnings continued. Restaurants kept serving food; retailers kept
selling clothing and so on; the economy kept moving forward. That's why AIM
sticks to its discipline. We follow the earnings. We don't try to time the
markets. Market timing can be a very expensive hobby.
What will AIM do in the event of a correction? What we do best, which is
the same thing that we did on October 27, 1997, when many feared a replay of
1987: try to find the best quality companies that have gotten hit the hardest
and buy those in preparation for the inevitable turn. That same strategy
applies long term.
Of course our Funds were affected by the drop. From its high on August 25,
1987, AIM Weingarten Fund was down 31.59% by the close of business on October
19, 1987. But if you look at the whole year of 1987, from January 1 through
December 31, the Fund returned 9.75% excluding sales charges. So for the smart
AIM investor who stuck it out, 1987 wasn't a bad year despite the crash.
Investors who have done their asset allocation ahead of time should have
little reason to be nervous about today's market.
One of the most enduring lessons of Black Monday for investors is don't go
it alone. And equally important, the investment company you keep can make all
the difference.
HOW A PATIENT, COOL-HEADED AIM WEINGARTEN FUND
INVESTMENT WEATHERED THE CRASH OF '87
================================================================================
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
9/30/87-10/31/97
- --------------------------------------------------------------------------------
9/30/87 10000
10/31/87 7658
10/31/88 8638
10/31/89 11673
10/31/90 11203
10/31/91 16231
10/31/92 17343
10/31/93 18413
10/31/94 19106
10/31/95 24494
10/31/96 28121
10/31/97 35666
================================================================================
6
<PAGE> 9
BLACK MONDAY: COULD IT HAPPEN TODAY?
Can we prevent a crash from happening again? Since no one can accurately
predict what will cause the next inevitable correction, it is unlikely that
anything can prevent a sell-off. But the '87 Crash highlighted some weak points
in the nation's financial system, which resulted in sweeping changes. Some of
the most significant changes enacted as a result of the `87 crash:
o CIRCUIT BREAKERS. Should the Dow drop by 350 points from the previous day's
close, "circuit breakers" kick in and trading on the New York Stock Exchange
(NYSE) halts for 30 minutes; if it falls more than 550 points, trading
stops for one hour. The circuit breakers were enacted for the first time
ever on October 27, 1997, when the Dow dropped 554 points.
o PROGRAM TRADING COLLARS, which restrict trading between stocks and
stock-index futures, kick in whenever the Dow industrials rise or fall 50
points from previous close. The trading collars, activated almost daily, are
designed to prevent accelerating market moves.
o COMMUNICATING DATA between the various stock, futures and options markets
can be critical during volatile market swings. Dedicated phone lines between
markets reduce the likelihood of telephone log jams, which contributed to
the '87 Crash.
o IN 1987, NYSE MARKET MAKERS AND SPECIALISTS were overwhelmed by the massive
increase in volume, which more than doubled to 604 million on Black Monday.
Ticker information fell behind by as much as an hour so traders lacked
information on up-to-date stock quotes. Today, the Big Board reports that it
can handle 2.5 billion shares a day--five times the current average daily
volume.
While none of these changes have been put to the test of an extreme drop, bulls
and bears alike agree that any downward market path is likely to be less steep,
making a one-day cataclysm like Black Monday improbable.
In addition, the NYSE began to modify its circuit breakers in December 1997
and has plans for a further fine-tuning early in 1998. These changes are in
response to problems that surfaced when circuit breakers forced the NYSE to
halt trading on October 27, 1997. Many believe the 350-point and 550-point
thresholds for activating circuit breakers are not large enough given today's
Dow level. Many also question the wisdom of ever halting trading early because
some widely used stock market strategies depend on making significant trades
just before the NYSE's regularly scheduled close.
---------------------------------------------
"For today's market to
decline 22.61%,
matching October 19, 1987's 508-point
drop, the DOW would have to shed over
1700 points from the 7800 level.
By comparison, the next biggest
percentage losses were October 28, 1929
(12.82%), October 29, 1929 (11.73%),
and November 6, 1929 (9.92%).
---------------------------------------------
7
<PAGE> 10
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-84.72%
AEROSPACE/DEFENSE-0.06%
Coltec Industries, Inc.(a) 183,600 $ 3,672,000
- ---------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.70%
DIMON, Inc. 675,000 17,507,813
- ---------------------------------------------------------------
Universal Corp. 700,000 26,906,250
- ---------------------------------------------------------------
44,414,063
- ---------------------------------------------------------------
AIR FREIGHT-0.26%
CNF Transportation Inc. 375,000 16,734,375
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.13%
Federal-Mogul Corp. 11,300 478,131
- ---------------------------------------------------------------
MascoTech, Inc. 416,400 7,911,600
- ---------------------------------------------------------------
8,389,731
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.05%
First Union Corp. 700,000 34,343,750
- ---------------------------------------------------------------
NationsBank Corp. 550,000 32,931,250
- ---------------------------------------------------------------
67,275,000
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-2.62%
BankAmerica Corp. 650,000 46,475,000
- ---------------------------------------------------------------
Chase Manhattan Corp. 800,000 92,300,000
- ---------------------------------------------------------------
Citicorp 225,000 28,139,063
- ---------------------------------------------------------------
166,914,063
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.06%
North Fork Bancorporation, Inc. 121,500 3,576,656
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.29%
PepsiCo, Inc. 500,000 18,406,250
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.44%
Chancellor Media Corp.(a) 200,000 10,975,000
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 400,000 16,750,000
- ---------------------------------------------------------------
27,725,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.46%
Crompton & Knowles Corp. 400,000 10,100,000
- ---------------------------------------------------------------
Cytec Industries Inc.(a) 25,000 1,218,750
- ---------------------------------------------------------------
Millennium Chemicals Inc. 750,000 17,625,000
- ---------------------------------------------------------------
28,943,750
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.37%
Lucent Technologies, Inc.(b) 600,000 49,462,500
- ---------------------------------------------------------------
Tellabs, Inc.(a) 700,000 37,800,000
- ---------------------------------------------------------------
87,262,500
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-2.81%
Compaq Computer Corp. 1,000,000 $ 63,750,000
- ---------------------------------------------------------------
Dell Computer Corp.(a) 300,000 24,037,500
- ---------------------------------------------------------------
Digital Equipment Corp.(a) 350,000 17,521,875
- ---------------------------------------------------------------
International Business Machines
Corp. 750,000 73,546,875
- ---------------------------------------------------------------
178,856,250
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.97%
Bay Networks, Inc.(a) 1,000,000 31,625,000
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 365,100 29,949,609
- ---------------------------------------------------------------
61,574,609
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.89%
Adaptec, Inc.(a) 700,000 33,906,250
- ---------------------------------------------------------------
EMC Corp.(a) 400,000 22,400,000
- ---------------------------------------------------------------
56,306,250
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-3.68%
America Online, Inc.(a) 100,000 7,700,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 290,000 17,508,750
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 300,000 15,975,000
- ---------------------------------------------------------------
Computer Associates
