<PAGE> 1
AIM CAPITAL
DEVELOPMENT FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1997
<PAGE> 2
-----------------------------------
AIM CAPITAL DEVELOPMENT FUND
For shareholders who seek
long-term growth through
investments in the
stocks of small-and
medium-size companies.
-----------------------------------
ABOUT FUND PERFORMANCE DATA THROUGHOUT THIS REPORT:
o AIM Capital Development Funds performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Funds performance is computed without a
sales charge.
o When sales charges are included, the Class A share performance reflects the
5.50% maximum 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% at the time of purchase to 0%
at the beginning of the seventh year. The performance of the Funds Class B
and Class C shares will differ from that of Class A shares due to
differences in sales charge structure and Fund expenses.
o Class C Shares commenced sales August 4, 1997.
o The Funds investment return and principal value will fluctuate so that an
investors shares, when redeemed, may be worth more or less than their
original cost.
o The Funds portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Russell 2000 Index is generally representative of the performance of
small-company stocks.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The Standard
& Poor's Index of 500 Stocks (S&P 500) is a group of unmanaged securities
widely regarded by investors to be representative of the stock market in
general. Results shown assume the reinvestment of dividends.
o Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Small Cap Fund Index represents an average of
the performance of the 30 largest small-capitalization growth funds.
o The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
large-company stocks.
o The Europe, Australia, Far East (EAFE) Index is a group of unmanaged
securities. The index is compiled by Morgan Stanley Capital International.
o 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
the volatility in equity markets, and it closed on an
[PHOTO OF unsettling note. In late October, in the wake of a currency
Charles T. crisis in Southeast Asia, the stock market experienced its
Bauer, first 10% correction since 1991. On Monday, October 27, the
Chairman of New York Stock Exchange closed to deal with market
the Board of volatility for the first time in its history when the Dow
THE FUND Jones Industrial Average fell 554 points, the indexes
APPEARS HERE] largest point decline ever. It is important to note that in
percentage terms, this was a drop of 7.18%, far smaller than
the 22.61% decline that occurred October 19, 1987.
Fortunately, this time the market snapped back, and the Dow
regained 337 points the next day. As of this writing,
markets continue to recover.
Many investment managers, including AIM, had cautioned
that a correction was inevitable, that the relentless rise
in benchmarks like the Dow could not continue. In less than 12 months, the Dow
had climbed from 6010 on October 14, 1996, to reach its all-time high of 8259
on August 6, 1997.
When markets become overvalued, no one knows what will precipitate a
decline. No one foresaw that a currency devaluation by Thailand beginning
during the summer would lead to worldwide stock market turmoil.
Despite recent activities, the fiscal year ended October 31 brought
domestic equity investors excellent returns: The Dow was up almost 26%; the
broader S&P 500, more than 32%; the NASDAQ small-cap index, 30.46%.
International investments, while positive, weren't as robust; the EAFE Index
rose 4.63%. On the following pages, your Fund managers discuss how your Fund
performed in this market context and their outlook for the future.
REALISTIC EXPECTATIONS
The 1100-point decline in the Dow between early August and late October was the
latest in a series of market breaks. Between mid-March and mid-April of this
year, for example, the Dow dropped almost 10%.
Many investors, including professional fund managers, have become accustomed
to buying on these market breaks because the market has bounced back quickly.
From its 1997 low of 6391 on April 11, the Dow took less than four months to
rise almost 2000 points to its all-time high.
However, this time could be different. Many investors have developed two
unrealistic expectations: first, a belief that stocks can rise more than 20% a
year indefinitely; and second, confidence that the market always rebounds
swiftly from a decline.
Neither notion is historically correct. History tells us that over the long
term, average annual total return for stocks is about 10%, not 20%. And those
of us who have been in this business for many years remember the bear market of
the 1970s, when the market experienced a series of declines and recovery was
very slow.
Nevertheless, there is reason for optimism, including sound fiscal policy
steadily shrinking the federal deficit, stable interest rates, and a strong
economy unharmed by inflation. Despite recent events in Asia, it is difficult
to be pessimistic about the U.S. economy and, indeed, about most of the
developed economies in the world.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have any questions or
comments. Don't forget that automated information about your AIM account is
available 24 hours a day on the AIM Investor Line, 800-246-5463. Or visit our
Web site, at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-----------------------------------
Despite recent activities
the fiscal year ended october 31
brought domestic equity investors
excellent returns.
-----------------------------------
<PAGE> 4
The Managers' Overview
FUND PERFORMS WELL AS SMALL-CAP STOCKS TAKE OVER MARKET LEADERSHIP
A roundtable discussion with the Fund management team for AIM Capital
Development Fund for the fiscal year ended October 31, 1997.
- --------------------------------------------------------------------------------
Q. IT WAS A MOMENTOUS YEAR IN THE STOCK MARKET. HOW DID AIM CAPITAL
DEVELOPMENT FUND PERFORM?
A. It was an excellent year for AIM Capital Development Fund. Total return
was 31.38% and 30.51% for Class A and B shares, respectively, for the
fiscal year ended October 31, 1997. That was good enough to beat the
29.33% total return for the Russell 2000 Index and the 18.58% total return
for the Lipper Small Cap Fund Index. Class C shares commenced sales August
4, 1997, and had a total return of 7.20% for the period ended October 31,
1997.
The Funds performance in the second half of the year was particularly
solid. For the six-month period ended October 31, 1997, Class A shares
posted a cumulative total return of 42.70% while total return for Class B
shares was 42.18%.
During the fiscal year, net assets in the Fund increased dramatically
from $273.7 million to almost $888 million.
Q. WHAT WAS BEHIND THE FUNDS REMARKABLE TURNAROUND?
A. During the first half of the fiscal year, large-company stocks were the
undisputed market kings. For the six-month period ended April 30, 1997,
the Standard and Poor's Composite Index of 500 Stocks (S&P 500) posted a
total return of 14.75% compared to 1.61% for the Russell 2000 Index.
Moreover, the stocks of the largest companies, the so-called "Super
caps," primarily were responsible for the gains of the S&P 500 in the
first half of the year.
In the second half of the year, however, there was a shift in the
market leadership from large- to small- and medium-size company stocks,
the type found in your Funds portfolio. The change in leadership was
reflected in the 27.29% total return of the Russell 2000 Index compared to
15.13% for the S&P 500 for the six-month period ended October 31, 1997.
Q. WHY DID SMALL-CAP STOCKS TAKE OVER THE MARKET LEADERSHIP?
A. Earlier in the year, market analysts were concerned that healthy economic
growth might accelerate inflation and lead to higher interest rates that
could adversely affect corporate profits. In such an environment,
investors were drawn to the stocks of large companies with more
predictable earnings and market liquidity.
Despite continued strong economic growth in the second half of the
fiscal year, however, inflation remained tame and borrowing costs
declined. Investors also became concerned about the relatively high prices
of large-cap stocks, particularly since the strength of the U.S. dollar
relative to other major currencies threatened to erode the profits of
giant, multinational companies. As a result, investors gravitated to the
more reasonably priced stocks of smaller companies with greater earnings
potential.
Q. THE CURRENCY DEVALUATIONS IN SOUTHEAST ASIA CAUSED STOCK MARKETS WORLDWIDE
TO PLUMMET ON OCTOBER 27, 1997. WHAT WAS THE IMPACT ON SMALL-CAP STOCKS?
A. Small-cap stocks weren't spared the massive selloffs that hit equity
markets on October 27 as the Russell 2000 Index lost 6.14% of its value in
a single day. However, the index rose nearly 2.0% the following day as
most major stock markets rebounded.
We believe the currency problems in Southeast Asia could ultimately
prove beneficial to domestic small-cap stocks. Money will probably flow
out of emerging markets in Southeast Asia and may be redirected into other
types of aggressive investments, such as domestic small-cap stocks.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
A. Among the Funds top sector holdings were: technology, 23%; energy, 14%;
and retail, 12%. Since our last report six months ago, we have increased
our holdings in energy and retail stocks while maintaining about the same
exposure in the technology sector.
Q. TECHNOLOGY STOCKS CONTINUED TO BE VOLATILE. WHY DO YOU FIND THIS SECTOR
ATTRACTIVE?
A. While technology stocks were volatile,
================================================================================
FUND HAS STRONG YEAR
- --------------------------------------------------------------------------------
1 year total returns, as of 10/31/97
AIM Capital Development Class A 31.38%
AIM Capital Development Class B 30.51%
Russell 2000 Index 29.33%
Lipper Small Cap Fund Index 18.58%
================================================================================
See important fund and index disclosures inside front cover.
2
<PAGE> 5
The Managers' Overview
PORTFOLIO COMPOSITION
As of 10/31/97, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. SunGard Data Systems Inc. 0.81% 1. Computers (Software & Services) 9.95%
2. Atwood Oceanics, Inc. 0.81 2. Oil & Gas (Drilling & Equipment) 9.53
3. Forest Laboratories, Inc. 0.81 3. Retail (Specialty) 6.44
4. Medical Manager Corp. 0.77 4. Services (Commercial & Consumer) 4.60
5. Hvide Marine, Inc./Class A 0.76 5. Communications Equipment 3.75
6. Stage Stores, Inc. 0.76 6. Health Care (Medical Products & Supplies) 2.82
7. Wild Oats Markets Inc. 0.75 7. Oil & Gas (Exploration & Production) 2.71
8. Metals USA 0.66 8. Health Care (Specialized Services) 2.59
9. EVI, Inc. 0.65 9. Health Care (Drugs-Generic & Other) 2.52
10. Stolt Comex Seaway, S.A. 0.64 10. Services (Data Processing) 2.36
Please keep in mind that the Funds portfolio is subject to change and there is no assurance the Fund will
continue to hold any particular security.
===================================================================================================================
</TABLE>
we remain optimistic about the long-term prospects for this sector. The
largest portion of corporate and global capital expenditures is being
channeled in technology.
The technology sector also stands to benefit from the reprogramming of
older computers to recognize the year 2000 and the conversion of Europe to
a single currency.
Finally, we only invest in the stocks of technology companies that
show earnings growth potential.
One of the stocks we found attractive was SunGard Data Systems, Inc.
A leading provider of large specialized proprietary investment support
systems and proprietary health-care information systems, the company
reported a significant earnings increase for the third quarter of 1997.
The Fund also benefited from owning the stocks of such technology
companies as Mastech Corp., HBO & Co., and Platinum Technology.
Q. WHAT IS BEHIND THE POSITIVE EARNINGS TRENDS IN THE ENERGY INDUSTRY?
A. Energy companies enjoyed stellar earnings in the third quarter of 1997
because of increases in both prices and demand for their products and
services. The industry also has benefited from a wave of consolidations.
