<PAGE> 1
AIM EQUITY FUNDS, INC.
INSTITUTIONAL CLASSES
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM WEINGARTEN FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT APRIL 30, 1998
<PAGE> 2
TABLE OF CONTENTS
AIM Charter Fund 2-17
AIM Constellation Fund 18-33
AIM Weingarten Fund 34-Inside
back cover
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
When we last reported to you, for the fiscal year ended
[PHOTO OF October 31, 1997, equity markets worldwide had just been
Charles T. shaken by the currency crisis in Southeast Asia. By April
Bauer, 30, 1998, the end of this six-month reporting period, most
Chairman of markets had recovered nicely, with domestic equities
the Board of reaching new highs and European markets outdoing even the
THE FUND U.S.'s heady pace. Only Asian markets remained in the
APPEARS HERE] doldrums. Bonds have turned in a solid performance with
generous real returns, though not as spectacular as some
had predicted when the Asian crisis first broke.
Good economic news has been arriving almost daily early
in 1998. Inflation and joblessness in the U.S. have been at
their lowest levels in decades, consumer confidence at its
highest. The economic fundamentals in the U.S. appear
sound, and we at AIM remain cautiously optimistic that the
current economic expansion, and the buoyant financial
markets that accompany it, may continue for the foreseeable future.
Nevertheless, by the close of this reporting period, many market
participants were uneasy. Some worried that economic growth was so robust and
labor markets so tight that the Federal Reserve Board would raise interest rates
to keep inflation at bay. Historically, it has been events such as a rise in
interest rates--or more ominous occurrences such as wars--that have ended bull
markets as experienced in this decade. Other participants fretted about signs of
speculative fever, particularly in U.S. stock markets, where equity prices
continued to rise despite evidence that earnings growth, especially for larger
companies, had slowed considerably. All were aware that the Asian story was not
yet completed, and no one was certain how serious its ultimate impact would be.
Of course, this bull market will end one day, and markets became less
ebullient shortly after this reporting period closed. In the face of
uncertainty, the best course for investors is to remain realistic and ready. The
market advances of the past three years have been unprecedented and may have
fostered unrealistic expectations among investors. We have never experienced two
years in a row of market returns above 30%, let alone three. Investors would do
well to remember that the long-term average return for equities is closer to 10%
per year.
A well-diversified portfolio is still one of the most effective tools for
coping with shifts in a market's direction because different asset classes and
different national markets tend to move independently of one another.
YOUR FUND MANAGERS COMMENT
On the pages that follow, the managers of your AIM fund discuss how the fund
performed during the six months covered by this report and give their
near-term market outlook. We hope you will find their discussion informative.
We are pleased to send you this report on your fund. If you have any
questions or comments, please contact our Client Services department at
800-659-1005.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 4
Long-Term Performance
AIM CHARTER FUND
For shareholders who seek growth and income by investing primarily in stocks of
large-cap, well-run companies with a history of stable and improving earnings
and generally increasing dividend payouts.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Charter Fund Institutional Class performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
actively traded primarily industrial stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
============================================================
AIM Charter Fund
INSTITUTIONAL CLASS
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 3/31/98, most recent calendar quarter-end.
1 Year 41.34%
3 Years 28.04
5 Years 18.37
Inception (7/30/91) 16.59
For periods ended 4/30/98.
1 Year 34.71%
3 Years 26.77
5 Years 18.85
Inception (7/30/91) 16.37
============================================================
2
C H A R T E R
<PAGE> 5
The Managers' Overview
FUND GENERATES SOLID RETURNS, ADOPTS MORE CONSERVATIVE STANCE
A roundtable discussion with the Fund management team for AIM Charter Fund for
the six months ended April 30, 1998.
- -------------------------------------------------------------------------------
Q. HOW DID AIM CHARTER FUND PERFORM DURING THE REPORTING PERIOD?
A. The Fund did very well, once again delivering steady growth and income. For
the six months ended April 30, 1998, total return for the Institutional
Class, including reinvestment of quarterly distributions, was 14.26%. This
performance is consistent with the Fund's excellent long-term track record
as shown on the following pages. Net assets continued to grow, from $40.2
million at the opening of the reporting period to $45.2 million at its
close.
Q. WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
A. During the first half of the period, the currency and market crises in Asia
dampened stock market performance dramatically. But as the new year
unfolded, the markets shrugged off these difficulties. A much-anticipated
slowdown in the U.S. economy, predicted to result from the Asian troubles,
never materialized. U.S. gross domestic output rose at a 4.8% annual rate
during the first quarter of 1998. Inflation, widely believed to result from
such robust economic expansion, remained low. The Commerce Department's
overall price index rose an annualized 0.9% during the quarter--its slowest
rate in 34 years. As worries about Asia receded, the markets resumed their
rise. In April, the Dow Jones Industrials closed above the 9200 mark for the
first time.
Fund performance paralleled that of the markets, with most of the growth
taking place during the latter half of the reporting period.
NET ASSETS UNDER MANAGEMENT
10/31/97 $40.2 million
4/30/98 $45.2 million
Q. SOME OBSERVERS EXPRESS CONCERN ABOUT STOCK PRICES RISING SO MUCH. DO YOU
THINK THE MARKET IS TOO HIGH?
A. That is probably impossible to say. While the strength of the U.S. economy
provides solid underpinnings for equity performance, we think the market is
very expensive by any valuation measure. Especially for very large
companies, the so-called "mega-caps" like General Electric, price/earnings
ratios have risen dramatically just in the past year or so.
And this has happened even as earnings growth has leveled off or
declined. Average earnings growth for large domestic companies was in the
single digits for the first quarter of 1998, compared to double-digits the
past few years.
Q. HAVE YOU CHANGED THE WAY YOU MANAGE THE FUND AS A RESULT?
A. We are becoming a bit more conservative as we see confidence in earnings
erode. One step we have taken is raising our stake in convertible
securities. With convertibles, you can keep an income-generating interest in
a corporation without being exposed to all the fluctuation in the value of
the company's common stock.
Convertible corporate bonds represented more than 9% of the portfolio at
the close of the reporting period, up from 8% six months earlier; and
convertible preferred stocks were approximately 9% of the portfolio, up from
just below 7.00%.
To give you a specific example, we owned America Online, Inc. as a
common stock six months ago. It was a very successful holding--it almost
doubled in the first quarter of 1998. We decided to protect some of our
profits and still keep an interest in the company by moving into their
convertible securities instead. Other companies whose convertible securities
have been very good holdings include WorldCom, Inc., and Continental
Airlines.
Q. WHERE ELSE HAVE YOU FOUND GOOD OPPORTUNITIES?
A. Three areas that have done well for the Fund are the financial sector;
communication services; and health care stocks, particularly
pharmaceuticals.
Q. WHY ARE FINANCIAL STOCKS STILL ATTRACTIVE? THEY WERE PROMINENT IN THE
PORTFOLIO SIX MONTHS AGO.
A. With financial markets ebullient, interest rates stable, and the trend
toward globalization and consolidation unabated, financial stocks have been
performing very well, and in many cases their valuations seem much more
reasonable than for the market in general. At approximately 24% of net
assets, financials represent the largest sector weighting in the portfolio,
as they did six months ago.
Emblematic of what is going on in this field is the merger, announced in
April, of insurance giant Travelers Group, Inc. and major money-center
banker Citicorp--two stocks in the Fund's portfolio. This largest corporate
merger in history aims to meld two financial-services leaders that reported
solid earnings for the first quarter of 1998.
One factor spurring this consolidation wave is the financial burden the
Year 2000 problem poses for financial companies. It will be advantageous to
spread those reprogramming costs over as large a base as possible.
Q. WHAT MAKES COMMUNICATIONS SERVICES A GOOD INVESTMENT?
A. We increased our holdings in this
3
C H A R T E R
<PAGE> 6
The Managers' Overview
PORTFOLIO COMPOSITION
As of 4/30/98, based on total net assets
<TABLE>
<CAPTION>
====================================================================================================
TOP 10 HOLDINGS NUMBER OF HOLDINGS: 177
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Philip Morris Companies, Inc. 3.73%
2. Chase Manhattan Corp. (The) 2.59
3. Warner-Lambert Co. 1.77 Common Stocks 75.58%
4. Pfizer, Inc. 1.70 Convertible Preferred Stock 9.32%
5. WorldCom, Inc.-$2.68 Conv.Dep.Pfd. 1.66 Convertible Bonds 9.36%
6. Intel Corp. 1.51 U.S. Government Bonds 3.94%
7. Service Corp. International 1.35 Cash & Cash Equivalents 1.80%
8. American International Group, Inc. 1.23
9. Union Bank of Switzerland (Switzerland) 1.20
10. Morgan Stanley, Dean Witter, Discover & Co. 1.18
Please keep in mind that the Fund's portfolio composition is subject to change
and there is no assurance the Fund will continue to hold any particular
security.
====================================================================================================
</TABLE>
area during the reporting period to about 7.5% of assets. Technical changes
and the growth of new services, especially wireless services, characterize
the communications sector. It, too, is undergoing a wave of mergers and
acquisitions. One of the largest mergers on the table involves rapidly
growing WorldCom, Inc. and MCI Communications Corp., both portfolio
holdings. Another portfolio holding, SBC Communications Inc., has merger
proposals outstanding for two other "Baby Bells," Southern New England
Telecom and Ameritech. Such transactions have led to speculation that the
old nationwide telephone system may gradually be reassembled piece by piece.
Q. HEALTH CARE IS STILL A SIGNIFICANT PORTION OF THE PORTFOLIO. WHY?
A. Though reduced slightly over the six-month reporting period, our
health-care holdings are still large: about 14% of assets. Consolidation and
cost cutting in the health-care sector have been benefiting profit margins
for service providers, and a number of HMOs and other care providers were
able to raise premiums recently for the first time in years.
Underlying the improved profit picture of many health-care providers are
systems improvements such as those provided by portfolio holding HBO &
Company. HBO produces software that integrates health-care information so
that patient information, for example, can move seamlessly among doctors'
offices, hospitals and other providers, and insurance companies.
Another positive factor has been the FDA's gradual streamlining of
filing and approval systems. This has been welcomed by pharmaceutical firms,
especially those with new products or drug delivery systems. A steady stream
of new pharmaceutical products has been a significant contributor to this
sector's recent good performance. Portfolio holding Warner-Lambert Co.
recently received "fast track" FDA approval for two new products: the
cholesterol reducer Lipitor and the diabetes treatment Rezulin.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND IN THE NEAR TERM?
A. Toward the close of the reporting period, there were some cautionary signs
for a few of our major holdings, especially the antitrust campaign against
Microsoft and the heightened scrutiny of mergers, such as the one involving
MCI Communications Corp. and WorldCom, Inc.
By and large, though, the environment appears promising. For example, by
the end of the reporting period, there was evidence market performance had
broadened somewhat, with mid-cap stocks slightly outperforming large-cap
issues. Since approximately 23% of portfolio holdings are in the mid-cap
sector, this is good news for the Fund.
We believe we have positioned the Fund well by trying to balance
higher-growth, lower-income securities with some slower-growth,
higher-income positions. While the vast majority of portfolio holdings are
growth-oriented equities, we have increased our holdings of convertibles,
and we have a small position, just below 4% of assets, in short-term
government securities to supplement the income stream.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND MARKETS IN GENERAL?
A. Most observers foresee stable interest rates, healthy economic growth, and
continued contained inflation as global competition and lower energy costs
offset the inflationary potential of tight labor markets. No one has
identified a good reason for the seven-plus years of domestic economic
expansion to end abruptly.
However, most market participants would welcome some cooling off. One of
the events most likely to trigger a halt in the market's prolonged rise
would be an interest rate hike by the Federal Reserve Board (the Fed).
Although the Fed left interest rates unchanged at its meeting shortly after
the close of the reporting period, it has been hinting about its concern
over rapid economic growth and the dramatic rise in equity values. An
interest rate rise would be forestalled by evidence that the economy is
growing a little less rapidly.
4
C H A R T E R
<PAGE> 7
SCHEDULE OF INVESTMENTS
April 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-75.58%
AUTO PARTS & EQUIPMENT-0.86%
Federal-Mogul Corp. 300,000 $ 19,406,250
- ---------------------------------------------------------------
Lear Corp.(a) 500,000 26,781,250
- ---------------------------------------------------------------
46,187,500
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-3.48%
Banc One Corp. 650,000 38,228,125
- ---------------------------------------------------------------
Bank of Montreal (Canada) 300,000 16,365,353
- ---------------------------------------------------------------
Mellon Bank Corp. 350,000 25,200,000
- ---------------------------------------------------------------
Royal Bank of Canada (Canada) 267,000 15,946,987
- ---------------------------------------------------------------
Schweizerischer Bankverein
(Switzerland) 75,000 26,037,849
- ---------------------------------------------------------------
Union Bank of Switzerland
(Switzerland) 40,000 64,396,615
- ---------------------------------------------------------------
186,174,929
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-4.26%
BankAmerica Corp. 450,000 38,250,000
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 1,000,000 138,562,500
- ---------------------------------------------------------------
Citicorp 340,000 51,170,000
- ---------------------------------------------------------------
227,982,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-2.12%
CBS Corp. 800,000 28,500,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 800,000 28,650,000
- ---------------------------------------------------------------
Tele-Communications, Inc.(a) 1,750,000 56,437,500
- ---------------------------------------------------------------
113,587,500
- ---------------------------------------------------------------
CHEMICALS-0.30%
Rohm & Haas Co. 150,000 16,171,875
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.35%
Monsanto Co. 350,000 18,506,250
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.04%
Lucent Technologies, Inc. 400,000 30,450,000
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Sweden) 150,000 7,715,625
- ---------------------------------------------------------------
Tellabs, Inc.(a) 250,000 17,718,750
- ---------------------------------------------------------------
55,884,375
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.84%
Compaq Computer Corp. 1,400,000 39,287,500
- ---------------------------------------------------------------
Hewlett-Packard Co. 400,000 30,125,000
- ---------------------------------------------------------------
International Business Machines
Corp. 250,000 28,968,750
- ---------------------------------------------------------------
98,381,250
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.62%
Cisco Systems, Inc.(a) 450,000 32,962,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE &
SERVICES)-2.58%
Computer Associates
International, Inc. 350,000 $ 20,496,875
- ---------------------------------------------------------------
Compuware Corp.(a) 400,000 19,550,000
- ---------------------------------------------------------------
HBO & Co. 300,000 17,943,750
- ---------------------------------------------------------------
Microsoft Corp.(a) 700,000 63,087,500
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 400,000 17,025,000
- ---------------------------------------------------------------
138,103,125
- ---------------------------------------------------------------
CONSUMER FINANCE-0.87%
Household International, Inc. 200,000 26,287,500
- ---------------------------------------------------------------
MBNA Corp. 600,000 20,325,000
- ---------------------------------------------------------------
46,612,500
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-1.05%
Bergen Brunswig Corp.-Class A 600,000 27,225,000
- ---------------------------------------------------------------
Cardinal Health, Inc. 300,000 28,875,000
- ---------------------------------------------------------------
56,100,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-0.98%
CINergy Corp. 350,000 12,206,250
- ---------------------------------------------------------------
Edison International 500,000 14,906,250
- ---------------------------------------------------------------
FPL Group, Inc. 200,000 12,412,500
- ---------------------------------------------------------------
PG&E Corp. 400,000 12,950,000
- ---------------------------------------------------------------
52,475,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.03%
General Electric Co. 650,000 55,331,250
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.52%
General Motors Corp.-Class H(a) 500,000 27,625,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.51%
Intel Corp. 1,000,000 80,812,500
- ---------------------------------------------------------------
ENTERTAINMENT-0.51%
Time Warner Inc. 350,000 27,475,000
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.47%
Applied Materials, Inc.(a) 700,000 25,287,500
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.74%
American Express Co. 400,000 40,800,000
- ---------------------------------------------------------------
Fannie Mae 1,000,000 59,875,000
- ---------------------------------------------------------------
Freddie Mac 1,300,000 60,206,250
- ---------------------------------------------------------------
MBIA, Inc. 400,000 29,850,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 800,000 63,100,000
- ---------------------------------------------------------------
253,831,250
- ---------------------------------------------------------------