International, Inc. 550,000 41,009,375
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 161,400 11,449,313
- ---------------------------------------------------------------
Compuware Corp.(a) 500,000 33,062,500
- ---------------------------------------------------------------
HBO & Co. 600,000 26,100,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 500,000 65,000,000
- ---------------------------------------------------------------
Unisys Corp.(a) 1,200,000 15,975,000
- ---------------------------------------------------------------
233,779,938
- ---------------------------------------------------------------
CONSUMER FINANCE-2.87%
ContiFinancial Corp.(a) 333,200 9,475,375
- ---------------------------------------------------------------
FIRSTPLUS Financial Group,
Inc.(a) 600,000 33,000,000
- ---------------------------------------------------------------
Green Tree Financial Corp. 725,000 30,540,625
- ---------------------------------------------------------------
Household International, Inc. 300,000 33,975,000
- ---------------------------------------------------------------
Money Store, Inc. 435,200 12,348,800
- ---------------------------------------------------------------
SLM Holding Corp. 450,000 63,168,750
- ---------------------------------------------------------------
182,508,550
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.14%
AmeriSource Health Corp.-Class A(a) 575,000 34,140,625
- ---------------------------------------------------------------
Cardinal Health, Inc. 250,000 18,562,500
- ---------------------------------------------------------------
Sysco Corp. 500,000 20,000,000
- ---------------------------------------------------------------
72,703,125
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.57%
American Power Conversion
Corp.(a) 600,000 16,350,000
- ---------------------------------------------------------------
General Electric Co. 1,224,400 79,050,325
- ---------------------------------------------------------------
Honeywell, Inc. 200,000 13,612,500
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-(CONTINUED)
SCI Systems, Inc.(a) 185,200 $ 8,148,800
- ---------------------------------------------------------------
Solectron Corp.(a) 560,400 21,995,700
- ---------------------------------------------------------------
Symbol Technologies, Inc. 610,300 24,259,425
- ---------------------------------------------------------------
163,416,750
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.83%
Perkin-Elmer Corp. 300,000 18,750,000
- ---------------------------------------------------------------
Waters Corp.(a) 775,000 34,100,000
- ---------------------------------------------------------------
52,850,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-2.76%
Analog Devices, Inc.(a) 425,000 12,989,063
- ---------------------------------------------------------------
Intel Corp. 625,000 48,125,000
- ---------------------------------------------------------------
Linear Technology Corp. 300,000 18,862,500
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 275,000 18,218,750
- ---------------------------------------------------------------
National Semiconductor Corp.(a) 550,000 19,800,000
- ---------------------------------------------------------------
Texas Instruments, Inc. 400,000 42,675,000
- ---------------------------------------------------------------
VLSI Technology, Inc.(a) 500,000 14,812,500
- ---------------------------------------------------------------
175,482,813
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.10%
Applied Materials, Inc.(a) 1,000,000 33,375,000
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 350,000 15,378,125
- ---------------------------------------------------------------
Teradyne, Inc.(a) 570,900 21,373,069
- ---------------------------------------------------------------
70,126,194
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.80%
American Express Co. 400,000 31,200,000
- ---------------------------------------------------------------
Amresco, Inc.(a) 500,000 15,687,500
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp. 875,000 33,140,625
- ---------------------------------------------------------------
Federal National Mortgage
Association 775,000 37,539,063
- ---------------------------------------------------------------
MBIA, Inc. 348,400 20,816,900
- ---------------------------------------------------------------
MGIC Investment Corp. 400,000 24,125,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover &
Co. 280,900 13,764,100
- ---------------------------------------------------------------
SunAmerica, Inc. 50,100 1,800,469
- ---------------------------------------------------------------
178,073,657
- ---------------------------------------------------------------
FOODS-0.85%
ConAgra, Inc. 450,000 13,556,250
- ---------------------------------------------------------------
Dean Foods Co. 529,300 25,042,506
- ---------------------------------------------------------------
Sara Lee Corp. 300,000 15,337,500
- ---------------------------------------------------------------
53,936,256
- ---------------------------------------------------------------
FOOTWEAR-0.17%
Wolverine World Wide, Inc. 500,000 11,000,000
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.35%
Abbott Laboratories 326,100 19,994,006
- ---------------------------------------------------------------
American Home Products Corp. 500,000 37,062,500
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 594,000 52,123,500
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-(CONTINUED)
Johnson & Johnson 711,300 $ 40,810,838
- ---------------------------------------------------------------
Warner-Lambert Co. 441,700 63,245,919
- ---------------------------------------------------------------
213,236,763
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.68%
Dura Pharmaceuticals, Inc.(a) 395,800 19,146,825
- ---------------------------------------------------------------
ICN Pharmaceuticals, Inc. 900,000 43,312,500
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 1,400,000 44,450,000
- ---------------------------------------------------------------
106,909,325
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.46%
Lilly (Eli) & Co. 450,000 30,093,750
- ---------------------------------------------------------------
Merck & Co., Inc. 750,000 66,937,500
- ---------------------------------------------------------------
Pfizer, Inc. 366,500 25,929,875
- ---------------------------------------------------------------
Schering-Plough Corp. 600,000 33,637,500
- ---------------------------------------------------------------
156,598,625
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.74%
Quorum Health Group, Inc.(a) 937,500 22,734,375
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 386,300 11,806,294
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 290,600 12,804,563
- ---------------------------------------------------------------
47,345,232
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.82%
Health Care and Retirement
Corp.(a) 222,350 8,407,609
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 1,200,000 30,675,000
- ---------------------------------------------------------------
NovaCare, Inc.(a) 1,000,000 13,062,500
- ---------------------------------------------------------------
52,145,109
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.29%
MedPartners, Inc.(a) 725,000 18,442,188
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-3.25%
Arterial Vascular Engineering,
Inc.(a) 350,000 18,593,750
- ---------------------------------------------------------------
Baxter International Inc. 643,700 29,771,125
- ---------------------------------------------------------------
Becton, Dickinson & Co. 1,000,000 46,062,500
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 250,000 11,375,000
- ---------------------------------------------------------------
DePuy, Inc.(a) 577,800 14,806,125
- ---------------------------------------------------------------
Guidant Corp. 400,000 23,000,000
- ---------------------------------------------------------------
Stryker Corp. 875,000 32,539,063
- ---------------------------------------------------------------
Sybron International Corp.(a) 757,500 30,394,688
- ---------------------------------------------------------------
206,542,251
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.07%
Physician Support Systems,
Inc.(a) 309,200 4,753,950
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE &
APPLIANCES-0.41%
Furniture Brands International,
Inc.(a) 559,900 9,378,325
- ---------------------------------------------------------------