We believe the energy industry will continue to be vibrant for several
more years because demand for its products and services has already
reached a point where it exceeds available supply.
Energy stocks in the portfolio included EVI Inc., an international
manufacturer of oil-field equipment which has experienced an impressive
growth in earnings in 1997 .
Other energy-company stocks in the portfolio included Stolt Comex
Seaway, Ensco International, Inc., and Diamond Offshore Drilling.
Q. WHY ARE YOU OPTIMISTIC ABOUT THE RETAIL SECTOR?
A. We are optimistic about this sector because of employment, wage, and sales
trends. In October 1997, the nation's unemployment rate dropped to 4.7%,
its lowest level in 24 years. The U.S. Labor Department also reported an
increase in hourly wages for private, non-supervisory production workers.
With the U.S. enjoying nearly full employment and wages on the rise, that
could bode well for the nation's retailers.
In the retail sector, one of the stocks we like is Wild Oats Markets,
which has emerged as one of the nation's largest natural food supermarket
chains. The company is expanding rapidly and recently has been involved in
the acquisition of several smaller competitors.
The Fund also benefited from owning the stocks of Stage Stores Inc.,
Pier 1 Imports, and Linens 'N Things, Inc.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. As 1997 draws to a close, the environment seems favorable for the stock
market. The economy is growing at a healthy pace, corporate profits are
strong, and inflation is low. The Federal Reserve Board (the Fed), after
tightening monetary policy in March 1997, has left interest rates
unchanged.
We are optimistic about small-cap stocks because of their lower
valuations in comparison to large-cap stocks. Also, we believe smaller
companies have greater earnings potential than their larger counterparts.
The profits of small companies also are less adversely affected by a
strong U.S. dollar because they do considerably less business overseas
than large, multinational companies.
Nevertheless, we expect volatility to continue to be a factor in the
market. The periodic release of key economic data, which could provide
some indication on the direction of inflation and the Fed's likely
response could cause the market to fluctuate dramatically. Also, as the
events of October 27 illustrated, offshore developments such as the Hong
Kong stock-market tumble could have an impact on the market.
Finally, investors would be well-advised to be realistic in their
expectations. Stock returns, which have exceeded 20% annually in recent
years, will most likely eventually experience both corrections and a
return to their more historic levels of approximately 10%. Nevertheless,
we remain confident that high-quality, small-cap growth issues offer
attractive prospects in the years ahead.
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Fund Performance
AIM CAPITAL DEVELOPMENT FUND CLASS A SHARES VS. BENCHMARK INDEXES
The chart below compares your Fund to benchmark indexes. It is intended to give
you a general idea of how your Fund performed compared to the stock market over
the period 6/17/96-10/31/97. It is important to understand the difference
between your Fund and an index. An index measures the performance of a
hypothetical portfolio, in this case the Russell 2000 Index and the Lipper
Small Cap Funds Index. Unlike your Fund, an index is not managed; therefore,
there are no sales charges, expenses or fees. You cannot invest in an index.
But if you could buy all the securities that make up an index, you would incur
expenses that would affect the return of your investment.
Growth of a $10,000 Investment
6/17/96-10/31/97
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AIM CAPITAL
DEVELOPMENT FUND, RUSSELL 2000 LIPPER SMALL CAP
CLASS A STOCK INDEX FUNDS INDEX
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
6/17/96 9,452 10,000 10,000
6/30/96 9,565 10,000 10,000
7/31/96 8,979 9,127 9,029
8/31/96 9,905 9,656 9,577
9/30/96 10,671 10,034 10,127
10/31/96 10,482 9,879 9,815
11/30/96 10,747 10,286 9,996
12/31/96 10,974 10,556 10,038
1/31/97 11,134 10,767 10,264
2/28/97 10,473 10,506 9,676
3/31/97 9,754 10,010 9,021
4/30/97 9,650 10,038 8,946
5/31/97 11,049 11,155 10,065
6/30/97 11,834 11,633 10,560
7/31/97 12,769 12,174 11,169
8/31/97 13,185 12,452 11,297
9/30/97 14,244 13,364 12,170
10/31/97 13,771 12,777 11,557
================================================================================
</TABLE>
Past performance cannot guarantee comparable future results.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/97, including sales charges
CLASS A SHARES
Inception (6/17/96) 26.25%
1 Year 24.11
CLASS B SHARES
Inception (10/1/97) 21.46
1 Year 25.51
CLASS C SHARES
Inception (8/4/97) 6.20
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. Your Funds total
return includes sales charges, expenses, and management fees. The performance of
Class B shares of the Fund 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.
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-90.05%
AEROSPACE/DEFENSE-0.37%
Aviation Sales Co.(a) 25,000 $ 859,375
- --------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 50,000 1,450,000
- --------------------------------------------------------------
InVision Technologies, Inc.(a) 50,000 525,000
- --------------------------------------------------------------
O'Gara Co.(a) 25,000 425,000
- --------------------------------------------------------------
3,259,375
- --------------------------------------------------------------
AIR FREIGHT-0.63%
AirNet Systems, Inc.(a) 70,000 1,435,000
- --------------------------------------------------------------
Eagle USA Airfreight, Inc.(a) 120,000 3,630,000
- --------------------------------------------------------------
Kitty Hawk, Inc.(a) 25,000 509,375
- --------------------------------------------------------------
5,574,375
- --------------------------------------------------------------
AIRLINES-0.23%
China Eastern Airlines Corp.
Ltd.-ADR (a)(Hong Kong) 35,000 796,250
- --------------------------------------------------------------
China Southern Airlines Co.
Ltd.-ADR (a)(China) 45,000 933,750
- --------------------------------------------------------------
Ryanair Holdings PLC-ADR (a)(Ireland) 12,200 305,000
- --------------------------------------------------------------
2,035,000
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.36%
Aftermarket Technology Corp.(a) 134,300 2,719,575
- --------------------------------------------------------------
Keystone Automotive Industries, Inc.(a) 20,500 453,562
- --------------------------------------------------------------
3,173,137
- --------------------------------------------------------------
BANKS (REGIONAL)-0.55%
AmSouth Bancorporation 9,000 432,563
- --------------------------------------------------------------
Banknorth Group, Inc. 16,000 968,000
- --------------------------------------------------------------
Cullen/Frost Bankers, Inc. 8,000 404,000
- --------------------------------------------------------------
Hibernia Corp.-Class A 30,000 534,375
- --------------------------------------------------------------
Marshall & Ilsley Corp. 35,000 1,815,625
- --------------------------------------------------------------
Southwest Bancorp. of Texas, Inc.(a) 25,000 750,000
- --------------------------------------------------------------
4,904,563
- --------------------------------------------------------------
BIOTECHNOLOGY-0.30%
Genzyme Corp.(a) 50,000 1,368,750
- --------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a) 35,000 1,251,250
- --------------------------------------------------------------
2,620,000
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-1.75%
Chancellor Media Corp.(a) 39,091 2,145,119
- --------------------------------------------------------------
Cox Radio, Inc.-Class A(a) 85,000 2,895,313
- --------------------------------------------------------------
Emmis Broadcasting Corp.-Class A(a) 20,000 885,000
- --------------------------------------------------------------
Hearst-Argyle Television Inc.(a) 24,870 708,795
- --------------------------------------------------------------
Heftel Broadcasting Corp.(a) 39,300 2,613,450
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 15,000 628,125
- --------------------------------------------------------------
Metro Networks, Inc.(a) 55,000 1,705,000
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-(CONTINUED)
Univision Communications, Inc.(a) 64,000 $ 3,968,000
- --------------------------------------------------------------
15,548,802
- --------------------------------------------------------------
BUILDING MATERIALS-0.37%
Diamond Home Services, Inc.(a) 100,000 850,000
- --------------------------------------------------------------
Pameco Corp.(a) 85,000 1,445,000
- --------------------------------------------------------------
White Cap Industries, Inc.(a) 50,000 950,000
- --------------------------------------------------------------
3,245,000
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.75%
Andrew Corp.(a) 60,000 1,391,250
- --------------------------------------------------------------
Cidco, Inc.(a) 45,000 838,125
- --------------------------------------------------------------
Coherent Communications Systems
Corp.(a) 80,000 2,420,000
- --------------------------------------------------------------
Corsair Communications, Inc.(a) 17,200 399,900
- --------------------------------------------------------------
Digital Lightwave, Inc.(a) 60,000 1,095,000
- --------------------------------------------------------------
DSC Communications Corp.(a) 180,000 4,387,500
- --------------------------------------------------------------
Innova Corp.(a) 75,000 1,612,500
- --------------------------------------------------------------
IWL Communications, Inc.(a) 50,000 562,500
- --------------------------------------------------------------
MAS Technology Ltd.-ADR(a)
(New Zealand) 150,000 2,306,250
- --------------------------------------------------------------
Metromedia Fiber Network, Inc.(a) 114,500 2,748,000
- --------------------------------------------------------------
NACT Telecommunications, Inc.(a) 50,000 681,250
- --------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(a) 60,000 1,357,500
- --------------------------------------------------------------
P-COM, Inc.(a) 70,000 1,408,750
- --------------------------------------------------------------
PairGain Technologies, Inc.(a) 80,000 2,260,000
- --------------------------------------------------------------
SBS Technologies, Inc.(a) 75,000 2,175,000
- --------------------------------------------------------------
Scientific-Atlanta, Inc. 160,000 2,970,000
- --------------------------------------------------------------
Stanford Telecommunications, Inc.(a) 40,000 970,000
- --------------------------------------------------------------
Tekelec(a) 25,000 1,046,875
- --------------------------------------------------------------
Tollgrade Communications, Inc.(a) 70,000 1,723,750
- --------------------------------------------------------------
Verilink Corp.(a) 125,000 953,125
- --------------------------------------------------------------
33,307,275
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-0.75%
Bell & Howell Co.(a) 90,000 2,480,625
- --------------------------------------------------------------
Concord EFS, Inc.(a) 5,000 148,438
- --------------------------------------------------------------
Gateway 2000, Inc.(a) 38,400 1,101,600
- --------------------------------------------------------------
IDX Systems Corp.(a) 14,600 492,750
- --------------------------------------------------------------
Micron Electronics, Inc.(a) 60,000 832,500
- --------------------------------------------------------------
National Instruments Corp.(a) 30,000 1,365,000
- --------------------------------------------------------------
Stratasys, Inc.(a) 15,000 230,625
- --------------------------------------------------------------
6,651,538
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.56%
Bay Networks, Inc.(a) 30,000 948,750
- --------------------------------------------------------------
Cabletron Systems, Inc.(a) 50,000 1,450,000
- --------------------------------------------------------------
FORE Systems, Inc.(a) 25,000 406,250
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-(CONTINUED)
MMC Networks, Inc.(a) 50,500 $ 1,104,688
- --------------------------------------------------------------
Premiere Technologies, Inc.(a) 30,000 1,020,000
- --------------------------------------------------------------
4,929,688
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.41%
DSP Communications, Inc.(a) 50,000 925,000
- --------------------------------------------------------------