HARDWARE & TOOLS-0.48%
Black & Decker Corp. (The) 500,000 25,812,500
- ---------------------------------------------------------------
</TABLE>
5
C H A R T E R
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED)-4.61%
Abbott Laboratories 350,000 $ 25,593,750
- ---------------------------------------------------------------
American Home Products Corp. 600,000 55,875,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 400,000 42,350,000
- ---------------------------------------------------------------
Johnson & Johnson 400,000 28,550,000
- ---------------------------------------------------------------
Warner-Lambert Co. 500,000 94,593,750
- ---------------------------------------------------------------
246,962,500
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.16%
Lilly (Eli) & Co. 600,000 41,737,500
- ---------------------------------------------------------------
Merck & Co., Inc. 500,000 60,250,000
- ---------------------------------------------------------------
Pfizer, Inc. 800,000 91,050,000
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(United Kingdom) 500,000 29,781,250
- ---------------------------------------------------------------
222,818,750
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.28%
Columbia/HCA Healthcare Corp. 800,000 26,350,000
- ---------------------------------------------------------------
Health Management Associates, Inc.-Class
A(a) 500,000 15,750,000
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 700,000 26,206,250
- ---------------------------------------------------------------
68,306,250
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.34%
HEALTHSOUTH Corp.(a) 600,000 18,112,500
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.46%
Arterial Vascular Engineering,
Inc.(a) 1,200,000 42,450,000
- ---------------------------------------------------------------
Henry Schein, Inc.(a) 450,000 17,550,000
- ---------------------------------------------------------------
Medtronic, Inc. 350,000 18,418,750
- ---------------------------------------------------------------
78,418,750
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.45%
Omnicare, Inc. 700,000 23,975,000
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-1.30%
Colgate-Palmolive Co. 500,000 44,843,750
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 300,000 24,656,250
- ---------------------------------------------------------------
69,500,000
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.36%
Provident Companies, Inc. 500,000 19,531,250
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.56%
Ace, Ltd. 750,000 28,406,250
- ---------------------------------------------------------------
American International Group,
Inc. 500,000 65,781,250
- ---------------------------------------------------------------
Travelers Group, Inc. 700,000 42,831,250
- ---------------------------------------------------------------
137,018,750
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.99%
Allstate Corp. (The) 550,000 52,937,500
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.82%
Merrill Lynch & Co., Inc. 500,000 43,875,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT-0.89%
Franklin Resources, Inc.(b) 800,000 $ 42,800,000
- ---------------------------------------------------------------
United Assets Management Corp. 178,200 4,722,300
- ---------------------------------------------------------------
47,522,300
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.30%
Brunswick Corp. 500,000 16,250,000
- ---------------------------------------------------------------
LODGING-HOTELS-0.39%
Carnival Corp.-Class A 300,000 20,868,750
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.03%
Hillenbrand Industries, Inc. 200,000 12,475,000
- ---------------------------------------------------------------
Textron, Inc. 200,000 15,650,000
- ---------------------------------------------------------------
Tyco International Ltd. 500,000 27,250,000
- ---------------------------------------------------------------
55,375,000
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.23%
US Filter Corp.(a) 371,000 12,103,875
- ---------------------------------------------------------------
NATURAL GAS-0.91%
El Paso Natural Gas Co. 800,000 29,550,000
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 600,000 18,975,000
- ---------------------------------------------------------------
48,525,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.68%
BJ Services Co.(a) 500,000 18,750,000
- ---------------------------------------------------------------
Dresser Industries, Inc. 550,000 29,081,250
- ---------------------------------------------------------------
Halliburton Co. 550,000 30,250,000
- ---------------------------------------------------------------
Petroleum Geo-Services ASA-ADR
(Norway)(a) 250,000 16,437,500
- ---------------------------------------------------------------
Santa Fe International Corp. 400,000 15,675,000
- ---------------------------------------------------------------
Schlumberger Ltd. 200,000 16,575,000
- ---------------------------------------------------------------
Transocean Offshore Inc. 300,000 16,762,500
- ---------------------------------------------------------------
143,531,250
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-2.34%
British Petroleum Co. PLC-ADR
(United Kingdom) 300,000 28,350,000
- ---------------------------------------------------------------
Elf Aquitaine S.A. (France) 200,000 12,987,500
- ---------------------------------------------------------------
Exxon Corp. 600,000 43,762,500
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.-New
York Shares (Netherlands) 450,000 25,453,125
- ---------------------------------------------------------------
Total S.A. (France) 250,000 14,687,500
- ---------------------------------------------------------------
125,240,625
- ---------------------------------------------------------------
PERSONAL CARE-0.54%
Gillette Co. 250,000 28,859,375
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.06%
Xerox Corp. 500,000 56,750,000
- ---------------------------------------------------------------
RAILROADS-0.29%
Kansas City Southern Industries,
Inc. 347,000 15,680,063
- ---------------------------------------------------------------
</TABLE>
6
C H A R T E R
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUST-2.88%
Boston Properties, Inc. 400,000 $ 13,225,000
- ---------------------------------------------------------------
Crescent Real Estate Equities,
Co. 500,000 17,062,500
- ---------------------------------------------------------------
Mack-Cali Realty Corp. 400,000 15,025,000
- ---------------------------------------------------------------
Patriot American Hospitality,
Inc. 1,600,000 40,400,000
- ---------------------------------------------------------------
Starwood Hotels & Resorts 1,000,000 50,187,500
- ---------------------------------------------------------------
Vornado Realty Trust 450,000 18,028,125
- ---------------------------------------------------------------
153,928,125
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.14%
CompUSA, Inc.(a) 400,000 7,425,000
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.77%
Federated Department Stores,
Inc.(a) 400,000 19,675,000
- ---------------------------------------------------------------
J.C. Penney Co., Inc. 350,000 24,871,875
- ---------------------------------------------------------------
Kohl's Corp.(a) 500,000 20,656,250
- ---------------------------------------------------------------
Proffitt's, Inc.(a) 750,000 29,812,500
- ---------------------------------------------------------------
95,015,625
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.39%
Walgreen Co. 600,000 20,700,000
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.46%
Costco Companies, Inc.(a) 200,000 11,175,000
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 300,000 13,462,500
- ---------------------------------------------------------------
24,637,500
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.52%
Washington Mutual, Inc. 400,000 28,025,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.73%
Service Corp. International 1,750,000 72,187,500
- ---------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 800,000 20,600,000
- ---------------------------------------------------------------
92,787,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.32%
Ceridian Corp.(a) 500,000 28,281,250
- ---------------------------------------------------------------
Equifax, Inc. 500,000 19,343,750
- ---------------------------------------------------------------
Fiserv, Inc.(a) 350,000 22,881,250
- ---------------------------------------------------------------
70,506,250
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.25%
Corrections Corp. of America(a) 491,600 13,641,900
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.39%
AT&T Corp. 400,000 24,025,000
- ---------------------------------------------------------------
MCI Communications Corp. 1,000,000 50,312,500
- ---------------------------------------------------------------
74,337,500
- ---------------------------------------------------------------
TELEPHONE-2.06%
Bell Atlantic Corp. 300,000 28,068,750
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 800,000 30,600,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
SBC Communications, Inc. 1,250,000 $ 51,796,875
- ---------------------------------------------------------------
110,465,625
- ---------------------------------------------------------------
TOBACCO-4.07%
Philip Morris Companies, Inc. 5,350,000 199,621,875
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 650,000 18,078,125
- ---------------------------------------------------------------
217,700,000
- ---------------------------------------------------------------
Total Common Stocks (Cost
$2,925,989,969) 4,046,636,817
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS
& NOTES-9.36%
AIRLINES-0.38%
Continental Airlines,
Conv. Sub. Notes, 6.75%,
04/15/06 $10,000,000 20,250,000
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.22%
Tower Automotive, Inc.,
Conv. Sub. Notes, 5.00%,
08/01/04 10,000,000 11,975,000
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.62%
Brightpoint, Inc.,
Conv. LYON, 4.00%,
03/11/18(c)(d) (Acquired
03/05/98; Cost $9,057,800) 20,000,000 9,325,000
- ---------------------------------------------------------------
Global Telesystems Group, Inc.,
Conv. Sr. Sec. Sub. Notes,
8.75%, 06/30/00 10,000,000 23,900,000
- ---------------------------------------------------------------
33,225,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.80%
EMC Corp.,
Conv. Sub. Notes, 3.25%,
03/15/02 20,000,000 42,770,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.81%
America Online, Inc.,
Conv. Sub. Notes, 4.00%,
11/15/02(c) (Acquired 02/10/98;
Cost $15,619,768) 12,500,000 21,103,125
- ---------------------------------------------------------------
Platinum Technology, Inc.,
Conv. Sub. Notes, 6.25%,
12/15/02(c) (Acquired
12/11/97-01/12/98; Cost
$9,961,125) 10,000,000 10,250,000
- ---------------------------------------------------------------
Veritas Software Corp.,
Conv. Sub. Notes, 5.25%,
11/01/04(c) (Acquired 10/09/97;
Cost $10,500,000) 10,500,000 12,022,500
- ---------------------------------------------------------------
43,375,625
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.50%
SCI Systems, Inc.,
Conv. Sub. Notes, 5.00%,
05/01/06(c) (Acquired
10/24/96-03/16/98; Cost
$22,519,192) 15,000,000 26,789,400
- ---------------------------------------------------------------
</TABLE>
7
C H A R T E R
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.46%
Candescent Technology Corp.,
Conv. Sr. Sub. Debs., 7.00%,
05/01/03(c) (Acquired 04/17/98;
Cost $25,000,000) $25,000,000 $25,000,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-0.27%
Analog Devices,
Conv. Sub. Notes, 3.50%,
12/01/00 7,500,000 14,261,400
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.16%
Lam Research Corp.,
Conv. Unsec. Sub. Notes, 5.00%,
09/01/02 10,000,000 8,681,300
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.32%
Concentra Managed Care,
Conv. Sub. Notes, 4.50%,
03/15/03(c) (Acquired 03/11/98;
Cost $17,000,000) 17,000,000 16,932,510
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-1.00%
NCS Healthcare Inc.,
Conv. Sub. Notes, 5.75%,
08/15/04(c) (Acquired
08/07/97-12/08/97; Cost
$13,098,245) 13,000,000 14,403,350
- ---------------------------------------------------------------
Omnicare, Inc.,
Conv. Sub. Deb., 5.00%,
12/01/07(c) (Acquired
12/04/97-03/18/98; Cost
$36,319,027) 35,000,000 39,180,050
- ---------------------------------------------------------------
53,583,400
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.21%
Thermo Electron Corp.,
Conv. Sub. Deb., 4.25%,
01/01/03(c) (Acquired
06/20/97-06/27/97; Cost
$11,547,115) 10,000,000 11,535,900
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.51%
Diamond Offshore Drilling, Inc.,
Conv. Sub. Notes, 3.75%,
02/15/07 20,000,000 27,068,600
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.26%
Costco Companies, Inc.,
Conv. Sub. Notes, 3.50%,
08/19/17(d) 20,000,000 13,837,600
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.46%
PETsMART Inc.,
Conv. Sub. Notes, 6.75%,
11/01/04(c) (Acquired
03/13/98-04/06/98; Cost
$6,630,033) 5,000,000 7,550,000
- ---------------------------------------------------------------
Staples Inc.,
Conv. Sub. Deb., 4.50%,
10/01/00(c) (Acquired
10/23/97-12/30/97; Cost
$13,054,000) 10,000,000 17,182,700
- ---------------------------------------------------------------
24,732,700
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER)-0.21%
Equity Corp. International,
Conv. Sub. Deb., 4.50%,
12/31/04(c) (Acquired
02/19/98-02/20/98; Cost
$10,005,625) $10,000,000 $ 11,021,900
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.20%
Affiliated Computer Services,
Conv. Sub. Notes, 4.00%,
03/15/05(c) (Acquired 03/17/98;
Cost $10,004,125) 10,000,000 10,535,900
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.48%
Career Horizons, Inc.,
Conv. Bonds, 7.00%, 11/01/02 8,000,000 25,815,680
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.19%
Tel-Save Holdings, Inc.,
Conv. Sub. Notes, 5.00%,
12/15/04(c) (Acquired 12/05/97;
Cost $10,000,000) 10,000,000 10,210,700
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.30%
Thermo Instrument System,
Conv. Sub. Unsec. Notes, 4.00%,
01/15/05 10,000,000 10,420,400
- ---------------------------------------------------------------
United Waste Systems, Inc.,
Conv. Sub. Notes, 4.50%,
06/01/01 17,500,000 28,825,475
- ---------------------------------------------------------------
USA Waste Services Inc.,
Conv. Sub. Notes, 4.00%,
02/01/02 13,000,000 16,014,440
- ---------------------------------------------------------------
WMX Technologies,
Conv. Sub. Notes, 2.00%,
01/24/05 15,000,000 14,418,750
- ---------------------------------------------------------------
69,679,065
- ---------------------------------------------------------------
Total Convertible Corporate
Bonds & Notes (Cost
$427,672,496) 501,281,680
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-9.32%
AIR FREIGHT-0.33%
CNF Trust I-$2.50 Conv. Pfd. 300,000 17,700,000
- ---------------------------------------------------------------
AIRLINES-0.47%
Continental Air Finance
Trust-$4.25 Conv. Pfd. 200,000 24,899,200
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.18%
Nextlink Communications-$3.25
Conv. Pfd.(c) (Acquired
03/26/98; Cost $10,000,000) 200,000 9,500,000
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.76%
AES Trust I-$2.69 Conv. Pfd. 200,000 16,587,500
- ---------------------------------------------------------------
Federal-Mogul Financial
Trust-$3.50 Conv.
Pfd.(c)(Acquired 04/24/98; Cost
$3,296,250) 45,000 3,267,180
- ---------------------------------------------------------------
MGIC Investment Corp.-$3.12 Conv.
Pfd. 200,000 21,000,000
- ---------------------------------------------------------------
40,854,680
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.49%
Medpartners Inc.-$1.44 Conv. Pfd. 2,000,000 26,375,000
- ---------------------------------------------------------------
</TABLE>
8
C H A R T E R
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE/HEALTH)-1.12%
Conseco Inc.-$4.278 Conv. PRIDES 350,000 $ 59,937,500
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.33%
Sealed Air Corp.-$2.00 Conv. Pfd. 275,000 17,462,500
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.27%
EVI, Inc.-$2.50 Conv. Pfd. 300,000 14,489,100
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.35%
Tosco Financing Trust-$2.88 Conv.
Pfd. 300,000 18,562,500
- ---------------------------------------------------------------
RAILROADS-0.49%
Union Pacific Capital
Trust-$3.125 Conv.
Pfd.(c)(Acquired
03/27/98-04/02/98; Cost
$25,245,408) 500,000 26,423,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.45%
TJX Cos., Inc.-$7.00 Conv. Pfd. 50,000 23,909,100
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.15%
Cendant Corp.-$3.75 Conv. PRIDES 1,500,000 61,781,250
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.62%
AirTouch Communications,
Inc.-$1.74 Conv. Pfd. 400,000 17,750,000
- ---------------------------------------------------------------
Nextel STRYPES Trust-$1.015 Conv.
Pfd. 600,000 15,525,000
- ---------------------------------------------------------------
33,275,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.92%
Winstar Communications-$3.50
Conv. Pfd.(c) (Acquired
03/12/98; Cost $13,500,000) 270,000 13,972,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
WorldCom, Inc.-$2.68 Conv. Dep.
Pfd. 600,000 $ 88,912,500
- ---------------------------------------------------------------
102,885,000
- ---------------------------------------------------------------
TELEPHONE-0.39%
Salomon Smith Barney
Holdings-$3.48 Conv. Pfd. 300,000 20,587,500
- ---------------------------------------------------------------
Total Convertible Preferred
Stocks (Cost $420,208,613) 498,641,330
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY NOTES-3.94%
9.125%, 05/15/99 $20,000,000 20,721,200
- ---------------------------------------------------------------
13.125%, 05/15/01 40,000,000 48,326,800
- ---------------------------------------------------------------
13.375%, 08/15/01 40,000,000 49,209,600
- ---------------------------------------------------------------
11.75%, 02/15/01 80,000,000 92,619,200
- ---------------------------------------------------------------
Total U.S. Treasury Notes
(Cost $214,642,078) 210,876,800
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(E)-1.27%
Dean Witter Reynolds Inc., 5.55%,
05/01/98(f) (Cost $67,927,729) 67,927,729 67,927,729
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.47% 5,325,364,356
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.53% 28,599,981
- ---------------------------------------------------------------
NET ASSETS-100.00% $5,353,964,337
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depositary
LYON - Liquid Yield Option Notes
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sec. - Secured
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
Unsec. - Unsecured
Notes to Schedule of Investments:
(a) Non-income producing security
(b) A portion of these securities are subject to call options written. See note
7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 04/30/98 was $296,205,715,
which represented 5.53% of the Fund's net assets.
(d) Zero coupon bonds. Interest rate shown represents the rate of original issue
discount.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily it ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$300,046,250. Collateralized by $307,111,000 U.S. Government obligations, 0%
to 9.40% due 06/10/98 to 09/26/19 with an aggregate market value at 04/30/98
of $306,000,308.
See Notes to Financial Statements.