Maytag Corp. 502,700 16,777,613
- ---------------------------------------------------------------
26,155,938
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.72%
Dial Corp. 1,000,000 $ 16,875,000
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 430,000 29,240,000
- ---------------------------------------------------------------
46,115,000
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.45%
AFLAC Inc. 224,700 11,431,613
- ---------------------------------------------------------------
Conseco Inc. 425,000 18,540,625
- ---------------------------------------------------------------
Equitable Companies, Inc. 800,000 32,950,000
- ---------------------------------------------------------------
Nationwide Financial Services, Inc.-
Class A 600,000 18,262,500
- ---------------------------------------------------------------
Torchmark Corp. 271,600 10,830,050
- ---------------------------------------------------------------
92,014,788
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.74%
Ace, Ltd. 400,000 37,175,000
- ---------------------------------------------------------------
Allmerica Financial Corp. 50,800 2,381,250
- ---------------------------------------------------------------
American International Group,
Inc. 352,600 35,987,238
- ---------------------------------------------------------------
Travelers Group, Inc. 500,000 35,000,000
- ---------------------------------------------------------------
110,543,488
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-1.91%
Allstate Corp. 565,300 46,884,569
- ---------------------------------------------------------------
Everest Re Holdings, Inc. 925,000 34,803,125
- ---------------------------------------------------------------
Exel Ltd. 353,800 21,382,788
- ---------------------------------------------------------------
Fremont General Corp. 400,000 18,650,000
- ---------------------------------------------------------------
121,720,482
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.53%
Merrill Lynch & Co., Inc. 213,000 14,404,125
- ---------------------------------------------------------------
Salomon, Inc. 250,000 19,421,875
- ---------------------------------------------------------------
33,826,000
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-1.07%
Franklin Resources, Inc. 388,800 34,943,400
- ---------------------------------------------------------------
T. Rowe Price Associates 500,000 33,125,000
- ---------------------------------------------------------------
68,068,400
- ---------------------------------------------------------------
LODGING-HOTELS-1.92%
Carnival Corp.-Class A 800,000 38,800,000
- ---------------------------------------------------------------
Doubletree Corp.(a) 203,600 8,474,850
- ---------------------------------------------------------------
Host Marriott Corp.(a) 208,500 4,352,438
- ---------------------------------------------------------------
ITT Corp. 350,000 26,140,625
- ---------------------------------------------------------------
Marriott International, Inc. 250,000 17,437,500
- ---------------------------------------------------------------
Patriot American Hospitality,
Inc. 630,000 20,790,000
- ---------------------------------------------------------------
Promus Hotel Corp.(a) 150,000 5,887,500
- ---------------------------------------------------------------
121,882,913
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.44%
Caterpillar Inc. 350,000 17,937,500
- ---------------------------------------------------------------
Deere & Co. 550,000 28,943,750
- ---------------------------------------------------------------
Dover Corp. 376,200 25,393,500
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-(CONTINUED)
Ingersoll-Rand Co. 501,150 $ 19,513,528
- ---------------------------------------------------------------
91,788,278
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-2.37%
AlliedSignal Inc. 275,000 9,900,000
- ---------------------------------------------------------------
Carlisle Companies, Inc. 87,800 3,797,350
- ---------------------------------------------------------------
Crane Co. 161,500 6,712,344
- ---------------------------------------------------------------
Eaton Corp. 175,000 16,909,375
- ---------------------------------------------------------------
Thermo Electron Corp.(a) 1,250,000 46,640,625
- ---------------------------------------------------------------
Tyco International Ltd. 800,000 30,200,000
- ---------------------------------------------------------------
U.S. Industries, Inc. 577,500 15,520,313
- ---------------------------------------------------------------
United Technologies Corp. 300,000 21,000,000
- ---------------------------------------------------------------
150,680,007
- ---------------------------------------------------------------
MANUFACTURING
(SPECIALIZED)-0.50%
Diebold, Inc. 450,150 19,834,734
- ---------------------------------------------------------------
U.S. Filter Corp.(a) 300,000 12,037,500
- ---------------------------------------------------------------
31,872,234
- ---------------------------------------------------------------
NATURAL GAS-0.13%
Coastal Corp. 132,700 7,978,587
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-0.48%
Exxon Corp. 500,000 30,718,750
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.84%
BJ Services Co.(a) 275,000 23,306,250
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 190,600 13,770,850
- ---------------------------------------------------------------
Halliburton Co. 800,000 47,700,000
- ---------------------------------------------------------------
Nabors Industries, Inc.(a) 1,075,000 44,209,375
- ---------------------------------------------------------------
Newpark Resources, Inc.(a) 198,400 8,233,600
- ---------------------------------------------------------------
Santa Fe International Corp. 176,800 8,696,350
- ---------------------------------------------------------------
Schlumberger Ltd. 400,000 35,000,000
- ---------------------------------------------------------------
180,916,425
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.43%
Bowater, Inc. 650,000 27,178,125
- ---------------------------------------------------------------
PERSONAL CARE-1.17%
Avon Products, Inc. 597,000 39,103,500
- ---------------------------------------------------------------
Gillette Co. 400,000 35,625,000
- ---------------------------------------------------------------
74,728,500
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.74%
Xerox Corp. 589,900 46,786,444
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.31%
AES Corp.(a) 500,000 19,812,500
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.53%
Gannett Co., Inc. 300,000 15,768,750
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PUBLISHING (NEWSPAPERS)-(CONTINUED)
New York Times Co.-Class A 325,000 $ 17,793,750
- ---------------------------------------------------------------
33,562,500
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-0.52%
Starwood Lodging Trust 550,000 32,896,875
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.33%
Home Depot, Inc. 375,000 20,859,375
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.77%
CompUSA, Inc.(a) 981,200 32,134,300
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 1,200,000 35,775,000
- ---------------------------------------------------------------
Tech Data Corp.(a) 1,000,000 44,500,000
- ---------------------------------------------------------------
112,409,300
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.50%
Federated Department Stores,
Inc.(a) 375,000 16,500,000
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 1,000,000 28,562,500
- ---------------------------------------------------------------
J.C. Penney Co., Inc. 300,000 17,606,250
- ---------------------------------------------------------------
Proffitt's, Inc.(a) 1,150,000 32,990,625
- ---------------------------------------------------------------
95,659,375
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.87%
Consolidated Stores Corp.(a) 618,125 24,647,734
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 466,200 10,955,700
- ---------------------------------------------------------------
Ross Stores, Inc. 525,000 19,621,875
- ---------------------------------------------------------------
55,225,309
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.70%
CVS Corp. 450,000 27,590,625
- ---------------------------------------------------------------
Rite Aid Corp. 290,000 17,218,750
- ---------------------------------------------------------------
44,809,375
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.49%