NeoMagic Corp.(a) 10,000 146,250
- --------------------------------------------------------------
Printronix, Inc.(a) 140,000 2,555,000
- --------------------------------------------------------------
3,626,250
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-9.95%
Activision, Inc.(a) 100,000 1,462,500
- --------------------------------------------------------------
Adobe Systems, Inc. 25,000 1,193,750
- --------------------------------------------------------------
Advanced Fibre Communications, Inc.(a) 60,000 1,743,750
- --------------------------------------------------------------
American Software, Inc.-Class A(a) 60,000 705,000
- --------------------------------------------------------------
ANSYS, Inc.(a) 50,000 462,500
- --------------------------------------------------------------
Aris Corp.(a) 10,000 236,250
- --------------------------------------------------------------
Aspen Technologies, Inc.(a) 40,000 1,505,000
- --------------------------------------------------------------
Autodesk, Inc. 10,000 370,000
- --------------------------------------------------------------
Avant! Corp.(a) 25,000 656,250
- --------------------------------------------------------------
Best Software, Inc.(a) 225,000 2,334,375
- --------------------------------------------------------------
BMC Software, Inc.(a) 40,000 2,415,000
- --------------------------------------------------------------
Box Hill Systems Corp.(a) 60,600 939,300
- --------------------------------------------------------------
Broderbund Software, Inc.(a) 165,000 4,785,000
- --------------------------------------------------------------
C/NET, Inc.(a) 15,000 361,875
- --------------------------------------------------------------
Cadence Design Systems, Inc.(a) 21,220 1,129,965
- --------------------------------------------------------------
Check Point Software Technologies
Ltd. (a)(Israel) 25,000 1,065,625
- --------------------------------------------------------------
Claremont Technology Group,
Inc.(a) 25,000 553,125
- --------------------------------------------------------------
Compuware Corp.(a) 35,000 2,314,375
- --------------------------------------------------------------
Concord Communications, Inc.(a) 55,000 976,250
- --------------------------------------------------------------
CyberMedia, Inc.(a) 20,000 595,000
- --------------------------------------------------------------
DAOU Systems, Inc.(a) 45,000 1,186,875
- --------------------------------------------------------------
Dassault Systemes S.A.-ADR (France) 20,000 600,000
- --------------------------------------------------------------
Dendrite International, Inc.(a) 87,500 1,695,312
- --------------------------------------------------------------
Dr. Solomon's Group PLC-ADR(a)
(United Kingdom) 35,000 1,071,875
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 35,000 1,185,625
- --------------------------------------------------------------
FARO Technologies, Inc.(a) 90,000 1,226,250
- --------------------------------------------------------------
Geoworks(a) 35,000 446,250
- --------------------------------------------------------------
Great Plains Software, Inc.(a) 60,000 1,432,500
- --------------------------------------------------------------
HBO & Co. 80,000 3,480,000
- --------------------------------------------------------------
HPR, Inc.(a) 90,000 2,160,000
- --------------------------------------------------------------
Infinity Financial Technology, Inc.(a) 75,000 1,153,125
- --------------------------------------------------------------
Intuit, Inc.(a) 65,000 2,120,625
- --------------------------------------------------------------
J.D. Edwards & Co.(a) 45,400 1,543,600
- --------------------------------------------------------------
JDA Software Group, Inc.(a) 45,000 1,406,250
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Kofax Image Products, Inc.(a) 150,000 $ 1,509,375
- --------------------------------------------------------------
Mastech Corp.(a) 100,000 3,312,500
- --------------------------------------------------------------
McAfee Associates, Inc.(a) 15,000 746,250
- --------------------------------------------------------------
Mechanical Dynamics, Inc.(a) 15,000 127,500
- --------------------------------------------------------------
Medical Manager Corp.(a) 390,000 6,825,000
- --------------------------------------------------------------
Memco Software Ltd. (a)(Israel) 67,700 1,709,425
- --------------------------------------------------------------
Mercury Interactive Corp.(a) 85,000 1,912,500
- --------------------------------------------------------------
MicroProse, Inc.(a) 50,000 325,000
- --------------------------------------------------------------
Midway Games Inc.(a) 75,000 1,570,312
- --------------------------------------------------------------
Netscape Communications Corp.(a) 80,000 2,630,000
- --------------------------------------------------------------
Network General Corp.(a) 220,000 4,455,000
- --------------------------------------------------------------
Network Solutions, Inc.-Class A(a) 40,300 765,700
- --------------------------------------------------------------
Omtool, Ltd.(a) 125,300 1,581,913
- --------------------------------------------------------------
Parametric Technology Co.(a) 32,500 1,434,063
- --------------------------------------------------------------
Peerless Systems Corp.(a) 10,000 130,000
- --------------------------------------------------------------
Platinum Technology, Inc.(a) 180,000 4,365,000
- --------------------------------------------------------------
QAD Inc.(a) 50,000 706,250
- --------------------------------------------------------------
Radiant Systems, Inc.(a) 10,000 181,250
- --------------------------------------------------------------
Security Dynamics Technologies, Inc.(a) 10,000 338,750
- --------------------------------------------------------------
Siebel Systems, Inc.(a) 20,083 810,865
- --------------------------------------------------------------
Simulation Sciences, Inc.(a) 30,000 547,500
- --------------------------------------------------------------
Sterling Commerce, Inc.(a) 37,500 1,244,531
- --------------------------------------------------------------
Sybase, Inc.(a) 25,000 407,813
- --------------------------------------------------------------
Technology Modeling Associates, Inc.(a) 53,500 749,000
- --------------------------------------------------------------
Transaction Systems Architects,
Inc.-Class A(a) 5,000 195,625
- --------------------------------------------------------------
Trusted Information Systems, Inc.(a) 75,000 703,125
- --------------------------------------------------------------
Vantive Corp.(a) 65,000 1,641,250
- --------------------------------------------------------------
Viewlogic Systems, Inc.(a) 40,000 970,000
- --------------------------------------------------------------
88,408,674
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.48%
Blyth Industries, Inc.(a) 110,000 2,736,250
- --------------------------------------------------------------
Lancaster Colony Corp. 15,000 742,500
- --------------------------------------------------------------
Little Switzerland, Inc.(a) 100,000 650,000
- --------------------------------------------------------------
TAG Heuer International S.A.-ADR
(a)(Switzerland) 10,000 115,000
- --------------------------------------------------------------
4,243,750
- --------------------------------------------------------------
CONSUMER FINANCE-0.17%
Green Tree Financial Corp. 25,000 1,053,125
- --------------------------------------------------------------
Investors Financial Services Corp. 10,000 440,000
- --------------------------------------------------------------
1,493,125
- --------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.77%
Peak International Ltd.(a) 85,000 1,912,500
- --------------------------------------------------------------
Silgan Holdings, Inc.(a) 140,000 4,935,000
- --------------------------------------------------------------
6,847,500
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)-1.12%
AmeriSource Health Corp.-Class A(a) 25,000 $ 1,484,375
- --------------------------------------------------------------
McKesson Corp. 28,000 3,004,750
- --------------------------------------------------------------
Owens & Minor, Inc. Holding Co. 30,000 420,000
- --------------------------------------------------------------
ProSource, Inc.(a) 50,000 368,750
- --------------------------------------------------------------
Rykoff-Sexton, Inc. 130,000 2,795,000
- --------------------------------------------------------------
Suburban Ostomy Supply Co., Inc.(a) 175,000 1,903,125
- --------------------------------------------------------------
9,976,000
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.37%
Black Box Corp.(a) 20,000 820,000
- --------------------------------------------------------------
Checkpoint Systems, Inc.(a) 50,000 800,000
- --------------------------------------------------------------
Harman International Industries, Inc. 10,000 540,000
- --------------------------------------------------------------
Itron, Inc.(a) 45,000 922,500
- --------------------------------------------------------------
Sawtek Inc.(a) 5,000 170,000
- --------------------------------------------------------------
3,252,500
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.53%
Power-One, Inc.(a) 140,000 2,607,500
- --------------------------------------------------------------
Stoneridge, Inc.(a) 126,300 2,052,375
- --------------------------------------------------------------
4,659,875
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.01%
Tracor, Inc.(a) 3,900 104,325
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.89%
ASM Lithography Holding N.V.(a)
(Netherlands) 5,000 366,250
- --------------------------------------------------------------
Alliance Semiconductor Corp.(a) 25,000 187,500
- --------------------------------------------------------------
Altera Corp.(a) 35,000 1,553,125
- --------------------------------------------------------------
Apex PC Solutions, Inc.(a) 10,000 257,500
- --------------------------------------------------------------
Cypress Semiconductor Corp.(a) 55,000 618,750
- --------------------------------------------------------------
Galileo Technology Ltd.(a) (Israel) 35,000 1,203,125
- --------------------------------------------------------------
General Scanning, Inc.(a) 15,000 387,187
- --------------------------------------------------------------
General Semiconductor, Inc.(a) 10,000 113,750
- --------------------------------------------------------------
Integrated Device Technology, Inc.(a) 40,000 462,500
- --------------------------------------------------------------
Oak Technology, Inc.(a) 30,000 288,750
- --------------------------------------------------------------
SDL, Inc.(a) 20,000 360,000
- --------------------------------------------------------------
3Dlabs Inc., Ltd.(a) 25,000 531,250
- --------------------------------------------------------------
Xilinx, Inc.(a) 45,000 1,535,625
- --------------------------------------------------------------
7,865,312
- --------------------------------------------------------------
ENTERTAINMENT-0.19%
Alliance Communications
Corp.-Class B(a) (Canada) 60,000 738,750
- --------------------------------------------------------------
N2K Inc.(a) 37,500 986,718
- --------------------------------------------------------------
1,725,468
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.10%
Aehr Test Systems(a) 70,000 945,000
- --------------------------------------------------------------
Asyst Technologies, Inc.(a) 10,000 290,938
- --------------------------------------------------------------
Credence Systems Corp.(a) 30,000 885,000
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-(CONTINUED)
DuPont Photomasks, Inc.(a) 55,000 $ 2,365,000
- --------------------------------------------------------------
KLA-Tencor Corp.(a) 10,000 439,375
- --------------------------------------------------------------
PRI Automation, Inc.(a) 15,000 573,750
- --------------------------------------------------------------
Speedfam International, Inc.(a) 95,000 3,526,875
- --------------------------------------------------------------
Teradyne, Inc.(a) 20,000 748,750
- --------------------------------------------------------------
9,774,688
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.13%
American Capital Strategies, Ltd.(a) 35,100 631,800
- --------------------------------------------------------------
Hamilton Bancorp, Inc.(a) 75,000 2,287,500
- --------------------------------------------------------------
Insignia Financial Group, Inc.-
Class A(a) 45,000 973,125
- --------------------------------------------------------------