9
C H A R T E R
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$4,056,440,885) $5,325,364,356
- ------------------------------------------------------------
Foreign currencies, at value (cost $873,554) 866,353
- ------------------------------------------------------------
Receivables for:
Investments sold 62,428,769
- ------------------------------------------------------------
Capital stock sold 21,344,795
- ------------------------------------------------------------
Dividends and interest 16,004,584
- ------------------------------------------------------------
Investment for deferred compensation plan 51,312
- ------------------------------------------------------------
Other assets 117,138
- ------------------------------------------------------------
Total assets 5,426,177,307
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 51,167,734
- ------------------------------------------------------------
Options written 103,313
- ------------------------------------------------------------
Capital stock reacquired 15,034,918
- ------------------------------------------------------------
Deferred compensation 51,312
- ------------------------------------------------------------
Accrued advisory fees 2,703,731
- ------------------------------------------------------------
Accrued administrative services fees 11,958
- ------------------------------------------------------------
Accrued directors' fees 2,671
- ------------------------------------------------------------
Accrued distribution fees 2,113,478
- ------------------------------------------------------------
Accrued transfer agent fees 686,374
- ------------------------------------------------------------
Accrued operating expenses 337,481
- ------------------------------------------------------------
Total liabilities 72,212,970
- ------------------------------------------------------------
Net assets applicable to shares outstanding $5,353,964,337
============================================================
NET ASSETS:
Class A $3,909,503,754
============================================================
Class B $1,376,994,727
============================================================
Class C $ 22,241,605
============================================================
Institutional Class $ 45,224,251
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 284,909,041
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 100,947,456
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 1,627,031
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 3,272,274
============================================================
Class A:
Net asset value and redemption price per
share $ 13.72
============================================================
Offering price per share:
(Net asset value of $13.72 divided
by 94.50%) $ 14.52
============================================================
Class B:
Net asset value and offering price per
share $ 13.64
============================================================
Class C:
Net asset value and offering price per
share $ 13.67
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 13.82
============================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $467,323 foreign
withholding tax) $ 29,787,570
- -----------------------------------------------------------
Interest 20,463,321
- -----------------------------------------------------------
Total investment income 50,250,891
- -----------------------------------------------------------
EXPENSES:
Advisory fees 15,306,678
- -----------------------------------------------------------
Administrative services fees 69,264
- -----------------------------------------------------------
Custodian fees 202,841
- -----------------------------------------------------------
Directors' fees 16,358
- -----------------------------------------------------------
Distribution fees-Class A 5,423,668
- -----------------------------------------------------------
Distribution fees-Class B 5,929,847
- -----------------------------------------------------------
Distribution fees-Class C 64,036
- -----------------------------------------------------------
Interest (Note 1) 361,470
- -----------------------------------------------------------
Transfer agent fees-Class A 2,164,957
- -----------------------------------------------------------
Transfer agent fees-Class B 1,094,520
- -----------------------------------------------------------
Transfer agent fees-Class C 15,489
- -----------------------------------------------------------
Transfer agent fees-Institutional Class 13,016
- -----------------------------------------------------------
Other 606,545
- -----------------------------------------------------------
Total expenses 31,268,689
- -----------------------------------------------------------
Less: Fees waived by advisor (359,115)
- -----------------------------------------------------------
Expenses paid indirectly (134,971)
- -----------------------------------------------------------
Net expenses 30,774,603
- -----------------------------------------------------------
Net investment income 19,476,288
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 273,393,296
- -----------------------------------------------------------
Foreign currencies 546,118
- -----------------------------------------------------------
Futures contracts (1,146,876)
- -----------------------------------------------------------
Option contracts (5,298,879)
- -----------------------------------------------------------
267,493,659
- -----------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 360,230,035
- -----------------------------------------------------------
Foreign currencies 29,136
- -----------------------------------------------------------
Futures contracts 2,332,675
- -----------------------------------------------------------
Option contracts (3,558,113)
- -----------------------------------------------------------
359,033,733
- -----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 626,527,392
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $646,003,680
===========================================================
</TABLE>
See Notes to Financial Statements.
10
C H A R T E R
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 AND THE YEAR ENDED OCTOBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 19,476,288 $ 25,716,155
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 267,493,659 471,905,541
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 359,033,733 453,826,181
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 646,003,680 951,447,877
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (11,381,512) (29,364,689)
- ----------------------------------------------------------------------------------------------
Class B (2,079,152) (2,392,475)
- ----------------------------------------------------------------------------------------------
Class C (26,906) --
- ----------------------------------------------------------------------------------------------
Institutional Class (163,482) (438,502)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (346,484,609) (162,219,599)
- ----------------------------------------------------------------------------------------------
Class B (108,856,873) (34,439,480)
- ----------------------------------------------------------------------------------------------
Class C (819,962) (2,594)
- ----------------------------------------------------------------------------------------------
Institutional Class (3,989,466) (1,797,486)
- ----------------------------------------------------------------------------------------------
Net equalization credits (See Note 1):
Class A -- 292,768
- ----------------------------------------------------------------------------------------------
Class B -- 189,770
- ----------------------------------------------------------------------------------------------
Institutional Class -- 6,698
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 317,616,265 247,700,247
- ----------------------------------------------------------------------------------------------
Class B 276,113,979 397,291,935
- ----------------------------------------------------------------------------------------------
Class C 15,631,817 5,872,568
- ----------------------------------------------------------------------------------------------
Institutional Class 3,534,392 4,247,713
- ----------------------------------------------------------------------------------------------
Net increase in net assets 785,098,171 1,376,394,751
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,568,866,166 3,192,471,415
- ----------------------------------------------------------------------------------------------
End of period $5,353,964,337 $4,568,866,166
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,813,645,409 $3,199,855,109
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 7,827,370 2,895,981
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 263,532,613 456,189,864
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 1,268,958,945 909,925,212
- ----------------------------------------------------------------------------------------------
$5,353,964,337 $4,568,866,166
==============================================================================================
</TABLE>
See Notes to Financial Statements.
11
C H A R T E R
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six separate portfolios: AIM
Charter Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Constellation Fund and AIM Weingarten Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. 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. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to provide growth of capital, with
current income as a secondary objective.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the closing bid
and asked prices. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued at the mean between last
bid and asked prices based upon quotes furnished by independent sources.
Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors of the Company. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
E. Expenses-Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
are allocated among the classes.
F. Equalization-The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective November 1, 1997, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of $893,847
from undistributed net investment income to paid-in capital. This change has
no effect on the net assets, the results of operations or the net asset
value per share of the Fund.
G. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items
12
C H A R T E R
<PAGE> 15
denominated in foreign currencies are translated into U.S. dollar amounts on
the respective dates of such transactions.
H. Foreign Currency Contracts-A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed upon price at a future
date. The Fund may enter into a foreign currency contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of that security. The Fund could be exposed to
risk if counterparties to the contracts are unable to meet the terms of
their contracts.
I. Stock Index Futures Contracts-The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and that a change in the value of the contracts may not correlate
with changes in the value of the securities being hedged.
J. Covered Call Options-The fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $150
million, plus 0.625% of the Fund's average daily net assets in excess of $150
million. AIM has agreed to voluntarily waive a portion of its advisory fees paid
by the Fund to AIM to the extent necessary to reduce the fees paid by the Fund
at net asset levels higher than those currently incorporated in the present
advisory fee schedule. Under the voluntary waiver, AIM will receive a fee
calculated at the annual rate of 1.0% of the first $30 million of the Fund's
average daily net assets, plus 0.75% of the Fund's average daily net assets in
excess of $30 million to and including $150 million, plus 0.625% of the Fund's
average daily net assets in excess of $150 million to and including $2 billion,
plus 0.60% of the Fund's average daily net assets in excess of $2 billion. The
waiver is entirely voluntary but approval is required by the Board of Directors
for any decision by AIM to discontinue the waiver. During the six months ended
April 30, 1998, AIM waived fees of $359,115. Under the terms of a master
sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM
Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1998, AIM
was reimbursed $69,264 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. On September 20, 1997, the Board of Directors
approved appointment of AFS as transfer agent of the Institutional Class
effective December 29, 1997. During the six months ended April 30, 1998, AFS was
paid $1,914,769 with respect to the Class A, Class B, and Class C shares and for
the period December 29, 1997 through April 30, 1998, AFS was paid $6,580 with
respect to the Institutional Class. Prior to the effective date of the agreement
with AFS, the Fund paid A I M Institutional Fund Services, Inc. $6,436 pursuant
to a transfer agency and shareholder services agreement with respect to the
Institutional Class for the period November 1, 1997 through December 28, 1997.
13
C H A R T E R
<PAGE> 16
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for 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 and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.30% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. The Fund, pursuant
to the Class B Plan, pays AIM Distributors compensation at an annual rate of
1.00% of the average daily net assets attributable to the Class B shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of Class A, Class B or C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer, or pledge to
one or more designees, its rights to all or a designated portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges received by AIM Distributors
related to the Class B shares. During the six months ended April 30, 1998, the
Class A, Class B and Class C shares paid AIM Distributors $5,423,668,
$5,929,847, and $64,036, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,086,530 from sales of Class A
shares of the Fund during the six months ended April 30, 1998. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the six months ended April 30,
1998, AIM Distributors received commissions of $77,611 in contingent deferred
sales charges imposed on redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AIM Capital, AIM
Distributors, AFS, and FMC.
During the six months ended April 30, 1998, the Fund paid legal fees of $4,503
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
During the six months ended April 30, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $27,335 and $107,636, respectively, under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $134,971 during the six months ended April 30, 1998.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BORROWINGS
Reverse repurchase agreements involve the sale of securities held by the Fund,
with an agreement that the Fund will repurchase such securities at an
agreed-upon price and date. Proceeds from reverse repurchase agreements are
treated as borrowings. The agreements are collateralized by the underlying
securities and are carried at the amount at which the securities will
subsequently be repurchased as specified in the agreements. The maximum amount
outstanding during the period ended April 30, 1998 was $117,134,000 while
borrowings averaged $12,801,586 per day with a weighted average interest rate of
5.62%.
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.
During the six months ended April 30, 1998, 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.
Effective May 1, 1998, the Fund may borrow up to the lesser of (i)
$1,000,000,000 or (ii) the limits set by the prospectus for borrowings.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1998 was
$3,682,213,016 and $3,633,872,643, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1998, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,314,067,633
- --------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (47,200,261)
- --------------------------------------------------------------
Net unrealized appreciation of investment
securities $1,266,867,372
==============================================================
Cost of investments for tax purposes is
$4,058,496,984.
</TABLE>
14
C H A R T E R
<PAGE> 17
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended April 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of Period 26,305 $ 5,836,484
- ---------------------------------------------------------------
Written 123,191 33,079,461
- ---------------------------------------------------------------
Closed (99,024) (29,168,778)
- ---------------------------------------------------------------
Exercised (19,505) (4,755,550)
- ---------------------------------------------------------------
Expired (29,882) (4,881,966)
- ---------------------------------------------------------------
End of period 1,085 $ 109,651
===============================================================
</TABLE>
Open call option contracts written at April 30, 1998 were as follows:
<TABLE>
<CAPTION>
APRIL 30,
NUMBER 1998
CONTRACT STRIKE OF PREMIUM MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
----- -------- ------ --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Franklin Resources,
Inc. May $55 85 $ 12,494 $ 9,563 $2,931
- --------------------------------------------------------------------------------------------------
Franklin Resources,
Inc. Jun 60 1,000 97,157 93,750 3,407
- --------------------------------------------------------------------------------------------------
$109,651 $103,313 $6,338
==================================================================================================
</TABLE>
NOTE 8-PUT OPTIONS PURCHASED
Transactions in put options purchased during the six months ended April 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-------------------------
NUMBER
OF PREMIUMS
CONTRACTS PAID
--------- -----------
<S> <C> <C>
Beginning of Period -- --
- ---------------------------------------------------------------
Purchased 19,775 $ 4,062,444
- ---------------------------------------------------------------
Exercised (17,275) (3,288,169)
- ---------------------------------------------------------------
Expired (2,500) (774,275)
- ---------------------------------------------------------------
End of period 0 $ 0
===============================================================
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in the capital stock outstanding during the six months ended April 30,
1998 and the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold
Class A 32,723,258 $427,839,084 64,563,425 $804,527,781
- --------------------------------------------------------------------------------
Class B 18,612,364 241,441,200 37,105,082 454,511,843
- --------------------------------------------------------------------------------
Class C* 1,219,147 15,914,024 437,883 6,069,012
- --------------------------------------------------------------------------------
Institutional Class 329,502 4,363,215 600,091 7,589,130
- --------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 28,113,951 339,788,931 16,507,011 181,612,880
- --------------------------------------------------------------------------------
Class B 8,740,085 105,063,329 3,210,439 35,080,359
- --------------------------------------------------------------------------------
Class C* 65,694 792,008 159 2,155
- --------------------------------------------------------------------------------
Institutional Class 330,212 4,020,658 193,613 2,149,460
- --------------------------------------------------------------------------------
Reacquired:
Class A (34,428,834) (450,011,750) (59,039,148) (738,440,414)
- --------------------------------------------------------------------------------
Class B (5,400,180) (70,390,550) (7,456,466) (92,300,267)
- --------------------------------------------------------------------------------
Class C* (81,223) (1,074,215) (14,629) (198,599)
- --------------------------------------------------------------------------------
Institutional Class (368,780) (4,849,481) (445,517) (5,490,877)
- --------------------------------------------------------------------------------
49,855,196 $612,896,453 55,661,943 $655,112,463
================================================================================
</TABLE>
* Class C commenced sales on August 4, 1997.
15
C H A R T E R
<PAGE> 18
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during the six months ended April 30, 1998 and each of
the years in the five-year period ended October 31, 1997.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, ---------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.48 $ 11.24 $ 10.66 $ 8.93 $ 9.48 $ 8.38
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.09 0.16 0.24 0.23 0.25 0.19
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 1.64 2.91 1.44 2.07 (0.44) 1.23
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total from investment operations 1.73 3.07 1.68 2.30 (0.19) 1.42
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.16) (0.20) (0.24) (0.20) (0.32)
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Distributions from net realized gains (1.34) (0.67) (0.90) (0.33) (0.16) --
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total distributions (1.39) (0.83) (1.10) (0.57) (0.36) (0.32)
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 13.82 $ 13.48 $ 11.24 $ 10.66 $ 8.93 $ 9.48
============================================================ ======= ======= ======= ======= ======= =======
Total return(a) 14.26% 29.05% 17.29% 27.45% (2.02)% 17.39%
============================================================ ======= ======= ======= ======= ======= =======
Net assets, end of period (000s omitted) $45,224 $40,191 $29,591 $25,538 $21,840 $24,196
============================================================ ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets(b) 0.66%(c)(d) 0.67% 0.69% 0.74% 0.73% 0.79%
============================================================ ======= ======= ======= ======= ======= =======
Ratio of net investment income to average net assets(e) 1.41%(c) 1.21% 2.24% 1.98% 2.76% 2.26%
============================================================ ======= ======= ======= ======= ======= =======
Portfolio turnover rate 74% 170% 164% 161% 126% 144%
============================================================ ======= ======= ======= ======= ======= =======
Average brokerage commission rate(f) $0.0601 $0.0615 $0.0638 N/A N/A N/A
============================================================ ======= ======= ======= ======= ======= =======
Borrowings for the period:
Amount of debt outstanding at end of period (000s omitted) $ -- -- -- -- -- --
============================================================ ======= ======= ======= ======= ======= =======
Average amount of debt outstanding during the period (000s
omitted)(g) $ 111 -- -- -- -- --
============================================================ ======= ======= ======= ======= ======= =======
Average number of shares outstanding during the period (000s
omitted)(g) 3,211 -- -- -- -- --
============================================================ ======= ======= ======= ======= ======= =======
Average amount of debt per share during the period $0.0340 -- -- -- -- --
============================================================ ======= ======= ======= ======= ======= =======
</TABLE>
(a) Total return is not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68% (annualized), 0.68% and 0.70% for 1998-1996.
(c) Ratios are annualized and based on average net assets of $42,274,309.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income prior to fee waivers and/or expense reimbursements were 1.39%
(annualized), 1.20% and 2.23% for 1998-1996.
(f) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
(g) Averages computed on a daily basis.
16
C H A R T E R
<PAGE> 19
<TABLE>
<CAPTION>
Directors & Officers
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
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 Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Capital Management, Inc.
11 Greenway Plaza
Edward K. Dunn Jr. Jonathan C. Schoolar Suite 100
Chairman, Mercantile Mortgage Corp.; Senior Vice President Houston, TX 77046
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and Dana R. Sutton TRANSFER AGENT
President, Mercantile Bankshares Vice President and Assistant Treasurer
A I M Fund Services, Inc.
Jack Fields Melville B. Cox 11 Greenway Plaza
Chief Executive Officer Vice President Suite 100
Texana Global, Inc.; Houston, TX 77046
Formerly Member Renee A. Bamford
of the U.S. House of Representatives Assistant Secretary CUSTODIAN
Carl Frischling P. Michelle Grace State Street Bank and Trust Company
Partner Assistant Secretary 225 Franklin Street
Kramer, Levin, Naftalis & Frankel Boston, MA 02110
Jeffrey H. Kupor
Robert H. Graham Assistant Secretary COUNSEL TO THE FUND
President and Chief Executive Officer
A I M Management Group Inc. Nancy L. Martin Ballard Spahr
Assistant Secretary Andrews & Ingersoll, LLP
John F. Kroeger 1735 Market Street
Formerly Consultant Ofelia M. Mayo Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Assistant Secretary
COUNSEL TO THE DIRECTORS
Lewis F. Pennock Lisa A. Moss
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 Fund Management Company
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
Limited Partnership Assistant Treasurer
</TABLE>
17
C H A R T E R
<PAGE> 20
Long-Term Performance
AIM CONSTELLATION FUND
For shareholders who seek capital appreciation through investments in common
stocks, with emphasis on medium-size and smaller emerging growth companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Constellation Fund Institutional Class performance figures are
historical and reflect reinvestment of all distributions and changes in net
asset value.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The
unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is
widely regarded by investors as representative of the stock market in
general. The Standard & Poor's Mid-Cap Index (S&P 400) is an unmanaged
index comprising common stocks of approximately 400 mid-capitalization
companies.
o The unmanaged Lipper Mid-Cap Fund Index represents an average of the
performance of middle-capitalization growth funds. Results shown reflect
reinvestment of dividends. Lipper Analytical Services, Inc. is an
independent mutual fund performance monitor.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
============================================================
AIM CONSTELLATION FUND
INSTITUTIONAL CLASS
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 3/31/98, most recent calendar quarter-end.