Kroger Co.(a) 1,125,000 36,703,125
- ---------------------------------------------------------------
Safeway, Inc.(a) 1,000,000 58,125,000
- ---------------------------------------------------------------
94,828,125
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-1.42%
Costco Companies, Inc.(a) 1,100,000 42,350,000
- ---------------------------------------------------------------
Dayton Hudson Corp. 425,000 26,695,313
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 601,800 21,138,225
- ---------------------------------------------------------------
90,183,538
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.18%
Barnes & Noble, Inc.(a) 138,600 3,542,962
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 475,000 15,081,250
- ---------------------------------------------------------------
Office Depot, Inc.(a) 1,370,700 28,270,687
- ---------------------------------------------------------------
Payless ShoeSource, Inc.(a) 217,500 12,125,625
- ---------------------------------------------------------------
Toys "R" Us, Inc.(a) 475,000 16,179,687
- ---------------------------------------------------------------
75,200,211
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.39%
Intimate Brands, Inc. 254,700 $ 5,444,212
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 650,000 19,256,250
- ---------------------------------------------------------------
24,700,462
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-1.44%
Ahmanson (H.F.) & Co. 800,000 47,200,000
- ---------------------------------------------------------------
Charter One Financial, Inc. 246,885 14,350,190
- ---------------------------------------------------------------
Washington Mutual, Inc. 440,000 30,112,500
- ---------------------------------------------------------------
91,662,690
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.68%
Interpublic Group of Companies,
Inc. 412,500 19,593,750
- ---------------------------------------------------------------
Outdoor Systems, Inc.(a) 405,100 12,456,825
- ---------------------------------------------------------------
Universal Outdoor Holdings,
Inc.(a) 269,000 11,365,250
- ---------------------------------------------------------------
43,415,825
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.14%
HFS, Inc.(a) 725,000 51,112,500
- ---------------------------------------------------------------
Service Corp. International 2,795,700 85,094,118
- ---------------------------------------------------------------
136,206,618
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.64%
Equifax, Inc. 1,789,800 55,595,662
- ---------------------------------------------------------------
First Data Corp. 400,000 11,625,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 482,100 21,573,975
- ---------------------------------------------------------------
National Data Corp. 425,000 15,698,438
- ---------------------------------------------------------------
104,493,075
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.37%
AccuStaff, Inc.(a) 761,200 21,741,775
- ---------------------------------------------------------------
Kelly Services, Inc.-Class A 46,900 1,664,950
- ---------------------------------------------------------------
23,406,725
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.50%
CIENA Corp.(a) 375,000 20,625,000
- ---------------------------------------------------------------
MCI Communications Corp. 500,000 17,750,000
- ---------------------------------------------------------------
WorldCom, Inc.(a) 1,690,800 56,853,150
- ---------------------------------------------------------------
95,228,150
- ---------------------------------------------------------------
TELEPHONE-0.55%
Bell Atlantic Corp. 233,300 18,634,837
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 600,000 16,200,000
- ---------------------------------------------------------------
34,834,837
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.16%
Jones Apparel Group, Inc.(a) 200,000 10,175,000
- ---------------------------------------------------------------
TOBACCO-0.53%
Philip Morris Companies, Inc. 849,900 33,677,288
- ---------------------------------------------------------------
TRUCKERS-0.33%
Caliber System, Inc. 400,000 20,850,000
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-0.98%
Browning-Ferris Industries, Inc. 1,000,000 $ 32,500,000
- ---------------------------------------------------------------
USA Waste Services, Inc.(a) 800,000 29,600,000
- ---------------------------------------------------------------
62,100,000
- ---------------------------------------------------------------
Total Domestic Common Stocks 5,389,072,735
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-1.38%
FINANCIAL (DIVERSIFIED)-1.06%
MGIC Investment Corp.-$3.12
Conv. Pfd. 400,000 40,800,000
- ---------------------------------------------------------------
SunAmerica, Inc.-Series E, $3.10
Dep. Conv. Pfd. 228,800 26,655,200
- ---------------------------------------------------------------
67,455,200
- ---------------------------------------------------------------
LODGING-HOTELS-0.32%
Host Marriott Corp., $3.375
Conv. Pfd. 310,800 20,318,550
- ---------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks 87,773,750
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE BONDS & NOTES-0.74%
ELECTRICAL EQUIPMENT-0.64%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06
(acquired 10/31/96-12/06/96; cost
$27,581,905)(c)
$22,050,000 40,709,371
- ---------------------------------------------------------------
MANUFACTURING
(SPECIALIZED)-0.10%
U.S. Filter Corp., Conv. Sub.
Notes, 6.00%, 09/15/05 2,700,000 6,005,205
- ---------------------------------------------------------------
Total Domestic Convertible
Bonds & Notes 46,714,576
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-0.39%
SWITZERLAND-0.39%
Sandoz Capital BVI Ltd.
(Financial-Diversified),
Sr. Conv. Deb., 2.00%, 10/06/02
(acquired 11/01/96-11/05/96;
cost $18,721,100)(c) 17,000,000 24,990,000
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-8.99%
CANADA-1.25%
Newbridge Networks Corp.
(Computers-Networking)(a) 220,000 11,660,000
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Communications Equipment) 325,000 29,148,438
- ---------------------------------------------------------------
Philip Services Corp. (Waste
Management)(a) 2,200,000 38,500,000
- ---------------------------------------------------------------
79,308,438
- ---------------------------------------------------------------
FINLAND-0.33%
Nokia Oy A.B.-Class A-ADR
(Communications Equipment) 240,000 21,180,000
- ---------------------------------------------------------------
FRANCE-1.81%
Banque Nationale de Paris
(Banks-Major Regional) 670,000 $ 29,619,035
- ---------------------------------------------------------------
Elf Aquitaine S.A. (Oil &
Gas-Refining & Marketing) 285,000 35,277,597
- ---------------------------------------------------------------
Renault S.A. (Automobiles)(a) 600,000 16,694,838
- ---------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 245,000 33,554,370
- ---------------------------------------------------------------
115,145,840
- ---------------------------------------------------------------
GERMANY-0.32%
Adidas A.G. (Footwear) 78,800 11,414,985
- ---------------------------------------------------------------
VEBA A.G.
(Manufacturing-Diversified) 158,000 8,815,746
- ---------------------------------------------------------------
20,230,731
- ---------------------------------------------------------------
HONG KONG-0.46%
HSBC Holdings PLC (Banks-Major
Regional) 469,000 10,615,664
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Land Development) 2,505,000 18,467,955
- ---------------------------------------------------------------
29,083,619
- ---------------------------------------------------------------
IRELAND-0.26%
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 326,600 16,289,175
- ---------------------------------------------------------------
ISRAEL-0.15%
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 200,000 9,350,000
- ---------------------------------------------------------------
ITALY-0.67%
Telecom Italia Mobile S.p.A.
(Telecommunications-
Cellular/Wireless) 6,000,000 22,150,030
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 3,333,333 20,850,559
- ---------------------------------------------------------------
43,000,589
- ---------------------------------------------------------------
MEXICO-0.03%
Panamerican Beverages,
Inc.-Class A
(Beverages-Non-Alcoholic) 68,300 2,117,300
- ---------------------------------------------------------------
NETHERLANDS-1.77%
Akzo Nobel N.V.