MGIC Investment Corp. 20,000 1,206,250
- --------------------------------------------------------------
Mutual Risk Management Ltd. (Bermuda) 30,000 778,125
- --------------------------------------------------------------
SEI Corp. 90,000 3,830,625
- --------------------------------------------------------------
SunAmerica, Inc. 8,400 301,875
- --------------------------------------------------------------
10,009,300
- --------------------------------------------------------------
FOODS-0.66%
American Italian Pasta Co.-Class
A(a) 170,000 3,570,000
- --------------------------------------------------------------
Weider Nutrition International,
Inc. 200,000 2,312,500
- --------------------------------------------------------------
5,882,500
- --------------------------------------------------------------
FOOTWEAR-0.29%
Samsonite Corp.(a) 55,000 2,550,625
- --------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES-0.91%
Circus Circus Enterprises(a) 100,000 2,225,000
- --------------------------------------------------------------
International Game Technology 135,000 3,450,937
- --------------------------------------------------------------
Sodak Gaming, Inc.(a) 225,000 2,418,750
- --------------------------------------------------------------
8,094,687
- --------------------------------------------------------------
HARDWARE & TOOLS-0.21%
Acorn Products, Inc.(a) 125,000 1,843,750
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.21%
Allergan, Inc. 10,000 329,375
- --------------------------------------------------------------
IVAX Corp. 200,000 1,512,500
- --------------------------------------------------------------
1,841,875
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.52%
Algos Pharmaceutical Corp.(a) 20,000 495,000
- --------------------------------------------------------------
BioChem Pharma, Inc.(a) (Canada) 30,000 751,875
- --------------------------------------------------------------
Collagenex Pharmaceuticals, Inc.(a) 20,000 240,000
- --------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 66,000 3,192,750
- --------------------------------------------------------------
Elan Corp. PLC-ADR(a) (Ireland) 15,000 748,125
- --------------------------------------------------------------
Forest Laboratories, Inc.(a) 155,000 7,168,750
- --------------------------------------------------------------
Gilead Sciences, Inc.(a) 8,000 273,000
- --------------------------------------------------------------
Guilford Pharmaceuticals, Inc.(a) 10,000 243,750
- --------------------------------------------------------------
Human Genome Sciences, Inc.(a) 15,000 615,000
- --------------------------------------------------------------
Jones Medical Industries, Inc. 35,000 1,054,375
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-GENERIC & OTHER)-(CONTINUED)
Martek Biosciences Corp.(a) 20,000 $ 222,500
- --------------------------------------------------------------
North American Vaccine, Inc.(a) 60,000 1,507,500
- --------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 50,000 475,000
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Israel) 33,000 1,542,750
- --------------------------------------------------------------
Warner Chilcott Laboratories-SP
ADR (a)(Ireland) 135,000 1,906,875
- --------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 60,000 1,905,000
- --------------------------------------------------------------
22,342,250
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-0.08%
Applied Analytical Industries, Inc.(a) 40,000 670,000
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.06%
Health Management Associates,
Inc.-Class A(a) 22,500 548,438
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.61%
Capital Senior Living Corp.(a) 100,500 1,683,375
- --------------------------------------------------------------
Horizon Health Corp.(a) 25,500 596,063
- --------------------------------------------------------------
Integrated Health Services, Inc. 40,000 1,270,000
- --------------------------------------------------------------
National Surgery Centers, Inc.(a) 12,500 312,500
- --------------------------------------------------------------
NovaCare, Inc.(a) 20,000 261,250
- --------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 35,000 1,299,375
- --------------------------------------------------------------
5,422,563
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-1.12%
Alternative Living Services, Inc.(a) 85,000 2,082,500
- --------------------------------------------------------------
American Oncology Resources, Inc.(a) 30,000 438,750
- --------------------------------------------------------------
Concentra Managed Care, Inc.(a) 40,000 1,305,000
- --------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 13,000 732,875
- --------------------------------------------------------------
HealthCare COMPARE Corp.(a) 20,000 1,075,000
- --------------------------------------------------------------
HealthPlan Services Corp. 55,000 1,158,437
- --------------------------------------------------------------
MedPartners, Inc.(a) 65,715 1,671,625
- --------------------------------------------------------------
Monarch Dental Corp.(a) 63,000 1,141,875
- --------------------------------------------------------------
PacifiCare Health Systems, Inc.-
Class B(a) 5,000 323,750
- --------------------------------------------------------------
9,929,812
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-2.82%
ADAC Laboratories 25,000 487,500
- --------------------------------------------------------------
Bard (C.R.), Inc. 55,000 1,526,250
- --------------------------------------------------------------
Biomet, Inc. 65,000 1,620,937
- --------------------------------------------------------------
Dentsply International, Inc. 70,000 1,986,250
- --------------------------------------------------------------
Endovascular Technologies, Inc.(a) 25,000 462,500
- --------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 11,000 363,000
- --------------------------------------------------------------
Marquette Medical Systems-Class A(a) 55,000 1,416,250
- --------------------------------------------------------------
Maxxim Medical, Inc.(a) 25,000 559,375
- --------------------------------------------------------------
MiniMed, Inc.(a) 70,000 2,730,000
- --------------------------------------------------------------
Nitinol Medical Technologies, Inc.(a) 80,000 1,120,000
- --------------------------------------------------------------
Protocol Systems Inc.(a) 25,000 265,625
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-(CONTINUED)
SangStat Medical Corp.(a) 25,000 $ 778,125
- --------------------------------------------------------------
Schick Technologies, Inc.(a) 25,000 537,500
- --------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 30,000 2,066,250
- --------------------------------------------------------------
Steris Corp.(a) 85,000 3,378,750
- --------------------------------------------------------------
Stryker Corp. 19,000 706,563
- --------------------------------------------------------------
Sullivan Dental Products, Inc. 25,000 584,375
- --------------------------------------------------------------
Sulzer Medica (a)(Switzerland) 26,900 719,575
- --------------------------------------------------------------
Sybron International Corp.(a) 85,000 3,410,625
- --------------------------------------------------------------
Trex Medical Corp.(a) 25,000 321,875
- --------------------------------------------------------------
25,041,325
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-2.59%
Advance ParadigM, Inc.(a) 140,000 3,570,000
- --------------------------------------------------------------
AmeriPath, Inc.(a) 110,000 1,815,000
- --------------------------------------------------------------
BioReliance Corp.(a) 42,500 945,625
- --------------------------------------------------------------
Boron, LePore & Associates, Inc.(a) 16,500 402,188
- --------------------------------------------------------------
Cohr, Inc.(a) 150,000 1,575,000
- --------------------------------------------------------------
Covance, Inc.(a) 40,000 707,500
- --------------------------------------------------------------
First Commonwealth, Inc.(a) 15,000 217,500
- --------------------------------------------------------------
FPA Medical Management, Inc.(a) 42,000 1,013,250
- --------------------------------------------------------------
Intensiva Healthcare Corp.(a) 70,000 533,750
- --------------------------------------------------------------
Medical Resources, Inc.(a) 75,000 1,359,375
- --------------------------------------------------------------
Ocular Sciences, Inc.(a) 131,100 2,884,200
- --------------------------------------------------------------
Prime Medical Services, Inc.(a) 60,000 795,000
- --------------------------------------------------------------
Summit Holding Southeast Inc.(a) 235,000 4,230,000
- --------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 25,000 775,000
- --------------------------------------------------------------
Ventana Medical Systems, Inc.(a) 140,000 2,170,000
- --------------------------------------------------------------
22,993,388
- --------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.22%
Kimball International, Inc.-Class B 30,000 1,230,000
- --------------------------------------------------------------
Service Experts, Inc.(a) 29,900 747,500
- --------------------------------------------------------------
1,977,500
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.20%
Dial Corp. 105,000 1,771,875
- --------------------------------------------------------------
HOUSEWARES-0.38%
Central Garden and Pet Co.(a) 80,000 2,100,000
- --------------------------------------------------------------
Helen of Troy Ltd.(a) 20,000 332,500
- --------------------------------------------------------------
Home Products International, Inc.(a) 80,000 955,000
- --------------------------------------------------------------
3,387,500
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.95%
AmerUs Life Holdings, Inc.-Class A 42,400 1,317,050
- --------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 4,261,250
- --------------------------------------------------------------
Penncorp Financial Group, Inc. 20,000 651,250
- --------------------------------------------------------------
UNUM Corp. 10,400 507,000
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE/HEALTH)-(CONTINUED)
Western National Corp. 60,000 $ 1,728,750
- --------------------------------------------------------------
8,465,300
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.18%
Ace, Ltd. 4,000 371,750
- --------------------------------------------------------------
Horace Mann Educators Corp. 8,000 450,000
- --------------------------------------------------------------
PAULA Financial(a) 29,900 754,975
- --------------------------------------------------------------
1,576,725
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.14%
Amerin Corp.(a) 200,000 4,575,000
- --------------------------------------------------------------
Capital Re Corp. 10,000 589,375
- --------------------------------------------------------------
CapMAC Holdings, Inc. 30,000 900,000
- --------------------------------------------------------------
CMAC Investment Corp. 13,000 710,937
- --------------------------------------------------------------
Everest Re Holdings, Inc. 56,000 2,107,000
- --------------------------------------------------------------
Executive Risk Inc. 5,000 329,375
- --------------------------------------------------------------
Exel Ltd. 11,200 676,900
- --------------------------------------------------------------
HCC Insurance Holdings, Inc. 50,000 1,168,750
- --------------------------------------------------------------
NAC Re Corp. 8,000 356,000
- --------------------------------------------------------------
Penn-America Group, Inc. 80,000 1,475,000
- --------------------------------------------------------------
Progressive Corp. 25,000 2,606,250
- --------------------------------------------------------------
TIG Holdings, Inc. 25,000 846,875
- --------------------------------------------------------------
Transatlantic Holdings, Inc. 10,000 691,875
- --------------------------------------------------------------
UnionAmerica Holdings PLC-ADR
(United Kingdom) 27,000 536,625
- --------------------------------------------------------------
Vesta Insurance Group, Inc. 10,000 581,250
- --------------------------------------------------------------
W. R. Berkley Corp. 20,000 822,500
- --------------------------------------------------------------
18,973,712
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.13%
ARM Financial Group, Inc.-Class A 51,400 1,111,525
- --------------------------------------------------------------