1 Year 35.03%
3 Years 22.85
5 Years 18.99
Inception (4/8/92) 19.70
For periods ended 4/30/98.
1 Year 35.98%
3 Years 22.89
5 Years 20.45
Inception (4/8/92) 19.88
============================================================
18
C O N S T E L L A T I O N
<PAGE> 21
The Managers' Overview
FUND PERFORMANCE REBOUNDS AFTER BOUT WITH "ASIAN FLU"
A roundtable discussion with the Fund management team for AIM Constellation Fund
for the six months ended April 30, 1998.
- -------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 1998?
A. The total return for AIM Constellation Fund's Institutional Class was
11.42%. This is a reflection of the difficult investing environment the Fund
faced, especially during the first half of the reporting period, when the
Asian financial crisis left mid-cap stocks decidedly out of favor. Because
of market uncertainty, investors preferred large, liquid blue-chip stocks.
During the latter half of the reporting period, when some of the concern
about Asia began to wane, the Fund rebounded nicely. During the last three
months of the reporting period, it outperformed both the Standard & Poor's
Mid-Cap 400 Index and the Lipper Mid-Cap Index of comparable mutual funds.
And the Fund's long-term performance remains excellent, as shown in the
chart and tables on the following pages.
Q. WHAT SHAPED MARKET CONDITIONS DURING THE REPORTING PERIOD?
A. As mentioned previously, during the first half of the period, Asia's
currency and market crises dampened stock market performance dramatically.
Investors gravitated toward widely traded blue-chip stocks and also moved
into sectors such as utilities that often provide safe haven when markets
are uncertain.
As the new year unfolded, the markets shrugged off these difficulties.
A much-anticipated slowdown in the U.S. economy, predicted to result from
the troubles in Asia, never materialized. U.S. gross domestic output rose at
a 4.8% annual rate during the first quarter of 1998. Inflation, widely
believed to result from such robust economic expansion, never developed. The
Commerce Department's overall price index rose an annualized 0.9% during the
quarter--its slowest rate in 34 years.
===========================
NET ASSETS UNDER MANAGEMENT
10/31/97 $188.2 million
4/30/98 $214.2 million
===========================
Q. HOW HAVE THE CHANGING MARKET CONDITIONS AFFECTED THE COMPOSITION OF THE
FUND'S PORTFOLIO?
A. We maintained our focus on companies with solid earnings history. While
liquidity-focused markets bid up the stocks of the very largest
companies--the so-called "mega-caps"--to extremely high valuations, we
stayed true to our investment discipline. The Fund invests in small- and
mid-cap stocks. In the short run, this has sometimes been a drawback.
Nevertheless, we believe there is greater growth potential in smaller and
mid-cap companies, especially now, after a two-year bear market in these
stocks.
So we modified the portfolio, but did not make drastic changes. We
trimmed our holdings of energy stocks, which slumped badly because of Asian
turmoil. Technology stocks in such industries as electronics, computers, and
computer software remained the portfolio's largest sector weighting, and we
increased our holdings in the health-care sector and in consumer cyclicals,
especially retailers.
Q. YOU SAY TECHNOLOGY IS YOUR LARGEST WEIGHTING. HASN'T THAT SECTOR BEEN
VOLATILE?
A. This sector is usually volatile, and it was not generally in favor for much
of the reporting period, partly because a few leading companies reported
disappointing earnings and partly because this sector was especially hard
hit by the Asian difficulties. Because many technology companies tend to
have manufacturing facilities in Asia, concern was widespread during the
fourth quarter of 1997 that the bottom could drop out under technology
stocks. That reaction may have been excessive. Most of the electronic
components made in Southeast Asia are shipped to computer manufacturers in
the U.S. The devaluation of Asian currencies is cutting costs, not markets,
for these companies.
We did reduce our technology holdings from about 36% of the portfolio to
about 28%. Part of that reduction was in semiconductor holdings, where
serious overcapacity exists for commodity-product producers.
But overall, the technology sector is still doing well. For example,
personal computer sales were up 16% in the U.S. during the first quarter of
1998. We increased our holdings in the software industry. One of our larger
holdings is BMC Software, Inc., a rapidly growing producer of software
products that improve the efficiency of large-scale business computer
environments--the kind of technology-based productivity improvement that
underpins recent economic expansion and corporate cost control.
We also own several firms known for their expertise in solving the Year
2000 problem, reprogramming computers to recognize this date. For example,
portfolio holding Compuware Corp., a leading information technology
professional services company, sends its experts to a client's location to
reprogram and test the client's computer system to ensure that it is Year
2000-compliant. Another holding is Comdisco, Inc. This company specializes
in helping businesses recover from disasters such as tornadoes or
hurricanes; it also has facilities where a company can test its computer
programs for Year 2000 compliance.
So despite volatility and some negative
19
C O N S T E L L A T I O N
<PAGE> 22
The Managers' Overview
PORTFOLIO COMPOSITION
As of 4/30/98, based on total net assets
NUMBER OF HOLDINGS: 368
<TABLE>
<CAPTION>
=====================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Health Management Associates, Inc.- Class A 1.00% 1. Computers (Software & Services) 10.16%
2. HEALTHSOUTH Corp. 1.00 2. Oil & Gas (Drilling & Equipment) 5.47
3. BMC Software, Inc. 0.98 3. Electronics (Semiconductors) 4.00
4. HBO & Co. 0.95 4. Consumer Finance 3.45
5. Tenet Healthcare Corp. 0.93 5. Retail (Specialty) 3.28
6. Service Corp. International l0.92 6. Communications Equipment 3.22
7. America Online, Inc. 0.89 7. Health Care (Medical Products & Supplies) 3.21
8. EMC Corp. 0.88 8. Health Care (Hospital Management) 2.93
9. Safeway, Inc. 0.85 9. Services (Data Processing) 2.89
10. Omnicare, Inc. 0.81 10. Health Care (Specialized Services) 2.83
Please keep in mind that the Fund's portfolio composition is subject to change
and there is no assurance the Fund will continue to hold any particular
security.
=====================================================================================================================
</TABLE>
earnings surprises, there are still very good stocks in the technology
sector.
Q. AND WHY IS THE RETAIL INDUSTRY ATTRACTIVE?
A. Consumer cyclicals, including retailers, are doing very well in the current
economy. Personal earnings are up, and The Conference Board reported
consumer confidence at a 29-year high in February. Good times are buoying
both discounters like TJX Companies, Inc., owner of the T.J. Maxx apparel
chain, and sellers of popular high-profile brands like Tommy Hilfiger.
Electronics-oriented stores like Best Buy Co., Inc. are boosted by the
arrival of sub-$1,000 personal computers and digital video disks, among
other new products. The Fund's retail holdings were among its best
performers early in 1998. More than 11% of assets were invested in retail
stocks at the close of the reporting period.
Q. YOU ALSO MENTIONED HEALTH CARE. ARE THERE PARTICULAR HOLDINGS IN THE
HEALTH-CARE SECTOR THAT DID WELL FOR YOU?
A. Though reduced slightly over the six-month reporting period, our
health-care holdings are still quite large: about 13% of assets.
Consolidation and cost cutting in the health-care sector have been
benefiting profit margins for service providers, and a number of HMOs and
other care providers were able to raise premiums recently for the first time
in years.
Underlying the improved profit picture of many health-care providers are
systems improvements such as those provided by HBO & Co. HBO produces
software that integrates health-care information so that patient
information, for example, can move seamlessly among doctors' offices,
hospitals and other providers, and insurance companies. HBO typifies the way
good information technology can improve productivity and efficiency.
Another positive development in the health-care arena has been the FDA's
gradual streamlining of filing and approval systems, which has been welcomed
by pharmaceutical firms, especially those with new products or drug delivery
systems. Elan Corp. PLC is one such company. It specializes in designing
pharmaceuticals that deliver their effective ingredients to the patient more
efficiently; Elan has significant research in progress, especially on
treatments for central nervous system disorders.
Q. WHAT DO YOU FORESEE FOR THE FUND IN THE NEXT FEW MONTHS?
A. We are optimistic. Values in the mid-cap sector are simply more attractive
than in the large-cap sector. Earnings of mid-cap and smaller companies are
growing in the double digits, whereas first-quarter year-over-year earnings
growth for the large companies in the S&P 500 was in the low single digits.
You simply get more earnings for your investment in smaller and mid-cap
stocks, especially in view of the ultra high price/earnings ratios of many
blue-chip stocks. We think that ultimately this comparative valuation should
translate into strong performance for mid-size company stocks.
There is evidence that this is already happening. Almost unnoticed by
the popular or business press, the dominance of very large-capitalization
stocks had slipped somewhat by the end of this reporting period. For the
three months ended April 30, 1998, the mid-cap Standard & Poor's 400
outperformed the large-cap S&P 500 index, a distinct change from the past
few years.
Q. AND FOR THE ECONOMY AND MARKETS IN GENERAL? WHAT'S YOUR OUTLOOK THERE?
A. For the investing environment in general, most observers do not expect
dramatic change; they foresee stable interest rates, healthy economic
growth, and continued contained inflation as global competition and lower
energy costs offset the inflationary potential of tight labor markets. While
there are worries about whether the ongoing bull market can be sustained, no
one has identified a good reason for the seven-plus years of domestic
economic expansion to end abruptly.
However, most market participants would welcome some cooling off. One of
the events most likely to trigger a halt in the market's prolonged rise
would be an interest rate hike by the Federal Reserve Board (the Fed).
Although the Fed left interest rates unchanged at its meeting shortly after
the close of the reporting period, it has been hinting about its concern
over rapid economic growth and the dramatic rise in equity values. An
interest rate rise would be forestalled by evidence that the economy is
growing a little less rapidly.
20
C O N S T E L L A T I O N
<PAGE> 23
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-90.18%
AEROSPACE/DEFENSE-0.97%
AAR Corp. 1,000,000 $ 26,187,500
- ---------------------------------------------------------------
BE Aerospace, Inc.(a) 600,000 18,712,500
- ---------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 1,000,000 41,937,500
- ---------------------------------------------------------------
Precision Castparts Corp. 500,000 31,062,500
- ---------------------------------------------------------------
Sundstrand Corp. 500,000 34,531,250
- ---------------------------------------------------------------
152,431,250
- ---------------------------------------------------------------
AIR FREIGHT-0.10%
AirNet Systems, Inc.(a) 560,000 15,120,000
- ---------------------------------------------------------------
AIRLINES-0.48%
Continental Airlines, Inc.(a) 1,000,000 58,875,000
- ---------------------------------------------------------------
Southwest Airlines Co. 600,000 16,462,500
- ---------------------------------------------------------------
75,337,500
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.04%
Danaher Corp. 82,200 5,908,125
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.39%
Summit Bancorp 500,000 25,062,500
- ---------------------------------------------------------------
Northern Trust Corp. 500,000 36,500,000
- ---------------------------------------------------------------
61,562,500
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.42%
AmSouth Bancorporation 500,000 31,187,500
- ---------------------------------------------------------------
Crestar Financial Corp. 500,000 29,906,250
- ---------------------------------------------------------------
Golden State Bancorp, Inc.(a) 750,000 29,250,000
- ---------------------------------------------------------------
Mercantile Bankshares Corp. 500,000 19,187,500
- ---------------------------------------------------------------
National Commerce
Bancorporation 107,700 4,819,575
- ---------------------------------------------------------------
North Fork Bancorporation,
Inc. 1,000,000 37,125,000
- ---------------------------------------------------------------
Star Banc Corp. 625,000 39,492,188
- ---------------------------------------------------------------
TCF Financial Corp. 1,000,000 32,562,500
- ---------------------------------------------------------------
223,530,513
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.26%
Coca-Cola Enterprises Inc. 1,100,000 41,525,000
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.39%
Biogen, Inc.(a) 825,000 36,609,375
- ---------------------------------------------------------------
Curative Health Services,
Inc.(a)(b) 795,000 24,645,000
- ---------------------------------------------------------------
61,254,375
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-1.50%
Chancellor Media Corp.(a) 280,002 13,282,595
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 400,000 37,700,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 1,500,000 53,718,750
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 750,000 33,468,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO
& CABLE)-(CONTINUED)
Heftel Broadcasting Corp.(a) 501,000 $ 21,981,375
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 700,000 39,812,500
- ---------------------------------------------------------------
Liberty Media Group(a) 1,080,000 35,842,500
- ---------------------------------------------------------------
235,806,470
- ---------------------------------------------------------------
CHEMICALS-0.25%
IMC Global, Inc. 1,000,000 36,000,000
- ---------------------------------------------------------------
NL Industries, Inc.(a) 121,700 2,745,856
- ---------------------------------------------------------------
38,745,856
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.11%
ADC Telecommunications,
Inc.(a) 750,000 22,453,125
- ---------------------------------------------------------------
Andrew Corp.(a) 1,000,000 22,875,000
- ---------------------------------------------------------------
Aspect Telecommunications
Corp.(a) 1,000,000 28,750,000
- ---------------------------------------------------------------
Brightpoint, Inc.(a) 1,500,000 29,250,000
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 850,000 40,268,750
- ---------------------------------------------------------------
Digital Microwave Corp.(a) 500,000 5,687,500
- ---------------------------------------------------------------
General Instrument Corp.(a) 1,000,000 22,437,500
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a) 2,000,000 36,875,000
- ---------------------------------------------------------------
REMEC, Inc.(a) 750,000 18,656,250
- ---------------------------------------------------------------
Tellabs, Inc.(a) 1,500,000 106,312,500
- ---------------------------------------------------------------
333,565,625
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.74%
Comdisco, Inc. 1,971,700 87,247,725
- ---------------------------------------------------------------
Dell Computer Corp.(a) 1,200,000 96,900,000
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 1,019,100 59,808,431
- ---------------------------------------------------------------
IDX Systems Corp.(a) 700,000 30,493,750
- ---------------------------------------------------------------
274,449,906
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.44%
Ascend Communications, Inc.(a) 2,790,000 121,539,375
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 500,000 36,625,000
- ---------------------------------------------------------------
FORE Systems, Inc.(a) 3,000,000 68,625,000
- ---------------------------------------------------------------
226,789,375
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.61%
EMC Corp.(a) 3,000,000 138,375,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 900,000 52,087,500
- ---------------------------------------------------------------
Storage Technology Corp.(a) 750,000 63,328,125
- ---------------------------------------------------------------
253,790,625
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-10.05%
America Online, Inc.(a) 1,750,000 140,000,000
- ---------------------------------------------------------------
Applied Voice Technology,
Inc.(a) 155,000 6,839,375
- ---------------------------------------------------------------
Aspect Development, Inc.(a) 363,000 22,982,438
- ---------------------------------------------------------------
</TABLE>
21
C O N S T E L L A T I O N
<PAGE> 24
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Autodesk, Inc. 700,000 $ 32,900,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 1,650,000 154,378,125
- ---------------------------------------------------------------
Broderbund Software,
Inc.(a)(b) 656,900 11,742,088
- ---------------------------------------------------------------
Cadence Design Systems,
Inc.(a) 3,500,000 127,093,750
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 525,000 32,615,625
- ---------------------------------------------------------------
Computer Associates
International, Inc. 750,000 43,921,875
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 1,193,000 62,930,750
- ---------------------------------------------------------------
Compuware Corp.(a) 2,500,000 122,187,500
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 3,000,000 94,500,000
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 1,000,000 46,250,000
- ---------------------------------------------------------------
HBO & Co. 2,500,000 149,531,250
- ---------------------------------------------------------------
Intuit, Inc.(a) 725,000 38,560,938
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 800,000 28,500,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 400,000 36,050,000
- ---------------------------------------------------------------
Network Associates, Inc.(a) 250,000 17,125,000
- ---------------------------------------------------------------
Oracle Corp.(a) 1,387,900 35,911,913
- ---------------------------------------------------------------
Parametric Technology Co.(a) 3,500,000 111,890,625
- ---------------------------------------------------------------
Platinum Technology, Inc.(a) 1,250,000 31,875,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 2,000,000 85,125,000
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 1,250,000 33,046,873
- ---------------------------------------------------------------
Symantec Corp.(a) 1,000,000 29,000,000
- ---------------------------------------------------------------
Synopsys, Inc.(a) 1,300,000 55,900,000
- ---------------------------------------------------------------
Wind River Systems(a) 1,000,000 34,625,000
- ---------------------------------------------------------------
1,585,483,125
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.30%
Action Performance Companies,
Inc.(a) 500,000 17,312,500
- ---------------------------------------------------------------
Blyth Industries, Inc.(a) 806,200 29,577,463
- ---------------------------------------------------------------
46,889,963
- ---------------------------------------------------------------
CONSUMER FINANCE-3.45%
Capital One Financial Corp. 1,000,000 96,062,500
- ---------------------------------------------------------------
ContiFinancial Corp.(a) 446,600 14,402,850
- ---------------------------------------------------------------
Countrywide Credit Industries,
Inc. 636,900 30,810,038
- ---------------------------------------------------------------
FIRSTPLUS Financial Group,
Inc.(a) 1,500,000 72,750,000
- ---------------------------------------------------------------
Household International, Inc. 900,000 118,293,750
- ---------------------------------------------------------------
IMC Mortgage Co.(a)(b) 1,500,000 23,906,250
- ---------------------------------------------------------------
MBNA Corp. 2,750,000 93,156,250
- ---------------------------------------------------------------
Providian Financial Corp. 650,000 39,121,875
- ---------------------------------------------------------------
SLM Holding Corp. 1,286,000 54,896,125
- ---------------------------------------------------------------
543,399,638
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.72%