(Chemicals-Diversified) 135,750 23,919,688
- ---------------------------------------------------------------
ASM Lithography Holding N.V.
(Electronics-Semiconductors)(a) 250,000 18,312,500
- ---------------------------------------------------------------
Philips Electronics N.V.-ADR-New
York Shares (Electrical
Equipment) 900,000 70,537,500
- ---------------------------------------------------------------
112,769,688
- ---------------------------------------------------------------
SINGAPORE-0.13%
Asia Pulp & Paper Co. Ltd.-ADR
(Paper & Forest Products) 745,700 8,482,338
- ---------------------------------------------------------------
SWEDEN-0.52%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 750,000 33,187,500
- ---------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND-0.33%
Novartis A.G. (Health
Care-Diversified) 13,300 $ 20,829,779
- ---------------------------------------------------------------
UNITED KINGDOM-0.96%
Granada Group PLC (Leisure
Time-Products) 1,330,000 18,342,168
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals) 900,000 42,862,500
- ---------------------------------------------------------------
61,204,668
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 572,179,665
- ---------------------------------------------------------------
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.24%(d)
5.093%, 01/02/98 $ 15,645,000(e) 15,520,153
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-3.32%(f)
CIBC Wood Gundy Securities
Corp., 5.75%, 11/03/97 (g) $100,000,000 $ 100,000,000
- ---------------------------------------------------------------
Goldman, Sachs, & Co., 5.70%,
11/03/97(h) 111,011,779 111,011,779
- ---------------------------------------------------------------
Total Repurchase Agreements 211,011,779
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.78% 6,347,262,658
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.22% 13,874,661
- ---------------------------------------------------------------
TOTAL NET ASSETS-100.00% $6,361,137,319
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/97 was $65,699,371 which
represented 1.03% of the Fund's net assets.
(d) 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.
(e) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 9.
(f) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into on 10/31/97 with maturing value of
$400,191,667. Collateralized by $400,695,000 U.S. Government obligations, 0%
to 7.75% due 11/12/97 to 07/30/07 with an aggregate market value at 10/31/97
of $408,000,188.
(h) Joint repurchase agreement entered into on 10/31/97 with maturing value of
$700,332,500. Collateralized by $691,835,000 U.S. Government obligations, 0%
to 8.50% due 10/15/98 to 05/15/07 with an aggregate market value at 10/31/97
of $714,757,792.
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$4,878,060,355) $6,347,262,658
- --------------------------------------------------------
Foreign currencies, at market value
(cost $24,034) 23,692
- --------------------------------------------------------
Receivables for:
Investments sold 32,071,207
- --------------------------------------------------------
Capital stock sold 12,718,493
- --------------------------------------------------------
Dividends and interest 3,624,232
- --------------------------------------------------------
Variation margins 324,000
- --------------------------------------------------------
Investment for deferred compensation
plan 80,090
- --------------------------------------------------------
Other assets 133,271
- --------------------------------------------------------
Total assets 6,396,237,643
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 19,092,775
- --------------------------------------------------------
Options written 600,000
- --------------------------------------------------------
Capital stock reacquired 8,360,129
- --------------------------------------------------------
Deferred compensation 80,090
- --------------------------------------------------------
Accrued advisory fees 3,355,000
- --------------------------------------------------------
Accrued administrative service fees 13,321
- --------------------------------------------------------
Accrued distribution fees 1,981,745
- --------------------------------------------------------
Accrued transfer agent fees 878,386
- --------------------------------------------------------
Accrued operating expenses 738,878
- --------------------------------------------------------
Total liabilities 35,100,324
- --------------------------------------------------------
Net assets applicable to shares
outstanding $6,361,137,319
========================================================
NET ASSETS:
Class A $5,810,582,232
========================================================
Class B $ 486,105,308
========================================================
Class C $ 2,326,193
========================================================
Institutional Class $ 62,123,586
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
CLASS A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 255,794,618
========================================================
CLASS B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 21,757,228
========================================================
CLASS C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 104,104
========================================================
INSTITUTIONAL CLASS:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 2,695,286
========================================================
CLASS A:
Net asset value and redemption price
per share $ 22.72
========================================================
Offering price per share:
(Net asset value of
$22.72 divided by 94.50%) $ 24.04
========================================================
CLASS B:
Net asset value and offering price per
share $ 22.34
========================================================
CLASS C:
Net asset value and offering price per
share $ 22.34
========================================================
INSTITUTIONAL CLASS:
Net asset value, offering and
redemption price per share $ 23.05
========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $781,220 foreign
withholding tax) $ 53,208,013
- ----------------------------------------------------------
Interest 14,062,704
- ----------------------------------------------------------
Total investment income 67,270,717
- ----------------------------------------------------------
EXPENSES:
Advisory fees 37,487,692
- ----------------------------------------------------------
Administrative service fees 163,243
- ----------------------------------------------------------
Custodian fees 518,851
- ----------------------------------------------------------
Directors' fees 48,806
- ----------------------------------------------------------
Distribution fees-Class A 16,399,127
- ----------------------------------------------------------
Distribution fees-Class B 3,831,989
- ----------------------------------------------------------
Distribution fees-Class C 2,338
- ----------------------------------------------------------
Transfer agent fees-Class A 7,665,449
- ----------------------------------------------------------
Transfer agent fees-Class B 875,767
- ----------------------------------------------------------
Transfer agent fees-Class C 473
- ----------------------------------------------------------
Transfer agent fees-Institutional Class 5,963
- ----------------------------------------------------------
Other 1,473,922
- ----------------------------------------------------------
Total expenses 68,473,620
- ----------------------------------------------------------
Less: Fees waived by advisor (2,187,021)
- ----------------------------------------------------------
Expenses paid indirectly (116,775)
- ----------------------------------------------------------
Net expenses 66,169,824
- ----------------------------------------------------------
Net investment income 1,100,893
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 917,642,460
- ----------------------------------------------------------
Foreign currencies (2,376,476)
- ----------------------------------------------------------
Futures contracts 12,648,342
- ----------------------------------------------------------
Options contracts 5,967,683
- ----------------------------------------------------------
933,882,009
- ----------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 434,974,571
- ----------------------------------------------------------
Foreign currencies 14,469
- ----------------------------------------------------------
Futures contracts (264,000)
- ----------------------------------------------------------
Options contracts 3,811,862
- ----------------------------------------------------------
438,536,902
- ----------------------------------------------------------
Net gain on investment securities,
foreign currencies, futures and option
contracts 1,372,418,911
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $1,373,519,804
==========================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,100,893 $ 14,147,587
- ----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies, futures and options contracts 933,882,009 590,548,116
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and options contracts 438,536,902 79,138,554
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,373,519,804 683,834,257
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (14,688,010) --
- ----------------------------------------------------------------------------------------------