INVESTMENTS-0.13%
Security Capital Group Inc.-Class B(a) 36,700 1,174,400
- --------------------------------------------------------------
IRON & STEEL-0.09%
Ispat International N.V.-New York
Registered Shares(a) (Netherlands) 33,200 840,375
- --------------------------------------------------------------
LAND DEVELOPMENT-0.38%
LaSalle Partners, Inc.(a) 35,000 1,279,687
- --------------------------------------------------------------
Silverleaf Resorts, Inc.(a) 95,000 2,066,250
- --------------------------------------------------------------
3,345,937
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.37%
Coastcast Corp.(a) 20,000 292,500
- --------------------------------------------------------------
Coleman Co., Inc.(a) 50,000 746,875
- --------------------------------------------------------------
Florida Panthers Holdings, Inc.(a) 15,000 301,875
- --------------------------------------------------------------
Galoob Toys, Inc.(a) 210,000 2,769,375
- --------------------------------------------------------------
GTECH Holdings Corp.(a) 25,000 806,250
- --------------------------------------------------------------
Hasbro, Inc. 30,000 870,000
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-(CONTINUED)
K2, Inc. 18,000 $ 455,625
- --------------------------------------------------------------
Oakley, Inc.(a) 95,000 938,125
- --------------------------------------------------------------
The North Face, Inc.(a) 145,000 3,425,625
- --------------------------------------------------------------
Toy Biz, Inc.(a) 110,000 969,375
- --------------------------------------------------------------
Travis Boats & Motors, Inc.(a) 30,000 573,750
- --------------------------------------------------------------
12,149,375
- --------------------------------------------------------------
LODGING-HOTELS-0.58%
Four Seasons Hotels, Inc. (Canada) 38,000 1,256,375
- --------------------------------------------------------------
Vail Resorts Inc.(a) 125,000 3,476,562
- --------------------------------------------------------------
Wyndham Hotel Corp.(a) 10,000 449,375
- --------------------------------------------------------------
5,182,312
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.65%
CTB International Corp.(a) 200,000 3,425,000
- --------------------------------------------------------------
Greenfield Industries 15,000 568,125
- --------------------------------------------------------------
OmniQuip International, Inc. 40,000 670,000
- --------------------------------------------------------------
Pfeiffer Vacuum Technology
A.G.-ADR(a) (Germany) 15,000 487,500
- --------------------------------------------------------------
Thermo Fibergen Inc. 45,000 410,625
- --------------------------------------------------------------
Thermo Fibergen Inc.-Rights(a) 45,000 154,688
- --------------------------------------------------------------
5,715,938
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.21%
Daniel Industries 30,000 603,750
- --------------------------------------------------------------
Figgie International Inc.-Class A(a) 30,000 401,250
- --------------------------------------------------------------
Industrial Distribution Group, Inc.(a) 45,100 873,813
- --------------------------------------------------------------
1,878,813
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.43%
Amor Holdings, Inc.(a) 50,000 550,000
- --------------------------------------------------------------
Big Dog Holdings, Inc.(a) 125,000 1,765,625
- --------------------------------------------------------------
Cognex Corp.(a) 105,000 2,808,750
- --------------------------------------------------------------
DONCASTERS PLC-ADR(a) (United Kingdom) 25,000 673,438
- --------------------------------------------------------------
First Years, Inc. (The) 118,000 2,950,000
- --------------------------------------------------------------
Novel Denim Holdings Ltd.(a) (Hong
Kong) 27,500 556,875
- --------------------------------------------------------------
Regal-Beloit Corp. 20,000 537,500
- --------------------------------------------------------------
Rock of Ages Corp.(a) 30,000 570,000
- --------------------------------------------------------------
Tefron Ltd.(a) (Israel) 120,000 2,302,500
- --------------------------------------------------------------
12,714,688
- --------------------------------------------------------------
METAL FABRICATORS-0.71%
Metals USA(a) 400,000 5,900,000
- --------------------------------------------------------------
Shaw Group, Inc.(a) 20,000 417,500
- --------------------------------------------------------------
6,317,500
- --------------------------------------------------------------
NATURAL GAS-0.16%
NGC Corp. 75,000 1,425,000
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.84%
Boise Cascade Office Products Corp.(a) 9,700 184,300
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OFFICE EQUIPMENT & SUPPLIES-(CONTINUED)
Daisytek International Corp.(a) 95,000 $ 3,621,875
- --------------------------------------------------------------
Danka Business Systems PLC-ADR
(United Kingdom) 30,000 1,110,000
- --------------------------------------------------------------
U.S. Office Products Co.(a) 70,000 2,187,500
- --------------------------------------------------------------
Wallace Computer Services, Inc. 9,400 361,313
- --------------------------------------------------------------
7,464,988
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-9.53%
Atwood Oceanics, Inc.(a) 65,000 7,198,750
- --------------------------------------------------------------
Baker Hughes, Inc. 80,000 3,675,000
- --------------------------------------------------------------
BJ Services Co.(a) 20,000 1,695,000
- --------------------------------------------------------------
Cal Dive International, Inc.(a) 121,000 3,781,250
- --------------------------------------------------------------
Camco International, Inc. 8,000 578,000
- --------------------------------------------------------------
Computalog Ltd.(a) (Canada) 25,000 514,062
- --------------------------------------------------------------
Cooper Cameron Corp.(a) 21,000 1,517,250
- --------------------------------------------------------------
Diamond Offshore Drilling, Inc. 40,000 2,490,000
- --------------------------------------------------------------
Dril-Quip, Inc.(a) 8,900 319,288
- --------------------------------------------------------------
ENSCO International, Inc. 105,000 4,416,562
- --------------------------------------------------------------
EVI, Inc.(a) 89,802 5,764,165
- --------------------------------------------------------------
Falcon Drilling Company, Inc.(a) 56,000 2,037,000
- --------------------------------------------------------------
Fred. Olsen Energy A.S.A.(a)
(Norway) 47,100 1,188,064
- --------------------------------------------------------------
Grey Wolf, Inc.(a) 110,000 907,500
- --------------------------------------------------------------
Gulfmark Offshore Inc.(a) 67,000 2,437,125
- --------------------------------------------------------------
Hanover Compressor Co.(a) 70,000 1,513,750
- --------------------------------------------------------------
Hvide Marine, Inc.-Class A(a) 205,000 6,765,000
- --------------------------------------------------------------
Input/Output, Inc.(a) 30,000 804,375
- --------------------------------------------------------------
National-Oilwell, Inc.(a) 43,000 3,292,188
- --------------------------------------------------------------
Noble Drilling Corp.(a) 105,000 3,734,063
- --------------------------------------------------------------
Oceaneering International, Inc.(a) 30,000 744,375
- --------------------------------------------------------------
Offshore Logistics, Inc.(a) 25,000 525,000
- --------------------------------------------------------------
Parker Drilling Co.(a) 80,000 1,185,000
- --------------------------------------------------------------
Petroleum Geo-Services ASA-ADR(a)
(Netherlands) 18,300 1,267,275
- --------------------------------------------------------------
Precision Drilling Corp.(a) (Canada) 20,000 615,000
- --------------------------------------------------------------
Pride International, Inc.(a) 90,000 2,970,000
- --------------------------------------------------------------
Reading & Bates Corp.(a) 50,000 2,118,750
- --------------------------------------------------------------
Rowan Companies, Inc.(a) 15,000 583,125
- --------------------------------------------------------------
Santa Fe International Corp. 15,200 747,650
- --------------------------------------------------------------
SEACOR Holdings Inc.(a) 12,000 781,500
- --------------------------------------------------------------
Smith International, Inc.(a) 20,000 1,525,000
- --------------------------------------------------------------
Tidewater, Inc. 6,000 394,125
- --------------------------------------------------------------
Transocean Offshore Inc. 30,000 1,620,000
- --------------------------------------------------------------
Trico Marine Services, Inc.(a) 130,000 4,777,500
- --------------------------------------------------------------
Tuboscope Vetco International
Corp.(a) 130,000 4,127,500
- --------------------------------------------------------------
UNIFAB International, Inc.(a) 67,200 2,150,400
- --------------------------------------------------------------
Veritas DGC, Inc.(a) 19,000 777,813
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Weatherford Enterra, Inc.(a) 60,000 $ 3,063,750
- --------------------------------------------------------------
84,602,155
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.71%
Anadarko Petroleum Corp. 4,000 293,000
- --------------------------------------------------------------
Apache Corp. 5,000 210,000
- --------------------------------------------------------------
Benton Oil & Gas Co.(a) 185,000 3,723,125
- --------------------------------------------------------------
Cabot Oil & Gas Corp.-Class A 70,000 1,680,000
- --------------------------------------------------------------
Cross Timbers Oil Co. 35,000 934,062
- --------------------------------------------------------------
Devon Energy Corp. 5,000 223,750
- --------------------------------------------------------------
Eagle Geophysical, Inc.(a) 100,000 1,750,000
- --------------------------------------------------------------
Houston Exploration Co. (The)(a) 80,000 1,940,000
- --------------------------------------------------------------
Louis Dreyfus Natural Gas Corp.(a) 15,000 331,875
- --------------------------------------------------------------
Newfield Exploration Co.(a) 5,000 135,625
- --------------------------------------------------------------
Noble Affiliates, Inc. 20,000 821,250
- --------------------------------------------------------------
Nuevo Energy Co.(a) 40,000 1,657,500
- --------------------------------------------------------------
Ocean Energy, Inc.(a) 25,000 1,543,750
- --------------------------------------------------------------
Petsec Energy Ltd.-ADR(a)
(Australia) 15,000 337,500
- --------------------------------------------------------------
Pogo Producing Co. 25,000 904,687
- --------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 40,400 527,725
- --------------------------------------------------------------
Stolt Comex Seaway, S.A.(a)
(United Kingdom) 95,000 5,700,000
- --------------------------------------------------------------
Titan Exploration, Inc.(a) 80,000 1,010,000
- --------------------------------------------------------------
United Meridian Corp.(a) 10,000 339,375
- --------------------------------------------------------------
24,063,224
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.28%
Gulf Indonesia Resources Ltd.(a)
(Indonesia) 60,000 1,260,000
- --------------------------------------------------------------
Rutherford-Moran Oil Corp.(a) 50,000 1,225,000
- --------------------------------------------------------------
2,485,000
- --------------------------------------------------------------
PERSONAL CARE-0.78%
Estee Lauder Companies-Class A 14,500 644,344
- --------------------------------------------------------------
French Fragrances, Inc.(a) 27,900 298,181
- --------------------------------------------------------------
Perrigo Co.(a) 72,600 1,116,225
- --------------------------------------------------------------
Rexall Sundown, Inc.(a) 70,000 1,531,250
- --------------------------------------------------------------
Twinlab Corp.(a) 175,000 3,325,000
- --------------------------------------------------------------
6,915,000
- --------------------------------------------------------------
PUBLISHING-0.30%
CMP Media Inc.-Class A(a) 75,000 1,387,500
- --------------------------------------------------------------
Petersen Companies, Inc.