Bergen Brunswig Corp.-Class A 1,000,000 45,375,000
- ---------------------------------------------------------------
Cardinal Health, Inc. 1,300,000 125,125,000
- ---------------------------------------------------------------
McKesson Corp. 1,422,400 100,545,900
- ---------------------------------------------------------------
271,045,900
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-1.86%
American Power Conversion
Corp.(a) 1,250,000 $ 40,234,375
- ---------------------------------------------------------------
Avid Technology, Inc.(a) 500,000 21,687,500
- ---------------------------------------------------------------
Berg Electronics Corp.(a) 1,000,000 23,812,500
- ---------------------------------------------------------------
Sanmina Corp.(a) 700,000 63,000,000
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 1,500,000 61,781,250
- ---------------------------------------------------------------
Solectron Corp.(a) 1,000,000 44,312,500
- ---------------------------------------------------------------
Symbol Technologies, Inc. 1,000,000 38,500,000
- ---------------------------------------------------------------
293,328,125
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.23%
Arrow Electronics, Inc.(a) 1,300,000 35,506,250
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.23%
General Motors Corp.-Class
H(a) 663,000 36,630,750
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.22%
Perkin-Elmer Corp. 500,000 34,187,500
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-4.00%
Advanced Micro Devices,
Inc.(a) 1,000,000 27,750,000
- ---------------------------------------------------------------
Altera Corp.(a) 850,000 34,425,000
- ---------------------------------------------------------------
Analog Devices, Inc.(a) 1,788,800 69,651,400
- ---------------------------------------------------------------
Atmel Corp.(a) 1,000,000 20,187,500
- ---------------------------------------------------------------
Burr-Brown Corp.(a) 1,125,000 34,242,188
- ---------------------------------------------------------------
Lattice Semiconductor Corp.(a) 500,000 22,812,500
- ---------------------------------------------------------------
Linear Technology Corp.(a) 1,000,000 80,500,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 2,000,000 54,250,000
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 2,500,000 100,937,500
- ---------------------------------------------------------------
Microchip Technology,
Inc.(a)(b) 2,000,175 56,754,966
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 1,000,000 45,500,000
- ---------------------------------------------------------------
Sipex Corp.(a) 100,000 1,987,500
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 700,000 40,381,250
- ---------------------------------------------------------------
Xilinx, Inc.(a) 892,700 40,841,024
- ---------------------------------------------------------------
630,220,828
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS)-0.83%
Applied Materials, Inc.(a) 1,000,000 36,125,000
- ---------------------------------------------------------------
Etec Systems, Inc.(a) 214,200 12,155,850
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 1,250,000 50,390,625
- ---------------------------------------------------------------
Teradyne, Inc.(a) 900,000 32,850,000
- ---------------------------------------------------------------
131,521,475
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.20%
FINOVA Group, Inc. 1,000,000 58,562,500
- ---------------------------------------------------------------
MGIC Investment Corp. 1,450,000 91,350,000
- ---------------------------------------------------------------
SunAmerica, Inc. 800,000 39,950,000
- ---------------------------------------------------------------
189,862,500
- ---------------------------------------------------------------
FOODS-0.26%
Suiza Foods Corp.(a) 700,000 41,475,000
- ---------------------------------------------------------------
</TABLE>
22
C O N S T E L L A T I O N
<PAGE> 25
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOOTWEAR-0.18%
Wolverine World Wide, Inc. 1,000,000 $ 28,875,000
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.18%
International Game Technology 1,000,000 27,812,500
- ---------------------------------------------------------------
GOLD & PRECIOUS METALS MINING-0.02%
Battle Mountain Gold Co. 537,800 3,865,438
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.63%
Alpharma, Inc.-Class A 254,967 5,800,499
- ---------------------------------------------------------------
Columbia Laboratories, Inc.(a) 500,000 4,500,000
- ---------------------------------------------------------------
Forest Laboratories, Inc.(a) 1,200,000 43,425,000
- ---------------------------------------------------------------
Jones Medical Industries,
Inc.(b) 1,600,850 47,225,075
- ---------------------------------------------------------------
Mylan Laboratories, Inc. 2,500,000 67,812,500
- ---------------------------------------------------------------
Parexel International Corp.(a) 350,000 11,725,000
- ---------------------------------------------------------------
R.P. Scherer Corp.(a) 156,900 11,453,700
- ---------------------------------------------------------------
Watson Pharmaceuticals,
Inc.(a) 1,500,000 64,500,000
- ---------------------------------------------------------------
256,441,774
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-2.93%
Health Management Associates,
Inc.-Class A(a) 5,000,030 157,500,945
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 1,800,000 57,825,000
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 3,913,800 146,522,888
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 1,750,000 100,734,374
- ---------------------------------------------------------------
462,583,207
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-1.62%
Beverly Enterprises, Inc.(a) 3,000,000 47,250,000
- ---------------------------------------------------------------
Health Care and Retirement
Corp.(a) 1,250,000 50,937,500
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 5,200,000 156,975,000
- ---------------------------------------------------------------
255,162,500
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.88%
American Oncology Resources,
Inc.(a) 450,000 6,750,000
- ---------------------------------------------------------------
Concentra Managed Care,
Inc.(a) 1,150,000 35,793,750
- ---------------------------------------------------------------
Express Scripts, Inc.-Class
A(a)(b) 700,000 56,000,000
- ---------------------------------------------------------------
First Health Group Corp.(a) 500,000 29,500,000
- ---------------------------------------------------------------
Trigon Healthcare, Inc.(a) 372,500 11,314,687
- ---------------------------------------------------------------
139,358,437
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS
& SUPPLIES)-3.21%
Allegiance Corp. 1,020,200 46,546,625
- ---------------------------------------------------------------
Arterial Vascular Engineering,
Inc.(a) 500,000 17,687,500
- ---------------------------------------------------------------
Biomet, Inc. 800,000 24,000,000
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 500,000 36,156,250
- ---------------------------------------------------------------
DENTSPLY International Inc. 842,200 27,687,325
- ---------------------------------------------------------------
Guidant Corp. 1,250,000 83,593,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS
& SUPPLIES)-(CONTINUED)
Henry Schein, Inc.(a) 900,000 $ 35,100,000
- ---------------------------------------------------------------
Medtronic, Inc. 500,000 26,312,500
- ---------------------------------------------------------------
PSS World Medical, Inc.(a) 1,200,000 26,925,000
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 300,000 26,325,000
- ---------------------------------------------------------------
St. Jude Medical, Inc.(a) 900,000 31,893,750
- ---------------------------------------------------------------
Stryker Corp. 400,000 18,000,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 4,000,000 106,000,000
- ---------------------------------------------------------------
506,227,700
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-2.75%
Alza Corp.(a) 700,000 33,556,250
- ---------------------------------------------------------------
American HomePatient,
Inc.(a)(b) 246,200 4,539,312
- ---------------------------------------------------------------
Covance, Inc.(a) 2,109,600 45,224,550
- ---------------------------------------------------------------
FPA Medical Management,
Inc.(a) 1,000,000 12,500,000
- ---------------------------------------------------------------
Lincare Holdings, Inc.(a) 1,000,000 81,125,000
- ---------------------------------------------------------------
Omnicare, Inc. 3,750,000 128,437,500
- ---------------------------------------------------------------
Orthodontic Centers of
America, Inc.(a) 524,200 11,204,775
- ---------------------------------------------------------------
Quintiles Transnational
Corp.(a) 1,210,000 59,895,000
- ---------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 1,692,933 56,078,406
- ---------------------------------------------------------------
Transition Systems, Inc.(a) 33,300 749,250
- ---------------------------------------------------------------
433,310,043
- ---------------------------------------------------------------
HOMEBUILDING-0.70%
Clayton Homes, Inc. 3,090,000 61,993,125
- ---------------------------------------------------------------
Fleetwood Enterprises, Inc. 507,000 23,417,063
- ---------------------------------------------------------------
Kaufman and Broad Home Corp. 616,900 17,928,656
- ---------------------------------------------------------------
Oakwood Homes Corp. 250,000 7,046,875
- ---------------------------------------------------------------
110,385,719
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.33%
Leggett & Platt, Inc. 1,000,000 51,937,500
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.26%
Fort James Corp. 835,000 41,436,875
- ---------------------------------------------------------------
HOUSEWARES-0.16%
Central Garden and Pet Co.(a) 485,500 16,628,375
- ---------------------------------------------------------------
Helen of Troy Ltd.(a) 435,000 8,917,500
- ---------------------------------------------------------------
25,545,875
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.31%
Provident Companies, Inc. 1,250,000 48,828,125
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.78%
Everest Reinsurance Holdings,
Inc. 750,000 30,937,500
- ---------------------------------------------------------------
Executive Risk Inc. 500,000 33,343,750
- ---------------------------------------------------------------
Mercury General Corp. 914,700 59,226,825
- ---------------------------------------------------------------
123,508,075
- ---------------------------------------------------------------
</TABLE>
23
C O N S T E L L A T I O N
<PAGE> 26
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT BANKING/BROKERAGE-0.50%
Edwards (A.G.), Inc. 750,000 $ 33,750,000
- ---------------------------------------------------------------
Paine Webber Group Inc. 1,000,000 44,812,500
- ---------------------------------------------------------------
78,562,500
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.70%
Franklin Resources, Inc. 1,000,000 53,500,000
- ---------------------------------------------------------------
T. Rowe Price Associates, Inc. 763,900 57,674,450
- ---------------------------------------------------------------
111,174,450
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.59%
Harley-Davidson, Inc. 2,000,000 72,000,000
- ---------------------------------------------------------------
North Face, Inc. (The)(a) 330,000 7,404,375
- ---------------------------------------------------------------
Speedway Motorsports, Inc.(a) 511,200 13,962,150
- ---------------------------------------------------------------
93,366,525
- ---------------------------------------------------------------
LODGING-HOTELS-0.50%
Host Marriott Corp.(a) 896,000 17,416,000
- ---------------------------------------------------------------
Promus Hotel Corp.(a) 1,304,050 58,926,759
- ---------------------------------------------------------------
Sunburst Hospitality Corp.(a) 299,800 2,417,137
- ---------------------------------------------------------------
78,759,896
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.02%
Applied Power, Inc.-Class A 95,000 3,550,625
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.04%
AMETEK, Inc. 300,000 9,131,250
- ---------------------------------------------------------------
Crane Co. 309,700 16,665,731
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 520,000 32,435,000
- ---------------------------------------------------------------
Pentair, Inc. 500,000 21,625,000
- ---------------------------------------------------------------
Thermo Electron Corp.(a) 1,000,000 39,812,500
- ---------------------------------------------------------------
Tyco International Ltd. 823,964 44,906,038
- ---------------------------------------------------------------
164,575,519
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.53%
Avery Dennison Corp. 500,000 26,187,500
- ---------------------------------------------------------------
Cognex Corp.(a) 1,000,000 24,187,500
- ---------------------------------------------------------------
US Filter Corp.(a) 1,032,800 33,695,100
- ---------------------------------------------------------------
84,070,100
- ---------------------------------------------------------------
METAL FABRICATORS-0.17%
Kennametal, Inc. 500,000 26,656,250
- ---------------------------------------------------------------
NATURAL GAS-0.88%
El Paso Natural Gas Co. 1,500,000 55,406,250
- ---------------------------------------------------------------
Equitable Resources, Inc. 750,000 24,375,000
- ---------------------------------------------------------------
KN Energy, Inc. 1,000,000 58,687,500
- ---------------------------------------------------------------
138,468,750
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.41%
Herman Miller, Inc. 1,100,000 33,206,250
- ---------------------------------------------------------------
HON INDUSTRIES, Inc. 963,800 30,841,600
- ---------------------------------------------------------------
64,047,850
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-5.10%
Baker Hughes, Inc. 500,000 $ 20,250,000
- ---------------------------------------------------------------
BJ Services Co.(a) 1,672,400 62,715,000
- ---------------------------------------------------------------
Camco International, Inc. 1,000,000 67,875,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 1,050,000 69,759,375
- ---------------------------------------------------------------
EVI, Inc.(a) 800,000 42,600,000
- ---------------------------------------------------------------
Global Industries Ltd.(a) 2,500,000 56,718,750
- ---------------------------------------------------------------
Input/Output, Inc.(a) 1,500,000 37,312,500
- ---------------------------------------------------------------
Marine Drilling Companies,
Inc.(a) 1,650,000 40,115,625
- ---------------------------------------------------------------
National-Oilwell, Inc.(a) 906,000 34,371,375
- ---------------------------------------------------------------
Noble Drilling Corp.(a) 1,250,000 40,390,625
- ---------------------------------------------------------------
Patterson Energy, Inc.(a) 658,500 9,219,000
- ---------------------------------------------------------------
Pride International, Inc.(a) 2,000,000 48,625,000
- ---------------------------------------------------------------
R&B Falcon Corp.(a) 1,000,000 32,062,500
- ---------------------------------------------------------------
Rowan Cos., Inc.(a) 529,000 15,572,438
- ---------------------------------------------------------------
Santa Fe International Corp. 394,200 15,447,712
- ---------------------------------------------------------------
Smith International, Inc.(a) 1,000,000 58,750,000
- ---------------------------------------------------------------
Transocean Offshore Inc. 500,000 27,937,500
- ---------------------------------------------------------------
Varco International, Inc.(a) 3,000,000 92,250,000
- ---------------------------------------------------------------
Veritas DGC, Inc.(a) 600,000 32,512,500
- ---------------------------------------------------------------
804,484,900
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.76%
Apache Corp. 750,000 26,531,250
- ---------------------------------------------------------------
Burlington Resources, Inc. 750,000 35,250,000
- ---------------------------------------------------------------
Ocean Energy, Inc.(a) 1,521,000 37,264,500
- ---------------------------------------------------------------
Santa Fe Energy Resources,
Inc.(a) 1,750,000 18,046,875
- ---------------------------------------------------------------
St. Mary Land & Exploration
Co. 100,000 3,200,000
- ---------------------------------------------------------------
120,292,625
- ---------------------------------------------------------------
PERSONAL CARE-0.38%
Rexall Sundown, Inc.(a) 1,891,800 60,419,363
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.56%
AES Corp.(a) 1,600,000 88,300,000
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.22%
A.H. Belo Corp. 650,000 34,409,375
- ---------------------------------------------------------------
RAILROADS-0.29%
Kansas City Southern
Industries, Inc. 1,000,000 45,187,500
- ---------------------------------------------------------------
RESTAURANTS-0.92%
Brinker International, Inc.(a) 1,500,000 36,000,000
- ---------------------------------------------------------------
CKE Restaurants, Inc. 1,042,690 36,103,141
- ---------------------------------------------------------------
Cracker Barrel Old Country
Store, Inc.................. 800,000 29,400,000
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(a) 500,000 19,062,500
- ---------------------------------------------------------------
Starbucks Corp.(a) 500,000 24,062,500
- ---------------------------------------------------------------
144,628,141
- ---------------------------------------------------------------
</TABLE>
24
C O N S T E L L A T I O N
<PAGE> 27
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (BUILDING
SUPPLIES)-0.29%
Lowe's Companies, Inc. 650,000 $ 45,459,375
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.74%
Best Buy Co., Inc.(a) 700,000 49,175,000
- ---------------------------------------------------------------
CDW Computer Centers,
Inc.(a)(b) 1,188,700 57,651,950
- ---------------------------------------------------------------
Circuit City Stores, Inc. 1,500,000 60,937,500
- ---------------------------------------------------------------
CompUSA, Inc.(a) 500,000 9,281,250
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 750,000 34,218,750
- ---------------------------------------------------------------
Tech Data Corp.(a) 1,275,000 63,590,625
- ---------------------------------------------------------------
274,855,075
- ---------------------------------------------------------------
RETAIL (DEPARTMENT
STORES)-0.51%
Kohl's Corp.(a) 1,000,000 41,312,500
- ---------------------------------------------------------------
Proffitt's, Inc.(a) 1,000,000 39,750,000
- ---------------------------------------------------------------
81,062,500
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.93%
Dollar General Corp. 781,352 29,593,707
- ---------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 1,040,400 56,441,700
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 800,000 27,200,000
- ---------------------------------------------------------------
Ross Stores, Inc. 734,000 33,993,375
- ---------------------------------------------------------------
147,228,782
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.74%
CVS Corp. 450,000 33,187,500
- ---------------------------------------------------------------
Rite Aid Corp. 2,600,040 83,526,285
- ---------------------------------------------------------------
116,713,785
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.55%
Kroger Co.(a) 2,637,400 110,441,125
- ---------------------------------------------------------------
Safeway, Inc.(a) 3,500,000 133,875,000
- ---------------------------------------------------------------
244,316,125
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.95%
Costco Companies, Inc.(a) 500,000 27,937,500
- ---------------------------------------------------------------
Dayton Hudson Corp. 500,000 43,656,250
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 1,760,000 78,980,000
- ---------------------------------------------------------------
150,573,750
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-3.28%
AutoZone, Inc.(a) 1,500,000 45,281,250
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 1,000,000 49,250,000
- ---------------------------------------------------------------
Finish Line, Inc. (The)-Class
A(a) 500,000 12,375,000
- ---------------------------------------------------------------