Institutional Class (444,894) --
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (552,547,910) (606,609,217)
- ----------------------------------------------------------------------------------------------
Class B (32,151,485) (7,814,517)
- ----------------------------------------------------------------------------------------------
Institutional Class (6,655,833) (7,332,667)
- ----------------------------------------------------------------------------------------------
Net equalization credits (charges):
Class A 436,828 2,368,957
- ----------------------------------------------------------------------------------------------
Class B 62,469 992,175
- ----------------------------------------------------------------------------------------------
Class C -- --
- ----------------------------------------------------------------------------------------------
Institutional Class (91,147) 65,590
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 126,373,106 362,344,237
- ----------------------------------------------------------------------------------------------
Class B 166,861,272 210,825,508
- ----------------------------------------------------------------------------------------------
Class C 2,401,569 --
- ----------------------------------------------------------------------------------------------
Institutional Class (7,373,537) 5,462,015
- ----------------------------------------------------------------------------------------------
Net increase in net assets 1,055,702,232 644,136,338
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,305,435,087 4,661,298,749
- ----------------------------------------------------------------------------------------------
End of period $6,361,137,319 $5,305,435,087
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,937,446,869 $3,649,184,459
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 28,516,289 44,516,626
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies, futures and options
contracts 925,614,568 580,711,311
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 1,469,559,593 1,031,022,691
- ----------------------------------------------------------------------------------------------
$6,361,137,319 $5,305,435,087
==============================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series of AIM Equity Funds, Inc. (the
"Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six diversified portfolios:
AIM Weingarten Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund and AIM Constellation Fund. The Fund
currently offers four different classes of shares: the Class A shares, Class B
shares, Class C shares and the Institutional Class. Class C shares commenced
sales on August 4, 1997. Matters affecting each portfolio or class will be voted
on exclusively by such shareholders. The assets, liabilities and operations of
each portfolio are accounted for separately. The Fund's investment objective is
to seek growth of capital principally through investment in common stocks of
seasoned and better capitalized companies. Information presented in these
financial statements pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If a mean is not available, as in the
case in some foreign markets, the closing bid will be used absent a last
sales price. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically authorized
by the Board of Directors of the Company. Short-term obligations having 60
days or less to maturity are valued at amortized cost which approximates
market value. Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the New
York Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of the New York Stock Exchange which 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. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract for the purchase or
sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contracts at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that the change in the value of the contracts may not correlate with
changes in the value of the securities being hedged.
E. Covered Call Options--The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option
16
<PAGE> 19
written. The current market value of a written option is the mean between
the last bid and asked prices on that day. If a written call option expires
on the stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or a loss if the closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
F. Put options--The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, a
Fund pays an option premium. The option's underlying instrument may be a
security, or a futures contract. Put options may be used by a Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or
a portion of the Fund's resulting losses. At the same time, because the
maximum the Fund has at risk is the cost of the option, purchasing put
options does not eliminate the potential for the Fund to profit from an
increase in the value of the securities hedged.
G. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1997,
undistributed net investment income was decreased by $2,376,476 and
undistributed net realized gains increased by $2,376,476 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
H. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
I. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated between the
classes.
J. Equalization--The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and the costs of repurchases
of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of 1.0%
of the first $30 million of the Fund's average daily net assets, plus 0.75% of
the Fund's average daily net assets in excess of $30 million to and including
$350 million, plus 0.625% of the Fund's average daily net assets in excess of
$350 million. AIM is currently voluntarily waiving a portion of its advisory
fees payable by the Fund to AIM to the extent necessary to reduce the fees paid
by the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver of fees is entirely voluntary but approval is
required by the Board of Directors of the Company for any decision by AIM to
discontinue the waiver. During the year ended October 31, 1997, AIM waived fees
of $2,187,021. 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, 1997, AIM was
reimbursed $163,243 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Class A shares, Class B shares and Class C
shares. During the year ended October 31, 1997, AFS was reimbursed $4,656,522
for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the
17
<PAGE> 20
Fund. During the year ended October 31, 1997, the Portfolio paid AIFS $5,963 for
such services. On September 19, 1997, the Board of Directors of the Fund
approved the appointment of AFS as transfer agent of the Fund to be effective in
late 1997 or early 1998.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC") to serve as the distributor for the
Institutional Class. The Company has adopted distribution plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A shares (the "Class A
Plan"), the Fund's Class B shares (the "Class B Plan"), and the Fund's Class C
shares (the "Class C Plan") (collectively, the "Plans"). The Fund, pursuant to
the Plan, pays AIM Distributors compensation at the annual rate of 0.30% of the
average daily net assets of Class A shares and 1.00% of the average daily net
assets of Class C shares. The Plan is designed to compensate AIM Distributors
for certain promotional and other sales related costs, and to implement a dealer
incentive program which provides for periodic payments to selected dealers who
furnish continuing personal shareholder services to their customers who purchase
and own Class A or Class C shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
B shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares of the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more designees, its rights to all or a designated portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges received by AIM
Distributors related to the Class B shares. During the year ended October 31,
1997 for the Class A shares and Class B shares and the period August 4, 1997
(date sales commenced) through October 31, 1997, the Class C shares paid AIM
Distributors $16,399,127, $3,831,989 and $2,338, respectively, as compensation
under the Plans.
AIM Distributors received commissions of $1,521,630 from sales of the Class A
shares of the Fund during the year ended October 31, 1997. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1997,
AIM Distributors received commissions of $38,015 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, AIM Capital, AIM Distributors,
AFS, AIFS and FMC.
During the year ended October 31, 1997, the Fund paid legal fees of $15,778
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $21,962 during the year ended October 31, 1997. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $77,032 and $17,781, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $116,775 during the year ended October
31, 1997.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lessor of (i) $325,000,000 or (ii) the limit set
by its prospectus for borrowings. During the year ended October 31, 1997, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.05% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended October 31, 1997 was $7,275,089,932 and
$7,776,089,044, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,533,476,526
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (75,979,727)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,457,496,799
==========================================================
</TABLE>
Cost of investments for tax purposes is $4,889,765,859.