(The)-Class A(a) 65,000 1,283,750
- --------------------------------------------------------------
2,671,250
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.54%
CCA Prison Realty Trust 50,000 1,725,000
- --------------------------------------------------------------
Equity Office Properties Trust 23,000 702,937
- --------------------------------------------------------------
Great Lakes REIT, Inc. 50,000 937,500
- --------------------------------------------------------------
Kilroy Realty Corp. 40,000 1,060,000
- --------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST-(CONTINUED)
SL Green Realty Corp.(a) 15,200 $ 380,950
- --------------------------------------------------------------
4,806,387
- --------------------------------------------------------------
RESTAURANTS-0.97%
Apple South, Inc. 30,000 558,750
- --------------------------------------------------------------
Brinker International, Inc.(a) 50,000 700,000
- --------------------------------------------------------------
Cracker Barrel Old Country Store,
Inc. 8,000 236,000
- --------------------------------------------------------------
Landry's Seafood Restaurants, Inc.(a) 20,000 560,000
- --------------------------------------------------------------
Logan's Roadhouse, Inc.(a) 40,000 715,000
- --------------------------------------------------------------
NPC International Inc.(a) 25,000 353,125
- --------------------------------------------------------------
Outback Steakhouse, Inc.(a) 10,000 270,625
- --------------------------------------------------------------
Ryan's Family Steak Houses, Inc.(a) 40,000 345,000
- --------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 85,000 1,806,250
- --------------------------------------------------------------
Starbucks Corp.(a) 45,000 1,485,000
- --------------------------------------------------------------
Wendy's International, Inc. 75,000 1,575,000
- --------------------------------------------------------------
8,604,750
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.11%
Eagle Hardware & Garden, Inc.(a) 60,000 1,020,000
- --------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.37%
CompUSA, Inc.(a) 33,000 1,080,750
- --------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 30,300 903,317
- --------------------------------------------------------------
Tech Data Corp.(a) 30,000 1,335,000
- --------------------------------------------------------------
3,319,067
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.28%
Neiman Marcus Group, Inc. (The)(a) 40,000 1,327,500
- --------------------------------------------------------------
Nordstrom, Inc. 15,000 918,750
- --------------------------------------------------------------
Proffitt's, Inc.(a) 8,400 240,975
- --------------------------------------------------------------
2,487,225
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.16%
Dollar Tree Stores, Inc.(a) 19,500 789,750
- --------------------------------------------------------------
Family Dollar Stores, Inc. 172,500 4,053,750
- --------------------------------------------------------------
Fred's, Inc. 50,000 1,112,500
- --------------------------------------------------------------
Mac Frugals Bargains Close-Outs,
Inc.(a) 60,000 2,040,000
- --------------------------------------------------------------
Men's Wearhouse, Inc.(a) 60,000 2,325,000
- --------------------------------------------------------------
10,321,000
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.15%
Rite Aid Corp. 22,000 1,306,250
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.31%
Dominick's Supermarkets, Inc.(a) 50,000 1,825,000
- --------------------------------------------------------------
Whole Foods Market, Inc.(a) 80,000 3,140,000
- --------------------------------------------------------------
Wild Oats Markets Inc.(a) 190,000 6,697,500
- --------------------------------------------------------------
11,662,500
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.04%
Costco Companies, Inc.(a) 10,000 385,000
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.07%
Damark International, Inc.-Class A(a) 50,000 $ 581,250
- --------------------------------------------------------------
RETAIL (SPECIALTY)-6.44%
Bed, Bath & Beyond Inc.(a) 35,000 1,111,250
- --------------------------------------------------------------
Borders Group, Inc.(a) 2,400 62,250
- --------------------------------------------------------------
Brookstone, Inc.(a) 35,000 423,281
- --------------------------------------------------------------
Casey's General Stores, Inc. 50,000 1,206,250
- --------------------------------------------------------------
Coldwater Creek Inc.(a) 75,000 2,175,000
- --------------------------------------------------------------
Cole National Corp.-Class A(a) 50,000 2,118,750
- --------------------------------------------------------------
Corporate Express, Inc.(a) 105,000 1,542,188
- --------------------------------------------------------------
Cross-Continent Auto Retailers,
Inc.(a) 50,000 493,750
- --------------------------------------------------------------
Diedrich Coffee, Inc.(a) 75,000 215,625
- --------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 100,000 1,687,500
- --------------------------------------------------------------
Friedman's, Inc.-Class A(a) 35,000 623,438
- --------------------------------------------------------------
Garden Ridge Corp.(a) 50,000 668,750
- --------------------------------------------------------------
General Nutrition Companies,
Inc.(a) 155,000 4,882,500
- --------------------------------------------------------------
Genesco Inc.(a) 50,000 634,375
- --------------------------------------------------------------
Gymboree Corp.(a) 20,000 485,000
- --------------------------------------------------------------
Hibbett Sporting Goods, Inc.(a) 40,000 1,110,000
- --------------------------------------------------------------
Hot Topic, Inc.(a) 90,000 1,518,750
- --------------------------------------------------------------
Just for Feet, Inc.(a) 235,000 3,480,938
- --------------------------------------------------------------
Linens 'N Things, Inc.(a) 145,000 5,210,938
- --------------------------------------------------------------
Lithia Motors, Inc.-Class A(a) 100,000 1,737,500
- --------------------------------------------------------------
OfficeMax, Inc.(a) 40,000 535,000
- --------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 80,000 2,015,000
- --------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 22,000 676,500
- --------------------------------------------------------------
PETsMART, Inc.(a) 425,000 3,240,625
- --------------------------------------------------------------
Pier 1 Imports, Inc. 105,000 1,916,250
- --------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 140,000 3,640,000
- --------------------------------------------------------------
RDO Equipment Co.-Class A(a) 50,000 1,084,375
- --------------------------------------------------------------
Sports Authority, Inc. (The)(a) 150,000 2,840,625
- --------------------------------------------------------------
Staples, Inc.(a) 10,000 262,500
- --------------------------------------------------------------
Sunglass Hut International,
Inc.(a) 150,000 1,200,000
- --------------------------------------------------------------
Tiffany & Co. 30,000 1,185,000
- --------------------------------------------------------------
U.S.A. Floral Products, Inc.(a) 80,000 1,400,000
- --------------------------------------------------------------
United Auto Group, Inc.(a) 50,000 1,018,750
- --------------------------------------------------------------
Viking Office Products, Inc.(a) 80,000 1,915,000
- --------------------------------------------------------------
West Marine, Inc.(a) 35,000 735,000
- --------------------------------------------------------------
Williams-Sonoma, Inc.(a) 25,000 1,003,125
- --------------------------------------------------------------
Zale Corp.(a) 45,000 1,136,250
- --------------------------------------------------------------
57,192,033
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.51%
Abercrombie & Fitch Co.-Class A(a) 115,000 2,990,000
- --------------------------------------------------------------
American Eagle Outfitters, Inc.(a) 10,000 290,000
- --------------------------------------------------------------
dELiA*s Inc.(a) 60,000 1,245,000
- --------------------------------------------------------------
Gadzooks, Inc.(a) 60,000 1,492,500
- --------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
Stage Stores, Inc.(a) 185,000 $ 6,752,500
- --------------------------------------------------------------
Talbots, Inc. 25,000 600,000
- --------------------------------------------------------------
13,370,000
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-2.01%
Abacus Direct Corp.(a) 70,000 2,572,500
- --------------------------------------------------------------
Castle Dental Centers, Inc.(a) 50,000 543,750
- --------------------------------------------------------------
Cognizant Corp. 13,000 509,437
- --------------------------------------------------------------
Eagle River Interactive, Inc.(a) 50,000 459,375
- --------------------------------------------------------------
Forrester Research, Inc.(a) 11,800 304,588
- --------------------------------------------------------------
Getty Communications PLC-ADR(a)
(United Kingdom) 30,000 442,500
- --------------------------------------------------------------
Hagler Bailly, Inc.(a) 35,000 708,750
- --------------------------------------------------------------
Information Resources, Inc.(a) 10,400 171,600
- --------------------------------------------------------------
JLK Direct Distribution Inc.-Class
A(a) 15,700 469,038
- --------------------------------------------------------------
Lamar Advertising Co.(a) 160,000 5,420,000
- --------------------------------------------------------------
Metromail Corp.(a) 70,000 1,386,875
- --------------------------------------------------------------
Snyder Communications, Inc.(a) 65,000 1,917,500
- --------------------------------------------------------------
Universal Outdoor Holdings,
Inc.(a) 70,000 2,957,500
- --------------------------------------------------------------
17,863,413
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-4.60%
Advantage Learning Systems,
Inc.(a) 32,500 820,625
- --------------------------------------------------------------
American Residential Services,
Inc.(a) 80,800 1,181,700
- --------------------------------------------------------------
Avis Rent A Car, Inc.(a) 90,400 2,480,350
- --------------------------------------------------------------
BA Merchant Services, Inc.-Class
A(a) 205,000 3,062,188
- --------------------------------------------------------------
C.H. Robinson Worldwide, Inc.(a) 100,000 2,200,000
- --------------------------------------------------------------
Cerner Corp.(a) 150,000 3,637,500
- --------------------------------------------------------------
Children's Comprehensive Services,
Inc.(a) 22,500 406,055
- --------------------------------------------------------------
CorporateFamily Solutions, Inc.(a) 50,000 743,750
- --------------------------------------------------------------
Equity Corp. International(a) 85,000 1,731,875
- --------------------------------------------------------------
First Aviation Services, Inc.(a) 60,000 465,000
- --------------------------------------------------------------
G & K Services, Inc.-Class A 28,500 1,026,000
- --------------------------------------------------------------
Galileo International, Inc. 51,200 1,286,400
- --------------------------------------------------------------
Hertz Corp.-Class A 41,100 1,420,519
- --------------------------------------------------------------
INSpire Insurance Solutions,
Inc.(a) 75,000 1,387,500
- --------------------------------------------------------------
MemberWorks, Inc.(a) 40,000 700,000
- --------------------------------------------------------------
Metzler Group, Inc.(a) 80,000 3,090,000
- --------------------------------------------------------------
National Research Corp.(a) 18,200 368,550
- --------------------------------------------------------------
PalEx, Inc.(a) 25,000 331,250
- --------------------------------------------------------------
Pegasus Systems, Inc.(a) 50,000 775,000
- --------------------------------------------------------------
Pierce Leahy Corp.(a) 40,000 1,120,000
- --------------------------------------------------------------
Pittston Brink's Group 35,000 1,264,375
- --------------------------------------------------------------
Protection One, Inc.(a) 225,000 4,050,000
- --------------------------------------------------------------
Rental Service Corp.(a) 49,000 1,310,750
- --------------------------------------------------------------
Sotheby's Holdings, Inc.-Class A 55,000 1,031,250
- --------------------------------------------------------------
Sylvan Learning Systems, Inc.(a) 5,000 210,625
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-(CONTINUED)
Travel Services International, Inc.(a) 51,000 $ 1,141,125
- --------------------------------------------------------------
U.S. Rentals, Inc.(a) 110,000 2,681,250
- --------------------------------------------------------------
Vivid Technologies, Inc.(a) 60,000 817,500
- --------------------------------------------------------------
Warrantech Corp.(a) 10,000 120,000
- --------------------------------------------------------------
40,861,137
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.86%
Shared Medical Systems Corp. 8,000 438,000
- --------------------------------------------------------------
SunGard Data Systems Inc.(a) 305,000 7,205,625
- --------------------------------------------------------------
7,643,625
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.36%
BDM International Inc.(a) 45,000 995,625
- --------------------------------------------------------------
BISYS Group, Inc.(a) 90,000 2,801,250
- --------------------------------------------------------------
CCC Information Services Group(a) 215,000 4,004,375
- --------------------------------------------------------------
DST Systems, Inc.(a) 34,000 1,200,625
- --------------------------------------------------------------
Hyperion Software Corp.(a) 96,500 3,679,062
- --------------------------------------------------------------
Lason Holdings, Inc.(a) 66,400 1,713,950
- --------------------------------------------------------------
Learning Tree International, Inc.(a) 100,000 3,475,000
- --------------------------------------------------------------