General Nutrition Cos.,
Inc.(a) 650,000 23,318,750
- ---------------------------------------------------------------
Hollywood Entertainment
Corp.(a) 1,500,000 18,843,750
- ---------------------------------------------------------------
Inacom Corp.(a) 580,000 20,771,250
- ---------------------------------------------------------------
Michaels Stores, Inc.(a)(b) 1,363,800 41,254,950
- ---------------------------------------------------------------
Office Depot, Inc.(a) 2,200,000 72,875,000
- ---------------------------------------------------------------
OfficeMax, Inc.(a) 581,600 10,941,350
- ---------------------------------------------------------------
PETsMART, Inc.(a) 3,094,300 36,358,025
- ---------------------------------------------------------------
Staples, Inc.(a) 5,073,000 125,239,688
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-(CONTINUED)
Tiffany & Co. 26,600 $ 1,210,300
- ---------------------------------------------------------------
Viking Office Products,
Inc.(a) 1,300,000 31,443,750
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 500,000 27,468,750
- ---------------------------------------------------------------
516,631,813
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.21%
Gap, Inc. 1,000,000 51,437,500
- ---------------------------------------------------------------
Men's Wearhouse,
Inc.(The)(a)(b) 1,500,050 63,189,606
- ---------------------------------------------------------------
Stage Stores, Inc.(a) 329,400 16,943,513
- ---------------------------------------------------------------
TJX Companies, Inc. 1,350,000 59,737,500
- ---------------------------------------------------------------
191,308,119
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.57%
Charter One Financial, Inc. 300,000 20,306,250
- ---------------------------------------------------------------
Dime Bancorp, Inc. 1,250,000 38,359,375
- ---------------------------------------------------------------
GreenPoint Financial Corp. 800,000 31,750,000
- ---------------------------------------------------------------
90,415,625
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.85%
Omnicom Group, Inc. 1,500,000 71,062,500
- ---------------------------------------------------------------
Outdoor Systems, Inc.(a) 1,000,000 31,750,000
- ---------------------------------------------------------------
Snyder Communications, Inc.(a) 750,000 31,875,000
- ---------------------------------------------------------------
134,687,500
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.96%
Choice Hotels International,
Inc.(a) 427,800 7,326,075
- ---------------------------------------------------------------
ChoicePoint, Inc.(a) 467,300 25,584,675
- ---------------------------------------------------------------
Cintas Corp. 940,700 44,800,837
- ---------------------------------------------------------------
Equity Corp. International (a) 779,100 19,331,419
- ---------------------------------------------------------------
Service Corp. International 3,500,000 144,375,000
- ---------------------------------------------------------------
Stewart Enterprises,
Inc.-Class A 2,600,000 66,950,000
- ---------------------------------------------------------------
308,368,006
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.33%
Cambridge Technology Partners,
Inc.(a) 645,400 33,722,150
- ---------------------------------------------------------------
Gartner Group, Inc.-Class A
(a) 1,500,000 49,687,500
- ---------------------------------------------------------------
Shared Medical Systems Corp. 750,000 54,703,125
- ---------------------------------------------------------------
SunGard Data Systems, Inc.(a) 2,000,000 71,250,000
- ---------------------------------------------------------------
209,362,775
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.89%
Affiliated Computer Services,
Inc.(a) 1,000,000 35,125,000
- ---------------------------------------------------------------
Billing Information Concepts
Corp.(a) 1,596,800 44,710,400
- ---------------------------------------------------------------
Ceridian Corp.(a) 1,000,000 56,562,500
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 903,100 41,091,050
- ---------------------------------------------------------------
DST Systems, Inc.(a) 949,300 52,330,163
- ---------------------------------------------------------------
Equifax, Inc. 500,000 19,343,750
- ---------------------------------------------------------------
Fiserv, Inc.(a) 1,275,200 83,366,200
- ---------------------------------------------------------------
National Data Corp. 750,000 30,609,375
- ---------------------------------------------------------------
</TABLE>
25
C O N S T E L L A T I O N
<PAGE> 28
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING)-(CONTINUED)
Paychex, Inc. 1,250,000 $ 67,890,625
- ---------------------------------------------------------------
PMT Services, Inc.(a) 1,250,000 24,375,000
- ---------------------------------------------------------------
455,404,063
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.20%
AccuStaff, Inc.(a) 900,000 32,287,500
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.13%
Corrections Corp. of
America(a) 727,900 20,199,225
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.19%
Valassis Communications,
Inc.(a) 750,000 29,437,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.61%
AirTouch Communications,
Inc.(a) 1,150,000 61,093,750
- ---------------------------------------------------------------
Nextel Communications, Inc.(a) 1,250,000 35,859,375
- ---------------------------------------------------------------
96,953,125
- ---------------------------------------------------------------
TELEPHONE-0.38%
Century Telephone Enterprises 520,450 22,151,653
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 1,000,000 38,250,000
- ---------------------------------------------------------------
60,401,653
- ---------------------------------------------------------------
TEXTILES (APPAREL)-1.90%
Jones Apparel Group, Inc.(a) 1,000,000 59,812,500
- ---------------------------------------------------------------
Liz Claiborne, Inc. 1,000,000 49,187,500
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 1,000,000 24,875,000
- ---------------------------------------------------------------
St. John Knits, Inc. 702,400 31,344,600
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 1,500,000 91,500,000
- ---------------------------------------------------------------
Warnaco Group, Inc. (The) 1,000,000 42,250,000
- ---------------------------------------------------------------
298,969,600
- ---------------------------------------------------------------
TEXTILES (SPECIALTY)-0.18%
Unifi, Inc. 750,000 28,734,375
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.23%
American Disposal Services,
Inc.(a)(b) 1,026,200 41,144,206
- ---------------------------------------------------------------
Thermo Instrument Systems,
Inc.(a) 1,049,900 30,972,050
- ---------------------------------------------------------------
USA Waste Services, Inc.(a) 2,500,000 122,656,250
- ---------------------------------------------------------------
194,772,506
- ---------------------------------------------------------------
Total Domestic Common
Stocks (Cost
$9,310,895,113) 14,223,744,088
===============================================================
</TABLE>
<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-0.39%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.07%
Jacor Communications Inc.,
Conv. Sr. LYON, 5.50%,
06/12/11(c) $ 14,450,000 11,226,639
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.24%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 17,500,000 37,423,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)-0.08%(A)
Alza Corp., Conv. Sub. LYON,
5.25%, 07/14/14(c) $ 19,000,000 $ 12,351,330
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes (Cost
$42,461,937) 61,001,719
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-3.64%
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-1.11%
Barrick Gold Corp. (Gold &
Precious Metals Mining) 750,000 16,828,125
- ---------------------------------------------------------------
Biovail Corp. International
(Health Care-Drugs-Generic &
Other)(a) 250,000 10,218,750
- ---------------------------------------------------------------
CanWest Global Communications
Corp.
(Broadcasting-Television,
Radio & Cable) 1,500,000 28,125,000
- ---------------------------------------------------------------
Newcourt Credit Group, Inc.
(Financial-Diversified) 1,087,500 53,423,438
- ---------------------------------------------------------------
Potash Corp. of Saskatchewan,
Inc. (Chemicals) 350,000 31,259,375
- ---------------------------------------------------------------
Precision Drilling Corp. (Oil
& Gas-Drilling &
Equipment)(a) 1,500,000 35,812,500
- ---------------------------------------------------------------
175,667,188
- ---------------------------------------------------------------
FINLAND-0.81%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 1,610,300 107,688,813
- ---------------------------------------------------------------
Nokia Oyj A.B.-Class A
(Communications Equipment) 305,300 20,482,212
- ---------------------------------------------------------------
128,171,025
- ---------------------------------------------------------------
FRANCE-0.20%
Coflexip S.A.
(Manufacturing-Specialized) 439,500 31,314,375
- ---------------------------------------------------------------
GERMANY-0.11%
Adidas Salomon A.G. (Footwear) 100,000 16,582,130
- ---------------------------------------------------------------
IRELAND-0.37%
CBT Group PLC-ADR
(Computers-Software &
Services)(a) 98,800 5,026,450
- ---------------------------------------------------------------
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic &
Other)(a) 850,000 52,806,250
- ---------------------------------------------------------------
57,832,700
- ---------------------------------------------------------------
ISRAEL-0.17%
ECI Telecommunications Ltd.
(Communications Equipment) 500,000 15,250,000
- ---------------------------------------------------------------
Tecnomatix Technologies Ltd.
(Computers-Software &
Services)(a) 479,500 12,167,312
- ---------------------------------------------------------------
27,417,312
- ---------------------------------------------------------------
</TABLE>
26
C O N S T E L L A T I O N
<PAGE> 29
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ITALY-0.07%
Telecom Italia Mobile S.p.A.
(Telecommunications-
Cellular/Wireless) 1,074,000 $ 6,152,907
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 596,666 4,495,163
- ---------------------------------------------------------------
10,648,070
- ---------------------------------------------------------------
NETHERLANDS-0.21%
Core Laboratories N.V. (Oil &
Gas-Drilling & Equipment)(a) 800,000 22,700,000
- ---------------------------------------------------------------
VNU-Verenigde Nederlandse
Uitgeversbedrijven Vereniged
Bezit (Publishing) 328,500 10,635,068
- ---------------------------------------------------------------
33,335,068
- ---------------------------------------------------------------
SWEDEN-0.33%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 496,300 25,528,431
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-Class B
(Communications Equipment) 503,700 26,544,768
- ---------------------------------------------------------------
52,073,199
- ---------------------------------------------------------------
UNITED KINGDOM-0.26%
Granada Group PLC (Leisure
Time-Products) 390,000 6,718,433
- ---------------------------------------------------------------
Stolt Comex Seaway, S.A. (Oil
& Gas-Exploration &
Production)(a) 1,050,000 34,125,000
- ---------------------------------------------------------------
40,843,433
- ---------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests (Cost $388,271,464) 573,884,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MASTER NOTE AGREEMENT-0.54%
Merrill Lynch Co. Inc.,
5.75%(d)
(Cost $85,000,000) $ 85,000,000 $ 85,000,000
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-4.72%(e)
BZW Securities Inc., 5.55%,
05/01/98(f) 369,950,070 369,950,070
- ---------------------------------------------------------------
Dean Witter Reynolds, Inc.,
5.55%, 05/01/98(g) 11,239 11,239
- ---------------------------------------------------------------
Goldman, Sachs & Co., 5.53%,
05/01/98(h) 22,353,793 22,353,793
- ---------------------------------------------------------------
HSBC Securities, Inc., 5.55%,
05/01/98(i) 345,000,000 345,000,000
- ---------------------------------------------------------------
UBS Securities LLC, 5.58%,
05/01/98(j) 7,696,137 7,696,137
- ---------------------------------------------------------------
Total Repurchase
Agreements
(Cost $745,011,239) 745,011,239
- ---------------------------------------------------------------
TIME DEPOSIT-0.57%
Deutsche Morgan Grenfell Inc.,
5.50%
(Cost $90,000,000) 90,000,000 90,000,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.04% 15,778,641,546
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(0.04%) (5,835,525)
- ---------------------------------------------------------------
NET ASSETS-100.00% $ 15,772,806,021
===============================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has never owned enough of the outstanding voting securities of any
issuer to have control (as defined in the Investment Company Act of 1940) of
that issuer. The aggregate market value of these securities as of 04/30/98
was $428,053,403 which represented 2.71% of the Fund's net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of original
issue discount.
(d) Master Note Purchase Agreement may be terminated by either party upon two
business days' prior written notice, at which time all amounts outstanding
under notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on 04/30/98.
(e) Collateral on repurchase agreements, include the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$700,107,917. Collateralized by $710,068,000 U.S. Government obligations,
5.50% to 5.75% due 11/15/98 to 04/15/03 with an aggregate market value at
04/30/98 of $714,001,370.
(g) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$300,046,250. Collateralized by $307,111,000 U.S. Government obligations,
0% to 9.40% due 06/10/98 to 09/26/19 with an aggregate market value at
04/30/98 of $306,000,308.
(h) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$500,076,806. Collateralized by $495,889,000 U.S. Government obligations,
0% to 7.75% due 07/23/98 to 01/15/08 with an aggregate market value at
04/30/98 of $510,500,080.
(i) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$600,092,500. Collateralized by $613,541,000 U.S. Government obligations,
0% to 5.755% due 05/13/98 to 07/30/07 with an aggregate market value at
04/30/98 of $612,003,354.
(j) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$500,077,500. Collateralized by $787,814,792 U.S. Government obligations,
0% to 15% due 01/01/01 to 05/01/28 with an aggregate market value at
04/30/98 of $510,029,679.
ABBREVIATIONS:
<TABLE>
<S> <C>
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
LYON - Liquid Yield Option Notes
Sub. - Subordinated
</TABLE>
See Notes to Financial Statements.
27
C O N S T E L L A T I O N
<PAGE> 30
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$10,661,639,753) $15,778,641,546
- ------------------------------------------------------------
Receivables for:
Investments sold 134,687,761
- ------------------------------------------------------------
Capital stock sold 31,826,007
- ------------------------------------------------------------
Dividends and interest 1,989,266
- ------------------------------------------------------------
Investment for deferred compensation plan 116,435
- ------------------------------------------------------------
Other assets 64,698
- ------------------------------------------------------------
Total assets 15,947,325,713
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 111,831,771
- ------------------------------------------------------------
Capital stock reacquired 46,035,207
- ------------------------------------------------------------
Deferred compensation 116,435
- ------------------------------------------------------------
Accrued advisory fees 7,761,900
- ------------------------------------------------------------
Accrued administrative services fees 23,840
- ------------------------------------------------------------
Accrued directors' fees 23,600
- ------------------------------------------------------------
Accrued distribution fees 3,919,133
- ------------------------------------------------------------
Accrued transfer agent fees 2,919,114
- ------------------------------------------------------------
Accrued operating expenses 1,888,692
- ------------------------------------------------------------
Total liabilities 174,519,692
- ------------------------------------------------------------
Net assets applicable to shares outstanding $15,772,806,021
============================================================
NET ASSETS:
Class A $15,315,819,440
============================================================
Class B $ 187,027,884
============================================================
Class C $ 55,892,833
============================================================
Institutional Class $ 214,065,864
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 509,744,770
============================================================
Class B:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 6,258,445
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 1,870,434
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,910,252
============================================================
Class A:
Net asset value and redemption price per
share $ 30.05
============================================================
Offering price per share:
(Net asset value of $30.05 divided
by 94.50%) $ 31.80
============================================================
Class B:
Net asset value and offering price per
share $ 29.88
============================================================
Class C:
Net asset value and offering price per
share $ 29.88
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 30.98
- ------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $382,423 foreign
withholding tax) $ 19,770,258
- ------------------------------------------------------------
Interest 23,324,243
- ------------------------------------------------------------
Total investment income 43,094,501
- ------------------------------------------------------------
EXPENSES:
Advisory fees 45,482,932
- ------------------------------------------------------------
Administrative services fees 138,746
- ------------------------------------------------------------
Custodian fees 472,092
- ------------------------------------------------------------
Directors' fees 62,896
- ------------------------------------------------------------
Distribution fees-Class A 21,302,650
- ------------------------------------------------------------
Distribution fees-Class B 412,862
- ------------------------------------------------------------
Distribution fees-Class C 179,794
- ------------------------------------------------------------
Transfer agent fees-Class A 11,608,835
- ------------------------------------------------------------
Transfer agent fees-Class B 107,105
- ------------------------------------------------------------
Transfer agent fees-Class C 39,775
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 8,715
- ------------------------------------------------------------
Other 947,321
- ------------------------------------------------------------
Total expenses 80,763,723
- ------------------------------------------------------------
Less: Fees waived by advisor (1,562,903)
- ------------------------------------------------------------
Expenses paid indirectly (131,832)
- ------------------------------------------------------------
Net expenses 79,068,988
- ------------------------------------------------------------
Net investment income (loss) (35,974,487)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 527,178,883
- ------------------------------------------------------------
Foreign currencies 8,919
- ------------------------------------------------------------
Futures contracts (22,094,375)
- ------------------------------------------------------------
Option contracts 286,346
- ------------------------------------------------------------
505,379,773
- ------------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 1,114,670,612
- ------------------------------------------------------------
Foreign currencies (1,959)
- ------------------------------------------------------------
Futures contracts 16,400,635
- ------------------------------------------------------------
1,131,069,288
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 1,636,449,061
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $1,600,474,574
============================================================
</TABLE>
See Notes to Financial Statements.