18
<PAGE> 21
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 55,804 $ 22,601,072
- ---------------------------------------------------------------------------------------
Written 86,525 29,354,760
- ---------------------------------------------------------------------------------------
Closed (91,359) (35,943,337)
- ---------------------------------------------------------------------------------------
Exercised (38,470) (10,831,639)
- ---------------------------------------------------------------------------------------
Expired (9,500) (3,963,917)
- ---------------------------------------------------------------------------------------
End of period 3,000 $ 1,216,939
=======================================================================================
</TABLE>
Open call option contracts written at October 31, 1997 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
CONTRACT STRIKE NUMBER OF PREMIUM 1997 UNREALIZED
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
ISSUE -------- ------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lucent Technologies, Inc. November 85 3,000 $1,216,939 $600,000 $616,939
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-PUT OPTIONS WRITTEN
Transactions in put options purchased during the year ended October 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- -----------
<S> <C> <C>
Beginning of period -- --
- ---------------------------------------------------------------------------------------
Purchased 7,500 $ 1,053,750
- ---------------------------------------------------------------------------------------
Exercised (7,500) (1,053,750)
- ---------------------------------------------------------------------------------------
End of period 0 $ 0
=======================================================================================
</TABLE>
NOTE 9-OPEN FUTURES CONTRACTS
On October 31, 1997, $363,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACT CONTRACTS COMMITMENT (DEPRECIATION)
-------- --------- ---------- --------------
<S> <C> <C> <C>
S&P 400 Midcap Index 96 Dec. '97 $(264,000)
</TABLE>
NOTE 10-CAPITAL STOCK
Changes in the capital stock outstanding during the years ended October 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 36,066,523 $748,100,033 34,550,539 $648,183,624
- ---------------------------------------------------------------------------------------------------------------------
Class B 9,401,446 192,004,936 12,381,545 231,706,372
- ---------------------------------------------------------------------------------------------------------------------
Class C* 117,736 2,708,502 -- --
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 377,655 7,900,669 516,716 9,877,153
- ---------------------------------------------------------------------------------------------------------------------
Issued as a reinvestment of dividends:
Class A 29,415,559 528,061,835 32,395,132 557,844,149
- ---------------------------------------------------------------------------------------------------------------------
Class B 1,715,350 30,687,644 425,933 7,326,082
- ---------------------------------------------------------------------------------------------------------------------
Class C* -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 313,585 5,650,803 338,803 5,871,449
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (56,267,501) (1,149,788,762) (44,929,759) (843,683,536)
- ---------------------------------------------------------------------------------------------------------------------
Class B (2,748,694) (55,831,308) (1,500,861) (28,206,946)
- ---------------------------------------------------------------------------------------------------------------------
Class C* (13,632) (306,933) -- --
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class (951,830) (20,925,009) (552,275) (10,286,587)
- ---------------------------------------------------------------------------------------------------------------------
17,426,197 $288,262,410 33,625,773 $578,631,760
=====================================================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
19
<PAGE> 22
NOTE 11-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1997, for a share of Class B capital stock outstanding during each of the years
in the two-year period ended October 31, 1997 and the period June 26, 1995 (date
sales commenced) through October 31, 1995, and for a share of Class C capital
stock outstanding during the period August 4, 1997 (date sales commenced)
through October 31, 1997.
CLASS A:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.19 $ 20.33 $ 17.82 $ 17.62 $ 16.68
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.01 0.06 -- 0.07 0.10
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) 4.82 2.51 4.36 0.57 0.93
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations 4.83 2.57 4.36 0.64 1.03
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.06) -- (0.07) (0.11) (0.09)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (2.24) (2.71) (1.78) (0.33) --
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions (2.30) (2.71) (1.85) (0.44) (0.09)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.72 $ 20.19 $ 20.33 $ 17.82 $ 17.62
============================================================ ========== ========== ========== ========== ==========
Total return(a) 26.83% 14.81% 28.20% 3.76% 6.17%
============================================================ ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,810,582 $4,977,493 $4,564,730 $3,965,858 $4,999,983
============================================================ ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(b) 1.07%(c)(d) 1.12% 1.17% 1.21% 1.13%
============================================================ ========== ========== ========== ========== ==========
Ratio of net investment income to average net assets(e) 0.07%(c) 0.33% (0.02)% 0.45% 0.62%
============================================================ ========== ========== ========== ========== ==========
Portfolio turnover rate 128% 159% 139% 136% 109%
============================================================ ========== ========== ========== ========== ==========
Average brokerage commission rate paid(f) $ 0.0618 $ 0.0615 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)(g) -- -- $ 593 -- --
============================================================ ========== ========== ========== ========== ==========
Average number of shares outstanding during the period (000s
omitted)(g) 262,563 248,189 229,272 249,351 314,490
============================================================ ========== ========== ========== ========== ==========
Average amount of debt per share during the period -- -- $ .0026 -- --
============================================================ ========== ========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.11%, 1.15%, 1.19%, 1.24% and 1.17% for the periods 1997-1993,
respectively.
(c) Ratios are based on average net assets of $5,466,375,838.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.03%, 0.30%, (0.04%), 0.42% and 0.58% for the periods
1997-1993, respectively.
(f) The average commission rate paid is the total brokerage commissions
paid on applicable purchases and sales of securities for the period divided
by the total number of related shares purchased and sold, which is required
to be disclosed for fiscal years beginning September 1, 1995 and thereafter.
(g) Averages computed on a daily basis.
20
<PAGE> 23
CLASS B:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 19.98 $ 20.28 $ 18.56
- ------------------------------------------------------------ ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.05)(a) (0.03)
- ------------------------------------------------------------ ---------- ---------- ----------
Net gains on securities (both realized and unrealized) 4.75 2.46 1.75
- ------------------------------------------------------------ ---------- ---------- ----------
Total from investment operations 4.60 2.41 1.72
- ------------------------------------------------------------ ---------- ---------- ----------
Less distributions:
Distributions from net realized gains (2.24) (2.71) --
- ------------------------------------------------------------ ---------- ---------- ----------
Net asset value, end of period $ 22.34 $ 19.98 $ 20.28
============================================================ ========== ========== ==========
Total return(b) 25.78% 13.95% 9.27%
============================================================ ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000's omitted) $ 486,105 $ 267,459 $ 42,238
============================================================ ========== ========== ==========
Ratio of expenses to average net assets(c) 1.87%(d)(e) 1.95% 1.91%(f)
============================================================ ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(g) (0.73)%(d) (0.50)% (0.76)%(f)
============================================================ ========== ========== ==========
Portfolio turnover rate 128% 159% 139%
============================================================ ========== ========== ==========
Average brokerage commission rate paid(h) $ 0.0618 $ 0.0615 N/A
============================================================ ========== ========== ==========
Borrowings for the period:
Amount of debt outstanding at end of
period (000s omitted) -- -- --
============================================================ ========== ========== ==========
Average amount of debt outstanding during the
period (000s omitted)(i) -- -- $ 3
============================================================ ========== ========== ==========
Average number of shares outstanding during the
period (000s omitted)(i) 18,505 7,956 1,036
============================================================ ========== ========== ==========
Average amount of debt per share during the period -- -- $ 0.0029
============================================================ ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and for periods less than
one year, total returns are not annualized.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.91%, 1.98% and 1.94% (annualized) for the periods 1997-1995,
respectively.
(d) Ratios are based on average net assets of $383,198,900.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
1.86%.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.77)%, (0.53)% and (0.79)% (annualized) for the
periods 1997-1995, respectively.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
(i) Averages computed on a daily basis.