May & Speh, Inc.(a) 25,000 315,625
- --------------------------------------------------------------
Medaphis Corp.(a) 50,000 303,125
- --------------------------------------------------------------
MedQuist, Inc.(a) 30,000 731,250
- --------------------------------------------------------------
Saville Systems Ireland PLC-ADR(a)
(Ireland) 20,000 1,195,000
- --------------------------------------------------------------
Transaction Network Services,
Inc.(a) 30,000 498,750
- --------------------------------------------------------------
20,913,637
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.56%
Administaff, Inc.(a) 40,000 865,000
- --------------------------------------------------------------
COREStaff, Inc.(a) 35,000 866,250
- --------------------------------------------------------------
Hall, Kinion & Associates, Inc.(a) 19,800 309,375
- --------------------------------------------------------------
Norrell Corp. 53,900 1,569,836
- --------------------------------------------------------------
Syntel, Inc.(a) 95,000 1,330,000
- --------------------------------------------------------------
4,940,461
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.23%
Corrections Corp. of America(a) 30,000 915,000
- --------------------------------------------------------------
MAXIMUS, Inc.(a) 39,000 1,092,000
- --------------------------------------------------------------
2,007,000
- --------------------------------------------------------------
SPECIALTY PRINTING-0.21%
Deluxe Corp. 40,000 1,310,000
- --------------------------------------------------------------
Gartner Group, Inc.(a) 20,000 565,000
- --------------------------------------------------------------
1,875,000
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.59%
Aerial Communications Inc.(a) 125,000 1,062,500
- --------------------------------------------------------------
International Telecommunication
Data Systems, Inc.(a) 30,000 795,000
- --------------------------------------------------------------
LCC International, Inc.-Class A(a) 170,000 3,187,500
- --------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-(CONTINUED)
Powerwave Technologies, Inc.(a) 5,000 $ 154,375
- --------------------------------------------------------------
5,199,375
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.40%
ACC Corp.(a) 40,000 1,585,000
- --------------------------------------------------------------
Billing Information Concepts(a) 15,000 588,750
- --------------------------------------------------------------
CIENA Corp.(a) 10,000 550,000
- --------------------------------------------------------------
TresCom International, Inc.(a) 50,000 500,000
- --------------------------------------------------------------
USLD Communications Corp.(a) 15,000 297,188
- --------------------------------------------------------------
3,520,938
- --------------------------------------------------------------
TELEPHONE-0.21%
GeoTel Communications Corp.(a) 14,700 251,738
- --------------------------------------------------------------
McLeod, Inc.-Class A(a) 6,500 241,313
- --------------------------------------------------------------
SmarTalk Teleservices Inc.(a) 65,000 1,401,562
- --------------------------------------------------------------
1,894,613
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.35%
Ashworth, Inc.(a) 45,000 447,187
- --------------------------------------------------------------
Nautica Enterprises, Inc.(a) 50,000 1,331,250
- --------------------------------------------------------------
Tommy Hilfiger Corp.(a) 32,500 1,285,781
- --------------------------------------------------------------
3,064,218
- --------------------------------------------------------------
TOBACCO-0.41%
800-JR CIGAR, Inc.(a) 45,000 1,406,250
- --------------------------------------------------------------
Consolidated Cigar Holdings, Inc.(a) 20,000 785,000
- --------------------------------------------------------------
General Cigar Holdings, Inc.(a) 50,000 1,446,875
- --------------------------------------------------------------
3,638,125
- --------------------------------------------------------------
TRUCKING-0.09%
Jevic Transportation, Inc.(a) 45,000 $ 798,750
- --------------------------------------------------------------
WASTE MANAGEMENT-1.05%
Casella Waste Systems, Inc.(a) 136,000 3,009,000
- --------------------------------------------------------------
ITEQ, Inc.(a) 93,000 1,162,500
- --------------------------------------------------------------
Philip Services Corp.(a) (Canada) 45,000 787,500
- --------------------------------------------------------------
Tetra Technologies, Inc.(a) 30,000 691,875
- --------------------------------------------------------------
USA Waste Services, Inc.(a) 40,000 1,480,000
- --------------------------------------------------------------
Waste Industries, Inc.(a) 42,500 897,812
- --------------------------------------------------------------
Waterlink, Inc.(a) 76,000 1,296,750
- --------------------------------------------------------------
9,325,437
- --------------------------------------------------------------
Total Common Stocks 799,208,016
- --------------------------------------------------------------
U.S. TREASURY BILLS-3.89%
U.S. Treasury Bills, 5.093%,
01/02/1998(b)(c) $34,805,000 $ 34,527,256
- --------------------------------------------------------------
REPURCHASE AGREEMENT-5.72%(d)
SBC Warburg Inc., 5.65%,
11/03/1997(e) 50,776,404 50,776,404
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.66% 884,511,676
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.34% 2,992,143
- --------------------------------------------------------------
NET ASSETS-100.00% $887,503,819
==============================================================
</TABLE>
Abbreviations:
ADR-American Depository Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/97 with a maturing value of
$350,164,792. Collateralized by $355,329,000 U.S. Government obligations,
7.00% to 9.8755% due 11/15/15 to 10/01/27 with an aggregate market value at
10/31/97 of $359,463,470.
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
$692,268,731) $884,511,676
- -----------------------------------------------------------
Receivables for:
Capital stock sold 22,983,394
- -----------------------------------------------------------
Dividends and interest 36,451
- -----------------------------------------------------------
Variation margin 744,625
- -----------------------------------------------------------
Investment for deferred compensation plan 6,353
- -----------------------------------------------------------
Other assets 46,684
- -----------------------------------------------------------
Total assets 908,329,183
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 18,162,308
- -----------------------------------------------------------
Capital stock reacquired 1,449,994
- -----------------------------------------------------------
Deferred compensation 6,353
- -----------------------------------------------------------
Accrued advisory fees 498,908
- -----------------------------------------------------------
Accrued administrative service fees 5,565
- -----------------------------------------------------------
Accrued directors' fees 4,066
- -----------------------------------------------------------
Accrued distribution fees 422,317
- -----------------------------------------------------------
Accrued transfer agent fees 174,020
- -----------------------------------------------------------
Accrued operating expenses 101,833
- -----------------------------------------------------------
Total liabilities 20,825,364
- -----------------------------------------------------------
Net assets applicable to shares outstanding $887,503,819
===========================================================
NET ASSETS:
Class A $577,685,308
===========================================================
Class B $297,623,358
===========================================================
Class C $ 12,195,153
===========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- -----------------------------------------------------------
Outstanding 39,659,317
===========================================================
Class B:
Authorized 750,000,000
- -----------------------------------------------------------
Outstanding 20,589,603
===========================================================
Class C:
Authorized 750,000,000
- -----------------------------------------------------------
Outstanding 843,780
===========================================================
CLASS A:
Net asset value and redemption price per
share $ 14.57
===========================================================
Offering price per share:
(Net assets value of $14.57
divided by 94.50%) $ 15.42
===========================================================
CLASS B:
Net asset value and offering price per
share $ 14.46
===========================================================
CLASS C:
Net asset value and offering price per
share $ 14.45
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $6,162 foreign withholding
tax) $ 980,386
- -----------------------------------------------------------
Interest 1,528,919
- -----------------------------------------------------------
Total investment income 2,509,305
- -----------------------------------------------------------
EXPENSES:
Advisory fees 3,633,989
- -----------------------------------------------------------
Administrative service fees 74,810
- -----------------------------------------------------------
Custodian fees 88,465
- -----------------------------------------------------------
Directors' fees 10,902
- -----------------------------------------------------------
Distribution fees-Class A 1,321,521
- -----------------------------------------------------------
Distribution fees-Class B 1,325,888
- -----------------------------------------------------------
Distribution fees-Class C 12,721
- -----------------------------------------------------------
Transfer agent fees-Class A 820,991
- -----------------------------------------------------------
Transfer agent fees-Class B 403,404
- -----------------------------------------------------------
Transfer agent fees-Class C 2,741
- -----------------------------------------------------------
Other 378,182
- -----------------------------------------------------------
Total expenses 8,073,614
- -----------------------------------------------------------
Less: Fees waived by advisor (262,189)
- -----------------------------------------------------------
Expenses paid indirectly (45,969)
- -----------------------------------------------------------
Net expenses 7,765,456
- -----------------------------------------------------------
Net investment income (loss) (5,256,151)
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES CONTRACTS, AND SECURITIES SOLD
SHORT:
Net realized gain (loss) on sales of:
Investment securities (6,200,075)
- -----------------------------------------------------------
Foreign currencies (2,308)
- -----------------------------------------------------------
Securities sold short (3,470)
- -----------------------------------------------------------
(6,205,853)
- -----------------------------------------------------------
Net unrealized appreciation of:
Investment securities 158,822,640
- -----------------------------------------------------------
Futures contracts 315,275
- -----------------------------------------------------------
159,137,915
- -----------------------------------------------------------
Net gain on investment securities,
foreign currencies, futures contracts
and securities sold short 152,932,062
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $147,675,911
===========================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 1997 AND THE PERIOD JUNE 17, 1996 (DATE
OPERATIONS COMMENCED) THROUGH OCTOBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (5,256,151) $ (167,630)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities, foreign currencies, futures contracts and
securities sold short (6,205,853) (5,381,138)
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
futures contracts 159,137,915 33,420,305
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 147,675,911 27,871,537
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 218,214,845 222,946,738
- ------------------------------------------------------------------------------------------
Class B 235,598,112 22,869,334
- ------------------------------------------------------------------------------------------
Class C 12,327,342 --
- ------------------------------------------------------------------------------------------
Net increase in net assets 613,816,210 273,687,609
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 273,687,609 --
- ------------------------------------------------------------------------------------------
End of period $887,503,819 $273,687,609
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $706,543,586 $245,649,966
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (10,996) (1,524)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities, foreign currencies, futures
contracts and securities sold short (11,586,991) (5,381,138)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 192,558,220 33,420,305
- ------------------------------------------------------------------------------------------
$887,503,819 $273,687,609
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Capital Development Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six diversified
portfolios: AIM Capital Development Fund, AIM Aggressive Growth Fund, AIM Blue
Chip Fund, AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund. The
Fund currently offers three different classes of shares: the Class A shares, the
Class B shares, and the Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a contingent
deferred sales charge. Class C shares commenced sales August 4, 1997. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is long-term capital appreciation.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a
15
<PAGE> 18
trade date basis. Realized gains or losses on sales are computed on the basis
specific identification of the securities sold. Interest income is recorded as
earned from settlement date and is recorded on the accrual basis. Dividend
income, dividend expense on short sales and distributions to shareholders are
recorded on the ex-dividend date. On October 31, 1997, 5,246,679 was
reclassified from undistributed net investment income (loss) to paid in
capital as a result of net operation tax loss. Net assets were unaffected by
the reclassification discussed above.
C. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in value of the contracts may not correlate with changes in
the value of the securities being hedged.
D. Accounting for Securities Sold Short--When the Fund sells common stock short,
an amount equal to the proceeds of the sales is recorded as an asset. This
asset is offset by a liability (representing the borrowed security) recorded
on the books of the Fund at the market value of the common stock determined
each day in accordance with the procedures for security valuations discussed
in "A" above. The Fund's risk is that the value of the security will increase
rather than decline and thus an unrealized loss will be recorded. When the
Fund closes out a short position by delivering the stock sold short, the Fund
will realize a gain or loss and the liability related to such short position
will be eliminated. The Fund will attempt to hedge against market risk by
entering into short sales of securities that it currently owns or has the
right to acquire through the conversion or exchange of other securities that
it owns. Such short sales may protect the Fund against the risk of losses in
the value of its portfolio securities because any unrealized losses with
respect to such securities may be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in
such portfolio may be wholly or partially offset by a corresponding loss in
the short position.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward of
$9,504,404 (which may be carried forward to offset future taxable gains, if
any) which expires, if not previously utilized, in the year 2005.
F. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. AIM has agreed to
waive advisory fees paid by the Fund to AIM to the extent necessary to keep the
annual expense ratio for Class A shares at 1.34% for two years commencing August
12, 1996. During the year ended October 31, 1997, AIM waived fees of $262,189.
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 $74,810 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1997, AFS was paid
$676,298 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the Class
A, Class B and Class C shares of the Fund. The Company has adopted distribution
plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class
A shares (the "Class A Plan"), 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 Class A and Class C Plans, pays AIM Distributors
compensation at the annual rate of 0.35% of the average daily net assets of
Class A shares and 1.00% of the average daily net assets of Class C shares. The
Class A and C Plans are 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 of the Class B shares. Of this amount, the Fund pays a service
fee of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer or pledge to
one or more assignees, its rights to all or a portion of (a) compensation
received by AIM Distributors from the Fund
16
<PAGE> 19
pursuant to the Class B Plan (but not AIM Distributors' duties and obligations
pursuant to the Class B Plan) and (b) any contingent deferred sales charges
payable to AIM Distributors related to the Class B shares. During the year ended
October 31, 1997, the Class A shares and Class B shares, and the period August
4, 1997 through October 31, 1997 the Class C shares paid AIM Distributors
$1,321,521, $1,325,888 and $12,721, respectively, as compensation pursuant to
the Plans.
AIM Distributors received commissions of $1,212,125 from Class A capital stock
transactions 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 capital stock. During the year ended October 31,
1997, AIM Distributors received $14,049 in contingent deferred sales charges
imposed on redemptions of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Distributors and AFS.
During the year ended October 31, 1997 the Fund paid legal fees of $4,956 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. For the year ended
October 31, 1997, the Fund's expenses were reduced by $3,096. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $6,455 and $36,418, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in reductions
of the Fund's total expenses of $45,969 during the year ended October 31, 1997.
NOTE 4-DIRECTOR'S FEES
Director's fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lesser of i) $325,000,000 or ii) the limit set by
its prospectus for borrowings. During the year ended October 31, 1997, the Fund
did not borrow under the line of credit agreement. The funds which are party to
the line of credit are charged a commitment fee of 0.05% on the unused balance
of the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1997 was
$606,671,871 and $199,600,375, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1997, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $210,972,026
- ------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (20,432,991)
- ------------------------------------------------------
Net unrealized appreciation of
investment securities $190,539,035
======================================================
</TABLE>
Cost of investments for tax purposes is $693,972,641.
NOTE 7-FUTURES CONTRACTS
On October 31, 1997, $356,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for futures contracts. Open
contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
-------- --------- ---------- ------------
<S> <C> <C> <C>
Russell 2000 Index 161 Dec. 97 $315,275
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in the capital stock outstanding during the year ended October 31, 1997
and the period June 17, 1996 (date operations commenced) through October 31,
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 33,846,855 $430,979,375 24,923,432 $246,810,746
- -----------------------------------------------------------------------------
Class B* 20,627,807 261,084,351 2,026,599 22,898,153
- -----------------------------------------------------------------------------
Class C** 850,531 12,426,338 -- --
- -----------------------------------------------------------------------------
Reacquired:
Class A (16,847,317) (212,764,530) (2,263,653) (23,864,008)
- -----------------------------------------------------------------------------
Class B* (2,062,227) (25,486,239) (2,576) (28,819)
- -----------------------------------------------------------------------------
Class C** (6,751) (98,996) -- --
- -----------------------------------------------------------------------------
36,408,898 $466,140,299 24,683,802 $245,816,072
=============================================================================
</TABLE>
* Class B shares commenced sales on October 1, 1996.
** Class C shares commenced sales on August 4, 1997.
17
<PAGE> 20
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the year ended October 31, 1997 and the period June 17, 1996
(date operations commenced) through October 31, 1996, for a share of Class B
capital stock outstanding during the year ended October 31, 1997 and the period
October 1, 1996 (date sales commenced) through October 31, 1996, and for a share
of Class C capital stock outstanding during the period August 4, 1997 (date
sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- --------------------- --------
1997 1996 1997 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.09 $ 10.00 $ 11.08 $ 11.26 $ 13.48
- ---------------------------------------------------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.10) (0.01)(a) (0.20) (0.01)(a) (0.06)
- ---------------------------------------------------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) 3.58 1.10 3.58 (0.17) 1.03
- ---------------------------------------------------- -------- -------- -------- -------- --------
Total from investment operations 3.48 1.09 3.38 (0.18) 0.97
- ---------------------------------------------------- -------- -------- -------- -------- --------
Net asset value, end of period $ 14.57 $ 11.09 $ 14.46 $ 11.08 $ 14.45
==================================================== ======== ======== ======== ======== ========
Total return(b) 31.38% 10.90% 30.51% (1.60)% 7.20%
==================================================== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $577,685 $251,253 $297,623 $ 22,435 $ 12,195
==================================================== ======== ======== ======== ======== ========
Ratio of expenses to average net assets(c) 1.32%(d)(e) 1.35%(f) 2.08%(d)(e) 1.89%(f) 2.14%(d)(e)(f)
==================================================== ======== ======== ======== ======== ========
Ratio of net investment income (loss) to average net
assets(g) (0.83)%(d) (0.29)%(f) (1.59)%(d) (0.83)%(f) (1.64)%(d)(f)(g)
==================================================== ======== ======== ======== ======== ========
Portfolio turnover rate 41% 13% 41% 13% 41%
==================================================== ======== ======== ======== ======== ========
Average brokerage commission rate(h) $ 0.0534 $ 0.0550 $ 0.0534 $ 0.0550 $ 0.0534
==================================================== ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one
year, total returns are not annualized.
(c) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements for the periods 1997 and 1996 are
1.61% and 1.60% (annualized) for Class A shares, 2.37% and
2.28% (annualized) for Class B shares and 2.42% (annualized)
for Class C shares (for 1997 only).
(d) Ratios are based on average net assets of $377,577,393 for
Class A shares, $132,588,760 for Class B shares, and
$5,217,273 for Class C shares.
(e) Excluding indirectly paid expenses, the ratios of expenses
to average net assets would have been 1.33% for Class A,
2.09% for Class B shares and 2.17% for Class C shares.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of
net investment income (loss) prior to fee waivers and/or
expense reimbursements for the periods 1997 and 1996 are
(1.12)% and (0.54)% (annualized) for Class A shares, (1.88)%
and (1.22)% (annualized) for Class B shares and (1.93%)
(annualized) for Class C shares (for 1997 only).
(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.
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM Capital Development Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Capital Development Fund (a series
portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1997, the
related statement of operations for the year ended October
31, 1997 and the statement of changes in net assets and
financial highlights for the year or period ended October
31, 1997 and the period June 17, 1996 (date operations
commenced) through October 31, 1996. These financial
statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial
highlights based on our audit.
We conducted our 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 the AIM
Capital Development Fund as of October 31, 1997, the
results of its operations for the year ended October 31,
1997 and the changes in its net assets and the financial
highlights for the year or period ended October 31, 1997
and the period June 17, 1996 (date operations commenced)
through October 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
19
<PAGE> 22
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the AIM Equity Funds, Inc. (the "Company")
was held on February 7, 1997 at the offices of A I M Management Group Inc., 11
Greenway Plaza, Houston, Texas. The meeting was held for the following purposes:
(1) To elect Directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson and Louis S. Sklar.
(2) To approve a new Master Investment Advisory Agreement between the AIM
Capital Development Fund (the "Fund") and A I M Advisors, Inc.
(3) To approve the elimination of the fundamental investment policy prohibiting
the Fund from investing in other investment companies.
(4) To ratify the selection of KPMG Peat Marwick LLP as independent accountants
for the Fund for the Company's fiscal year ending October 31, 1997.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Votes Withheld/
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............ 15,997,633 226,397 615,219
(3) Elimination of policy prohibiting investments in other
investment companies........................................ 12,434,128 708,699 648,163
(4) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
20
<PAGE> 23
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 Senior 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>
<PAGE> 24
<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>