28
C O N S T E L L A T I O N
<PAGE> 31
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1998 and the year ended October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (35,974,487) $ (51,626,612)
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 505,379,773 1,046,160,029
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 1,131,069,288 1,234,273,644
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,600,474,574 2,228,807,061
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (1,004,026,712) (401,536,883)
- -------------------------------------------------------------------------------------------------
Class B (2,316,706) --
- -------------------------------------------------------------------------------------------------
Class C (1,919,835) --
- -------------------------------------------------------------------------------------------------
Institutional Class (13,223,346) (10,336,039)
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 442,661,670 1,280,740,251
- -------------------------------------------------------------------------------------------------
Class B 173,539,816 --
- -------------------------------------------------------------------------------------------------
Class C 31,310,483 22,611,449
- -------------------------------------------------------------------------------------------------
Institutional Class 17,247,105 (139,767,829)
- -------------------------------------------------------------------------------------------------
Net increase in net assets 1,243,747,049 2,980,518,010
=================================================================================================
NET ASSETS:
Beginning of period 14,529,058,972 11,548,540,962
- -------------------------------------------------------------------------------------------------
End of period $15,772,806,021 $14,529,058,972
- -------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $10,185,392,653 $ 9,520,633,579
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (36,244,730) (270,243)
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 506,656,051 1,022,762,877
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 5,117,002,047 3,985,932,759
- -------------------------------------------------------------------------------------------------
$15,772,806,021 $14,529,058,972
=================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six separate portfolios: AIM
Constellation Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund and AIM Weingarten Fund. The Fund currently
offers four different classes of shares: Class A shares, Class B shares, Class C
shares and the Institutional Class. Class B shares commenced sales on November
3, 1997. 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. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is to seek capital appreciation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service
29
C O N S T E L L A T I O N
<PAGE> 32
may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as yield, type of issue, coupon rate and
maturity date. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in
foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which would not be reflected in
the computation of the Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair market value as determined in good
faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses--Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
E. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of that security. The Fund could be exposed to
risk if counterparties to the contracts are unable to meet the terms of
their contracts.
G. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contracts are open, changes in the
value of the contracts are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contracts at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contracts are closed, the Fund recognizes a realized
gain or loss equal to the difference between the proceeds from, or cost of,
the closing transaction and the Fund's basis in the contract. Risks include
the possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at
the stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at
such earlier time at which the Fund effects a closing purchase transaction
by purchasing (at a price which may be higher than that received when the
call option was written) a call option identical to the one originally
written.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the master investment advisory agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
agreed to voluntarily waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the voluntary waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets,
30
C O N S T E L L A T I O N
<PAGE> 33
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of the Fund's average daily net assets
in excess of $150 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion. During the six months ended
April 30, 1998, AIM waived fees of $1,562,903. The waiver is entirely voluntary
but approval is required by the Board of Directors for any decision by AIM to
discontinue the waiver. Under the terms of a master sub-advisory agreement
between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM
Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1998, AIM
was reimbursed $138,746 for such services.
The Fund, pursuant to a transfer agent and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency and shareholder services to the Fund. On September 20, 1997, the Board of
Directors approved appointment of AFS as transfer agent of the Institutional
Class effective December 29, 1997. During the six months ended April 30, 1998,
AFS was paid $5,353,661 with respect to the Class A, Class B and Class C shares
and for the period December 29, 1997 through April 30, 1998, AFS was paid $6,030
with respect to the Institutional Class. Prior to the effective date of the
agreement with AFS, the Fund paid A I M Institutional Fund Services, Inc. $2,685
pursuant to a transfer agency and shareholder services agreement with respect to
the Institutional Class for the period November 1, 1997 through December 28,
1997.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for 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 and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.30% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. The Fund, pursuant
to the Class B Plan, pays AIM Distributors compensation at an annual rate of
1.00% of the average daily net assets attributable to the Class B shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer, or pledge to
one or more designees, its rights to all or a designated portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges received by AIM Distributors
related to the Class B shares. During the six months ended April 30, 1998, the
Class A shares, Class B shares and Class C shares paid AIM Distributors
$21,302,650, $412,862, and $179,794, respectively as compensation under the
Plans.
AIM Distributors received commissions of $3,247,503 from sales of the Class A
shares of the Fund during six months ended April 30, 1998. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year six months ended April
30, 1998, AIM Distributors received commissions of $208,489 in contingent
deferred sales charges imposed on the redemptions of Fund shares. Certain
officers and directors of the Company are officers and directors of AIM, AIM
Capital, AIM Distributors, AFS, and FMC.
During the six months ended April 30, 1998, the Fund paid legal fees of
$11,568 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
During the six months ended April 30, 1998, the fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $80,915 and $50,917, respectively, under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $131,832 during the six months ended April 30, 1998.
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.
During the six months ended April 30, 1998, 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.
Pursuant to an amendment to the line of credit agreement effective May 1,
1998, the Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the
limits set by the prospectus for borrowings.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1998 was
$5,208,411,142 and $5,779,274,077, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1998, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $5,246,115,470
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (140,690,702)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $5,105,424,768
==========================================================
</TABLE>
Cost of investments for tax purposes is $10,673,216,778.
31
C O N S T E L L A T I O N
<PAGE> 34
NOTE 7-CAPITAL STOCK
Changes in the capital stock outstanding during the six months ended April 30,
1998 and the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 136,637,646 $ 3,814,563,362 211,624,665 $ 5,717,830,615
- --------------------------------------------------------------------------------------
Class B* 6,686,341 185,919,918 -- --
- --------------------------------------------------------------------------------------
Class C** 1,269,109 35,353,346 745,655 22,872,597
- --------------------------------------------------------------------------------------
Institutional Class 1,247,605 35,117,654 5,274,034 141,917,489
- --------------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 37,921,261 959,396,206 15,529,296 381,406,093
- --------------------------------------------------------------------------------------
Class B* 88,205 2,225,150 -- --
- --------------------------------------------------------------------------------------
Class C** 72,234 1,823,183 -- --
- --------------------------------------------------------------------------------------
Institutional Class 484,141 12,607,035 387,258 9,720,186
- --------------------------------------------------------------------------------------
Reacquired:
Class A (154,721,807) (4,331,297,898) (178,999,514) (4,818,496,457)
- --------------------------------------------------------------------------------------
Class B* (516,101) (14,605,252) -- --
- --------------------------------------------------------------------------------------
Class C** (208,072) (5,866,046) (8,492) (261,148)
- --------------------------------------------------------------------------------------
Institutional Class (1,091,093) (30,477,584) (10,657,023) (291,405,504)
- --------------------------------------------------------------------------------------
27,869,469 $ 664,759,074 43,895,879 $ 1,163,583,871
======================================================================================
</TABLE>
*Class B Shares commenced sales on November 3, 1997.
**Class C Shares commenced sales on August 4, 1997.
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended April 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period -- --
- ----------------------------------- ------ -----------
Written 18,204 $ 4,967,371
- ----------------------------------- ------ -----------
Closed (9,204) (2,394,658)
- ----------------------------------- ------ -----------
Exercised (4,000) (2,262,924)
- ----------------------------------- ------ -----------
Expired (5,000) (309,789)
- ----------------------------------- ------ -----------
End of Period 0 $ 0
=================================== ====== ===========
</TABLE>
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during the six months ended April 30, 1998 and each of
the years in the five-year period ended October 31, 1997.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 30.00 $ 26.01 $ 24.05 $ 18.49 $ 17.13 $ 13.27
- ----------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (0.01) 0.02 0.04 0.02 0.03 --
- ----------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains on securities (both realized and
unrealized) 3.05 4.86 2.67 6.06 1.33 3.86
- ----------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 3.04 4.88 2.71 6.08 1.36 3.86
- ----------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Distributions from net realized gains (2.06) (0.89) (0.75) (0.52) -- --
- ----------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 30.98 $ 30.00 $ 26.01 $ 24.05 $ 18.49 $ 17.13
===================================================== ======== ======== ======== ======== ======== ========
Total return(a) 11.42% 19.42% 11.81% 34.09% 7.94% 29.09%
===================================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $214,066 $188,109 $293,035 $138,918 $ 39,847 $ 12,338
===================================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets(b) 0.64%(c)(d) 0.65% 0.66% 0.66% 0.69% 0.87%
===================================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets(e) (0.05)%(c) 0.06% 0.21% 0.18% 0.36% 0.04%
===================================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 37% 67% 58% 45% 79% 70%
===================================================== ======== ======== ======== ======== ======== ========
Average brokerage commission rate paid(f) $ 0.0565 $ 0.0576 $ 0.0596 N/A N/A N/A
===================================================== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Total return is not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.66% (annualized), 0.67%, 0.67%, 0.68% and 0.70% for 1998-1994.
(c) Ratios are annualized and based on average net assets of $195,277,729.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) prior to fee waivers and/or expense reimbursements were
(0.07)% (annualized), 0.04%, 0.20%, 0.16% and 0.35% for 1998-1994.
(f) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
32
C O N S T E L L A T I O N
<PAGE> 35
Directors & Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
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 Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Capital Management, Inc.
11 Greenway Plaza
Edward K. Dunn Jr. Jonathan C. Schoolar Suite 100
Chairman, Mercantile Mortgage Corp.; Senior Vice President Houston, TX 77046
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and Dana R. Sutton TRANSFER AGENT
President, Mercantile Bankshares Vice President and Assistant Treasurer
A I M Fund Services, Inc.
Jack Fields Melville B. Cox 11 Greenway Plaza
Chief Executive Officer Vice President Suite 100
Texana Global, Inc.; Houston, TX 77046
Formerly Member Renee A. Bamford
of the U.S. House of Representatives Assistant Secretary CUSTODIAN
Carl Frischling P. Michelle Grace State Street Bank and Trust Company
Partner Assistant Secretary 225 Franklin Street
Kramer, Levin, Naftalis & Frankel Boston, MA 02110
Jeffrey H. Kupor
Robert H. Graham Assistant Secretary COUNSEL TO THE FUND
President and Chief Executive Officer
A I M Management Group Inc. Nancy L. Martin Ballard Spahr
Assistant Secretary Andrews & Ingersoll, LLP
John F. Kroeger 1735 Market Street
Formerly Consultant Ofelia M. Mayo Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Assistant Secretary
COUNSEL TO THE DIRECTORS
Lewis F. Pennock Lisa A. Moss
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 Fund Management Company
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
Limited Partnership Assistant Treasurer
</TABLE>
33
C O N S T E L L A T I O N
<PAGE> 36
Long-Term Performance
AIM WEINGARTEN FUND
For shareholders who seek long-term growth of capital through investments
primarily in common stocks of leading U.S. companies considered by management to
have strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Weingarten Fund Institutional Class performance figures are historical
and reflect reinvestment of all distributions and changes in net asset
value.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor. The unmanaged Lipper Growth Fund Index represents an average of the
performance of the 30 largest growth mutual funds.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The unmanaged
Standard & Poor's Composite Index of 500 Stocks (S&P 500) is widely regarded
by investors as representative of the stock market in general. The Standard
& Poor's Mid-Cap Index (S&P 400) is an unmanaged index comprising common
stocks of approximately 400 mid-capitalization companies.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
============================================================
AIM WEINGARTEN FUND
INSTITUTIONAL CLASS
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 3/31/98, most recent calendar quarter-end.
1 Year 45.28%
3 Years 28.17
5 Years 19.17
Inception (3/31/97) 16.65
For periods ended 4/30/98.
1 Year 42.17%
3 Years 27.81
5 Years 20.66
Inception (10/8/91) 16.74
============================================================
34
W E I N G A R T E N
<PAGE> 37
The Managers' Overview
FUND PERFORMANCE SOLID AS MARKETS
SHRUG OFF "ASIAN FLU"
A roundtable discussion with the management team for AIM Weingarten Fund for the
six-month period ended April 30, 1998.
- --------------------------------------------------------------------------------
------------------------------------
But we follow earnings growth for
individual companies, so our model
picks up sectors that are showing
relative earnings momentum.
------------------------------------
Q. THE MARKETS PERFORMED A TURNAROUND DURING THE SIX MONTHS ENDED APRIL 30,
COMING BACK FROM THE STEEP DECLINE LATE IN OCTOBER 1997. HOW DID THE FUND DO
IN THIS ENVIRONMENT?
A. Fund performance was very good: 18.24% total return for the Institutional
Class. This essentially matches the performance of other growth funds
included in the Lipper Growth Fund Index, which produced total return of
18.15% over the same period.
Q. WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
A. During the first half of the reporting period, Asia's currency and market
crises dampened stock market performance dramatically. Investors gravitated
toward widely traded blue-chip stocks, so mid-size stocks were particularly
hard hit. While predominantly a large-cap mutual fund, AIM Weingarten Fund
has a big stake in smaller companies also--about one-third of net assets
were mid-capitalization stocks at the close of the reporting period. So when
markets focus so intensely on the very largest companies--the so-called
"mega-caps"--those mid-cap Fund holdings tend to underperform.
As the new year unfolded, however, the markets seemed to shrug off
Asia's difficulties. The much-anticipated slowdown in the U.S. economy,
predicted to result from the Asian troubles, has been less serious than
expected. U.S. gross domestic output rose at a 4.8% annual rate during the
first quarter of 1998. Inflation, perhaps as a consequence, remained low.
The Commerce Department's overall price index rose an annualized 0.9% during
the quarter--its slowest rate in 34 years.
Fund performance rebounded, too, and during the latter half of the
reporting period, the Fund outperformed both the S&P 500 and the Lipper
Growth Fund Index.
===========================
NET ASSETS UNDER MANAGEMENT
10/31/97 $60.1 million
4/30/98 $73.8 million
===========================
Q. DID YOU ALTER THE PORTFOLIO AS MARKET CONDITIONS CHANGED?
A. Not drastically. We trimmed holdings of energy stocks, which fell out of
favor in the wake of the Asian situation. We slightly increased our holdings
in the health-care sector. Financial stocks and technology stocks remained
our two largest sector weightings even though we did not increase or
decrease holdings of either group very much.
Q. WHY ARE FINANCIAL STOCKS STILL ATTRACTIVE? THEY WERE PROMINENT IN THE
PORTFOLIO SIX MONTHS AGO.
A. Traditionally, financial stocks--companies like banks and brokerage
houses--have not been thought of as growth stocks. But we follow earnings
growth for individual companies, so our model picks up sectors that are
showing relative earnings momentum. This pulls us into sectors that may grow
very well for a few years that a traditional growth manager might not even
consider. With financial markets ebullient, interest rates stable, and the
trend toward globalization and consolidation unabated, financial stocks have
certainly shown growth-stock-like profits recently. At approximately 20% of
net assets, financials represented the largest sector weighting in the
Fund's portfolio at the reporting period's close, as they did six months
earlier.
Emblematic of what is going on in this field is the merger, announced in
April, of insurance giant Travelers Group, Inc. and major money-center
banker Citicorp--two stocks in the portfolio. This is the largest corporate
merger in history; it melds two financial-services leaders that both
reported solid earnings for the first quarter of 1998.
Q. YOU SAY TECHNOLOGY, A TRADITIONAL GROWTH SECTOR, IS YOUR SECOND-LARGEST
WEIGHTING. WHY?
A. This sector was not generally in favor during much of the reporting period
because of the Asian downdraft and because a few leading companies reported
disappointing earnings. Nevertheless, the technology sector is still doing
well. For example, personal computer sales were up 16% in the U.S. during
the first quarter of 1998. This was good news for portfolio holdings such as
Dell Computer Corp., which has reported a string of earnings increases, and
also for other technology sector leaders such as Microsoft Corp. and Intel
Corp., which
35
W E I N G A R T E N
<PAGE> 38
THE MANAGERS' OVERVIEW
PORTFOLIO HOLDINGS
As of 4/30/98, based on total net assets
TOTAL NUMBER OF HOLDINGS: 194
<TABLE>
<CAPTION>
============================================================================================================
TOP 10 INDUSTRIES TOP 10 HOLDINGS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Computers (Software & Services) 5.80% 1. Microsoft Corp. 1.97%
2. Financial (Diversified) 5.45 2. Intel Corp. 1.86
3. Health Care (Medical Products & Supplies) 4.19 3. Merck & Co., Inc. 1.86
4. Health Care (Diversified) 3.66 4. MCI Communications Corp. 1.75
5. Health Care (Drugs-Major Pharmaceuticals) 3.56 5. Service Corp. International 1.29
6. Manufacturing (Diversified) 3.02 6. Freddie Mac 1.26
7. Broadcasting (Television, Radio & Cable) 2.96 7. Lucent Technologies, Inc. 1.25
8. Banks (Major Regional) 2.92 8. Warner-Lambert Co. 1.10
9. Telecommunications (Long Distance) 2.61 9. Chase Manhattan Corp. (The) 1.09
10. Equipment (Semiconductors) 2.60 10. Fannie Mae 1.06
Please keep in mind that the Fund's portfolio composition is subject to change
and there is no assurance the Fund will continue to hold any particular
security.
============================================================================================================
</TABLE>
are among our largest holdings. All together, technology stocks represented
about 19% of net assets at the close of the reporting period.
Q. AND WHY DOES THE HEALTH-CARE SECTOR REMAIN A MAJOR EMPHASIS?
A. Our health-care holdings were increased during the reporting period to
about 15% of assets. A major positive factor here has been the FDA's gradual
streamlining of filing and approval systems. This development has been
welcomed by pharmaceutical firms, especially those with new products or drug
delivery systems. A steady stream of new pharmaceutical products has been a
significant contributor to this sector's recent good performance. For
example, Merck & Co., Inc., a solid portfolio holding with such
well-established products as the anti-cholesterol drug Zocor, has developed
an anti-migraine drug that is currently being reviewed for marketing in the
U.S.