21
<PAGE> 24
CLASS C:
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Net asset value, beginning of period $ 22.83
- ------------------------------------------------------------ -------
Income from investment operations:
Net investment income (0.04)(a)
- ------------------------------------------------------------ -------
Net gains (losses) on securities (both realized and
unrealized) (0.45)
- ------------------------------------------------------------ -------
Total from investment operations (0.49)
============================================================ =======
Net asset value, end of period $ 22.34
============================================================ =======
Total return(b) (2.15)%
============================================================ =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 2,326
============================================================ =======
Ratio of expenses to average net assets(c) 1.84%(d)(e)
============================================================ =======
Ratio of net investment income (loss) to average net
assets(f) (0.70)%(d)
============================================================ =======
Portfolio turnover rate 128%
============================================================ =======
Average brokerage commission rate paid(g) $0.0618
============================================================ =======
Borrowings for the period:
Amount of debt outstanding at end of period (000's omitted) --
============================================================ =======
Average amount of debt outstanding during the period (000's
omitted) --
============================================================ =======
Average number of shares outstanding during the period
(000's omitted)(h) 41,282
============================================================ =======
Average amount of debt per share during the period --
============================================================ =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and periods for less than one year,
total returns are not annualized.
(c) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 1.88% (annualized).
(d) Ratios are annualized and based on average net assets of
$958,881.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would
have remained the same.
(f) After fee waivers and/or expense reimbursements. Ratio of net
investment income (loss) to average net assets prior to fee
waivers and/or expense reimbursements was (0.74)% (annualized).
(g) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities
for the period divided by the total number of related shares
purchased and sold, which is required to be disclosed for fiscal
years beginning September 1, 1995 and thereafter.
(h) Averages computed on a daily basis.
22
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Weingarten Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1997, the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended, and financial
highlights for each of the years or periods in the
five-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1997, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Weingarten Fund as of October 31, 1997, the results of
its operations for the year then ended, the changes in
its net assets for each of the years in the two-year
period then ended, and the financial highlights for each
of the years or periods in the five-year period then
ended.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
23
<PAGE> 26
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the AIM Equity Funds, Inc. (the "Company")
was held on February 7, 1997 at the offices of A I M Management Group Inc., 11
Greenway Plaza, Houston, Texas. The meeting was held for the following purposes:
(1) To elect Directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson and Louis S. Sklar.
(2) To approve a new Master Investment Advisory Agreement between the AIM
Weingarten Fund (the "Fund") and A I M Advisors, Inc.
(3) To approve a new Sub-Advisory Agreement between AIM and A I M Capital
Management, Inc.
(4) To approve the elimination of the fundamental investment policy prohibiting
the Fund from investing in other investment companies.
(5) To approve the elimination of the fundamental investment policy prohibiting
or restricting the Fund's investments in puts, calls, straddles and spreads.
(6) To ratify the selection of KPMG Peat Marwick LLP as independent accountants
for the Fund for the Company's fiscal year ending October 31, 1997.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Votes Withhold/
Director/Matter Votes For Against Abstentions
--------------- --------- ------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 618,811,245 N/A 19,923,485
Bruce L. Crockett........................................... 619,427,685 N/A 19,307,045
Owen Daly II................................................ 618,919,919 N/A 19,814,811
Carl Frischling............................................. 619,275,356 N/A 19,459,374
Robert H. Graham............................................ 619,431,576 N/A 19,303,154
John F. Kroeger............................................. 618,878,096 N/A 19,856,634
Lewis F. Pennock............................................ 619,272,998 N/A 19,461,732
Ian W. Robinson............................................. 618,944,840 N/A 19,789,890
Louis S. Sklar.............................................. 619,462,714 N/A 19,272,016
(2) Approval of Master Investment Advisory Agreement............ 146,733,416 2,498,355 6,552,908
(3) Approval of Sub-Advisory Agreement.......................... 146,153,496 2,885,840 6,745,343
(4) Elimination of Fundamental Investment Policy Concerning
Investments in Other Investment Companies................... 111,841,005 5,168,602 6,908,560
(5) Elimination of Fundamental Investment Policy Concerning
Puts, Calls, Straddles and Spreads.......................... 110,091,179 6,531,415 7,295,571
(6) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
24
<PAGE> 27
Directors & Officers
<TABLE>
<S> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Chief Senior Vice President and Treasurer 11 Greenway Plaza
Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Carol F. Relihan
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
and Secretary P.O. Box 4739
Jack Fields Houston, TX 77210-4739
Formerly Member of the Jonathan C. Schoolar
U.S. House of Representatives Vice President CUSTODIAN
Carl Frischling Melville B. Cox State Street Bank & Trust Company
Partner Vice President 225 Franklin Street
Kramer, Levin, Naftalis & Frankel Boston, MA 02110
Dana R. Sutton
Robert H. Graham Vice President and Assistant Treasurer COUNSEL TO THE FUND
President and Chief Executive Officer
A I M Management Group Inc. P. Michelle Grace Ballard Spahr
Assistant Secretary Andrews & Ingersoll
John F. Kroeger 1735 Market Street
Formerly Consultant Nancy L. Martin Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Assistant Secretary
COUNSEL TO THE DIRECTORS
Lewis F. Pennock Ofelia M. Mayo
Attorney Assistant Secretary Kramer, Levin, Naftalis & Frankel
919 Third Avenue
Ian W. Robinson Kathleen J. Pflueger New York, NY 10022
Consultant; Formerly Executive Assistant Secretary
Vice President and DISTRIBUTOR
Chief Financial Officer Samuel D. Sirko
Bell Atlantic Management Assistant Secretary A I M Distributors, Inc.
Services, Inc. 11 Greenway Plaza
Stephen I. Winer Suite 100
Louis S. Sklar Assistant Secretary Houston, TX 77046
Executive Vice President
Hines Interests Mary J. Benson AUDITORS
Limited Partnership Assistant Treasurer
KPMG Peat Marwick LLP
700 Louisiana
Houston, TX 77002
</TABLE>
Required Federal Income Tax Information
AIM Weingarten Fund Retail Class paid ordinary dividends in the amount of
$0.609 per share to shareholders of Class A and $0.549 per share to
shareholders of Class B shares during its tax year ended October 31, 1997. Of
this amount 27.79% is eligible for the dividends received deduction for
corporations. The Fund also distributed long-term capital gains of $1.686 per
share for Class A and Class B shares during its tax year ended October 31,
1997.
Required State Income Tax Information
Of the total income dividends paid, 5.29% was derived from U.S. Treasury
obligations.
<PAGE> 28
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
[PHOTO OF AIM Blue Chip Fund
11 GREENWAY PLAZA AIM Global Growth Fund
APPEARS HERE] AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and managed approximately June 5, 1997. For more complete information about any AIM
$82 billion in assets for more than 3.6 million shareholders, Fund(s), including sales charges and expenses, ask your
including individual investors, corporate clients, and financial financial consultant or securities dealer for a free
institutions as of September 30, 1997. The AIM Family of prospectus(es). Please read the prospectus(es) carefully
Funds--Registered Trademark-- is distributed nationwide, and before you invest or send money.
AIM today ranks among the nation's top 15 mutual fund
companies in assets under management, according to Lipper INVEST WITH DISCIPLINE-SM-
Analytical Services, Inc.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
-----------------
</TABLE>