A consistent growth stock, Merck represents what we dub the "core"
portion of the Fund, companies with proven long-term consistent earnings
performance. Other portfolio holdings are companies showing momentum in
their earnings growth. As corporate earnings growth has decelerated
recently, we have found ourselves migrating more into core companies with
reliable earnings records.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND IN THE NEAR TERM?
A. Toward the close of the reporting period, there were some cautionary signs
for a few of our major holdings, especially the antitrust campaign against
Microsoft and the heightened scrutiny of mergers, such as the one involving
MCI Communications Corp., which planned to merge with WorldCom, Inc.
By and large, though, the environment for the Fund appears promising.
Almost unnoticed by the popular or business press, the dominance of very
large-capitalization stocks had slipped somewhat by the end of this
reporting period. For the three months ended April 30, 1998, the mid-cap
Standard & Poor's 400 outperformed the large-cap S&P 500 Index, a distinct
change from the very narrow markets of the past few years. Given AIM
Weingarten Fund's sizable stake in the mid-cap portion of the market, this
is good news. Of course, large-cap stocks were still performing well too, so
the Fund seems very well balanced.
Q. AND FOR THE ECONOMY AND MARKETS IN GENERAL? WHAT'S YOUR OUTLOOK THERE?
A. For the investing environment in general, most observers do not expect
dramatic change; they foresee stable interest rates, reasonable economic
growth, and continued contained inflation as global competition and lower
energy costs offset the inflationary potential of tight labor markets. No
one has identified a good reason for the seven-plus years of domestic
economic expansion to end abruptly.
However, most market participants would welcome some cooling off. One of
the events most likely to trigger a halt in the market's prolonged rise
would be an interest rate hike by the Federal Reserve Board (the Fed).
Although the Fed left interest rates unchanged at its meeting shortly after
the close of the reporting period, it has been hinting about its concern
over rapid economic growth and the dramatic rise in equity values. An
interest rate rise would be forestalled by evidence that the economy is
growing a little less rapidly.
36
W E I N G A R T E N
<PAGE> 39
SCHEDULE OF INVESTMENTS
April 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-86.48%
AEROSPACE/DEFENSE-0.61%
Sundstrand Corp. 650,000 $ 44,890,625
- ---------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.36%
Universal Corp. 700,000 26,206,250
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.53%
Federal-Mogul Corp. 600,000 38,812,500
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-2.53%
BankAmerica Corp. 450,000 38,250,000
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 575,000 79,673,438
- ---------------------------------------------------------------
Citicorp 450,000 67,725,000
- ---------------------------------------------------------------
185,648,438
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.38%
North Fork Bancorporation, Inc. 750,000 27,843,750
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.96%
CBS Corp. 1,100,000 39,187,500
- ---------------------------------------------------------------
Chancellor Media Corp.(a) 550,000 26,090,625
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 180,230 16,986,678
- ---------------------------------------------------------------
Comcast Corp.-Class A 1,500,000 53,718,750
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 400,000 22,750,000
- ---------------------------------------------------------------
Tele-Communications, Inc.(a) 1,800,000 58,050,000
- ---------------------------------------------------------------
216,783,553
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.32%
Millennium Chemicals Inc. 650,000 23,318,750
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.78%
Lucent Technologies, Inc. 1,200,000 91,350,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 550,000 38,981,250
- ---------------------------------------------------------------
130,331,250
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-2.17%
Compaq Computer Corp. 1,200,000 33,675,000
- ---------------------------------------------------------------
Dell Computer Corp.(a) 575,000 46,431,250
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 650,000 38,146,875
- ---------------------------------------------------------------
International Business Machines
Corp. 350,000 40,556,250
- ---------------------------------------------------------------
158,809,375
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.35%
Cisco Systems, Inc.(a) 350,000 25,637,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (PERIPHERALS)-0.72%
EMC Corp.(a) 1,150,000 $ 53,043,750
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-5.80%
Advanced Fibre Communications,
Inc.(a) 800,000 33,900,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 500,000 46,781,250
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 950,000 34,496,875
- ---------------------------------------------------------------
Computer Associates
International, Inc. 600,000 35,137,500
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 700,000 36,925,000
- ---------------------------------------------------------------
Compuware Corp.(a) 750,000 36,656,250
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 740,000 23,310,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,600,000 144,200,000
- ---------------------------------------------------------------
Unisys Corp.(a) 1,500,000 33,656,250
- ---------------------------------------------------------------
425,063,125
- ---------------------------------------------------------------
CONSUMER FINANCE-1.14%
Countrywide Credit Industries,
Inc. 425,000 20,559,375
- ---------------------------------------------------------------
FIRSTPLUS Financial Group,
Inc.(a) 775,000 37,587,500
- ---------------------------------------------------------------
Providian Financial Corp. 232,900 14,017,669
- ---------------------------------------------------------------
SLM Holding Corp. 263,100 11,231,081
- ---------------------------------------------------------------
83,395,625
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-1.71%
AmeriSource Health Corp.-Class
A(a) 917,700 50,014,650
- ---------------------------------------------------------------
Bergen Brunswig Corp.-Class A 686,500 31,149,938
- ---------------------------------------------------------------
Cardinal Health, Inc. 250,000 24,062,500
- ---------------------------------------------------------------
Sysco Corp. 835,700 19,900,106
- ---------------------------------------------------------------
125,127,194
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.79%
American Power Conversion
Corp.(a) 600,000 19,312,500
- ---------------------------------------------------------------
General Electric Co. 850,000 72,356,250
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 94,400 3,888,100
- ---------------------------------------------------------------
Symbol Technologies, Inc. 915,450 35,244,825
- ---------------------------------------------------------------
130,801,675
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.47%
Waters Corp.(a) 650,000 34,775,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-2.42%
Altera Corp.(a) 1,000,000 40,500,000
- ---------------------------------------------------------------
Intel Corp. 1,689,700 136,548,881
- ---------------------------------------------------------------
177,048,881
- ---------------------------------------------------------------
ENTERTAINMENT-0.44%
Viacom, Inc.-Class B(a) 560,700 32,520,600
- ---------------------------------------------------------------
</TABLE>
37
W E I N G A R T E N
<PAGE> 40
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)-2.60%
Applied Materials, Inc.(a) 1,900,000 $ 68,637,500
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 1,075,000 43,335,938
- ---------------------------------------------------------------
Lam Research Corp.(a) 1,250,000 38,750,000
- ---------------------------------------------------------------
Teradyne, Inc.(a) 1,100,000 40,150,000
- ---------------------------------------------------------------
190,873,438
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.38%
American Express Co. 400,000 40,800,000
- ---------------------------------------------------------------
Amresco, Inc.(a) 478,000 17,327,500
- ---------------------------------------------------------------
Fannie Mae 1,300,000 77,837,500
- ---------------------------------------------------------------
Freddie Mac 2,000,000 92,625,000
- ---------------------------------------------------------------
MBIA, Inc. 348,400 25,999,350
- ---------------------------------------------------------------
MGIC Investment Corp. 554,900 34,958,700
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 400,000 31,550,000
- ---------------------------------------------------------------
321,098,050
- ---------------------------------------------------------------
FOOTWEAR-0.30%
Wolverine World Wide, Inc. 750,000 21,656,250
- ---------------------------------------------------------------
HARDWARE & TOOLS-0.35%
Black & Decker Corp. (The) 500,000 25,812,500
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.66%
Abbott Laboratories 643,700 47,070,563
- ---------------------------------------------------------------
American Home Products Corp. 550,000 51,218,750
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 510,000 53,996,250
- ---------------------------------------------------------------
Johnson & Johnson 500,000 35,687,500
- ---------------------------------------------------------------
Warner-Lambert Co. 425,000 80,404,688
- ---------------------------------------------------------------
268,377,751
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.82%
ICN Pharmaceuticals, Inc. 1,484,000 73,087,000
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 1,400,000 60,200,000
- ---------------------------------------------------------------
133,287,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.56%
Lilly (Eli) & Co. 375,000 26,085,938
- ---------------------------------------------------------------
Merck & Co., Inc. 1,128,900 136,032,450
- ---------------------------------------------------------------
Pfizer Inc. 366,500 41,712,281
- ---------------------------------------------------------------
Schering-Plough Corp. 717,200 57,465,650
- ---------------------------------------------------------------
261,296,319
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-1.07%
Columbia/HCA Healthcare Corp. 900,000 29,643,750
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 1,000,000 32,125,000
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 290,600 16,727,663
- ---------------------------------------------------------------
78,496,413
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (LONG TERM
CARE)-0.74%
Health Care and Retirement
Corp.(a) 442,350 $ 18,025,763
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 1,200,000 36,225,000
- ---------------------------------------------------------------
54,250,763
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-4.19%
Arterial Vascular Engineering,
Inc.(a)(b) 1,648,000 58,298,000
- ---------------------------------------------------------------
Baxter International Inc. 528,100 29,276,544
- ---------------------------------------------------------------
Becton, Dickinson & Co. 1,000,000 69,625,000
- ---------------------------------------------------------------
Biomet, Inc. 1,010,800 30,324,000
- ---------------------------------------------------------------
Guidant Corp. 467,400 31,257,375
- ---------------------------------------------------------------
Medtronic, Inc. 300,000 15,787,500
- ---------------------------------------------------------------
Stryker Corp. 766,500 34,492,500
- ---------------------------------------------------------------
Sybron International Corp.(a) 1,430,700 37,913,550
- ---------------------------------------------------------------
306,974,469
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.75%
Furniture Brands International,
Inc.(a) 559,900 16,447,063
- ---------------------------------------------------------------
Maytag Corp. 750,000 38,625,000
- ---------------------------------------------------------------
55,072,063
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-1.27%
Colgate-Palmolive Co. 425,000 38,117,187
- ---------------------------------------------------------------
Dial Corp. (The) 750,000 18,281,250
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 450,000 36,984,375
- ---------------------------------------------------------------
93,382,812
- ---------------------------------------------------------------
HOUSEWARES-0.27%
Sunbeam Corp. 800,000 20,100,000
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.93%
Equitable Companies, Inc. 390,000 23,936,250
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 627,900 27,235,163
- ---------------------------------------------------------------
Torchmark Corp. 375,000 16,710,938
- ---------------------------------------------------------------
67,882,351
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.22%
Ace, Ltd. 570,000 21,588,750
- ---------------------------------------------------------------
Allmerica Financial Corp. 400,000 25,050,000
- ---------------------------------------------------------------
American International Group,
Inc. 220,000 28,943,750
- ---------------------------------------------------------------
Lincoln National Corp. 169,100 15,018,193
- ---------------------------------------------------------------
Travelers Group, Inc. 1,173,750 71,818,828
- ---------------------------------------------------------------
162,419,521
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.94%
Allstate Corp. 199,100 19,163,375
- ---------------------------------------------------------------
Everest Reinsurance Holdings,
Inc. 231,000 9,528,750
- ---------------------------------------------------------------
Fremont General Corp. 400,000 22,300,000
- ---------------------------------------------------------------
</TABLE>
38
W E I N G A R T E N
<PAGE> 41
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-(CONTINUED)
Old Republic International Corp. 390,000 $ 17,647,500
- ---------------------------------------------------------------
68,639,625
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.51%
Merrill Lynch & Co., Inc. 425,000 37,293,750
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-1.03%
Franklin Resources, Inc. 700,000 37,450,000
- ---------------------------------------------------------------
T. Rowe Price Associates, Inc. 500,000 37,750,000
- ---------------------------------------------------------------
75,200,000
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.93%
Harley-Davidson, Inc. 734,400 26,438,400
- ---------------------------------------------------------------
Mattel, Inc. 1,089,700 41,749,131
- ---------------------------------------------------------------
68,187,531
- ---------------------------------------------------------------
LODGING-HOTELS-1.05%
Carnival Corp.-Class A 800,000 55,650,000
- ---------------------------------------------------------------
Host Marriott Corp.(a) 315,800 6,138,362
- ---------------------------------------------------------------
Promus Hotel Corp.(a) 342,350 15,469,941
- ---------------------------------------------------------------
77,258,303
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.12%
Ingersoll-Rand Co. 188,600 8,687,388
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.50%
Crane Co. 291,900 15,707,869
- ---------------------------------------------------------------
Thermo Electron Corp.(a) 900,000 35,831,250
- ---------------------------------------------------------------
Tyco International Ltd. 800,000 43,600,000
- ---------------------------------------------------------------
U.S. Industries, Inc. 882,100 23,926,963
- ---------------------------------------------------------------
United Technologies Corp. 650,000 63,984,375
- ---------------------------------------------------------------
183,050,457
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.57%
BJ Services Co.(a) 750,000 28,125,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 250,000 16,609,375
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 450,000 22,781,250
- ---------------------------------------------------------------
ENSCO International, Inc. 650,000 18,362,500
- ---------------------------------------------------------------
Halliburton Co. 425,000 23,375,000
- ---------------------------------------------------------------
Santa Fe International Corp. 575,000 22,532,812
- ---------------------------------------------------------------
Western Atlas Inc.(a) 721,400 56,990,600
- ---------------------------------------------------------------
188,776,537
- ---------------------------------------------------------------
PERSONAL CARE-1.14%
Avon Products, Inc. 597,000 49,065,937
- ---------------------------------------------------------------
Gillette Co. 300,000 34,631,250
- ---------------------------------------------------------------
83,697,187
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.54%
Xerox Corp. 350,000 39,725,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
POWER PRODUCERS
(INDEPENDENT)-0.37%
AES Corp.(a) 492,700 $ 27,190,880
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.42%
Gannett Co., Inc. 375,000 25,523,438
- ---------------------------------------------------------------
New York Times Co.-Class A 77,200 5,476,375
- ---------------------------------------------------------------
30,999,813
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-1.02%
Crescent Real Estate Equities,
Co. 625,000 21,328,125
- ---------------------------------------------------------------
Patriot American Hospitality,
Inc. 700,000 17,675,000
- ---------------------------------------------------------------
Starwood Hotels & Resorts 714,144 35,841,102
- ---------------------------------------------------------------
74,844,227
- ---------------------------------------------------------------
RESTAURANTS-0.51%
McDonald's Corp. 600,000 37,125,000
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.24%
Home Depot, Inc. 755,250 52,584,280
- ---------------------------------------------------------------
Lowe's Companies, Inc. 550,000 38,465,625
- ---------------------------------------------------------------
91,049,905
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.93%
Circuit City Stores-Circuit City
Group 850,000 34,531,250
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 742,400 33,872,000
- ---------------------------------------------------------------
68,403,250
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.77%
Federated Department Stores,
Inc.(a) 375,000 18,445,312
- ---------------------------------------------------------------
Proffitt's, Inc.(a) 950,000 37,762,500
- ---------------------------------------------------------------
56,207,812
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.42%
Family Dollar Stores, Inc. 200,400 6,813,600
- ---------------------------------------------------------------
Ross Stores, Inc. 525,000 24,314,062
- ---------------------------------------------------------------
31,127,662
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.68%
CVS Corp. 350,000 25,812,500
- ---------------------------------------------------------------
Rite Aid Corp. 750,000 24,093,750
- ---------------------------------------------------------------
49,906,250
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.08%
Albertson's, Inc. 525,000 26,250,000
- ---------------------------------------------------------------
Kroger Co.(a) 958,000 40,116,250
- ---------------------------------------------------------------
Safeway, Inc.(a) 340,600 13,027,950
- ---------------------------------------------------------------
79,394,200
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-2.41%
Costco Companies, Inc.(a) 725,000 40,509,375
- ---------------------------------------------------------------
Dayton Hudson Corp. 425,000 37,107,813
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 800,000 35,900,000
- ---------------------------------------------------------------
</TABLE>
39
W E I N G A R T E N
<PAGE> 42
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-(CONTINUED)
Kmart Corp.(a) 2,186,000 $ 38,118,375
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 500,000 25,281,250
- ---------------------------------------------------------------
176,916,813
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.27%
Bed Bath & Beyond, Inc.(a) 282,500 13,913,125
- ---------------------------------------------------------------
Office Depot, Inc.(a) 1,370,700 45,404,437
- ---------------------------------------------------------------
Staples, Inc.(a) 1,366,800 33,742,875
- ---------------------------------------------------------------
93,060,437
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.24%
Brylane Inc.(a) 89,000 5,228,750
- ---------------------------------------------------------------
Gap, Inc. 625,000 32,148,437
- ---------------------------------------------------------------
Intimate Brands, Inc. 845,800 24,528,200
- ---------------------------------------------------------------
TJX Companies, Inc. 650,000 28,762,500
- ---------------------------------------------------------------
90,667,887
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.47%
Ahmanson (H.F.) & Co. 225,000 17,156,250
- ---------------------------------------------------------------
Washington Mutual, Inc. 250,000 17,515,624
- ---------------------------------------------------------------
34,671,874
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.34%
Outdoor Systems, Inc.(a) 790,350 25,093,613
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.75%
H&R Block, Inc. 750,000 33,750,000
- ---------------------------------------------------------------
Service Corp. International 2,292,000 94,545,000
- ---------------------------------------------------------------
128,295,000
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.03%
Ciber, Inc.(a) 71,900 2,336,750
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.08%
Equifax, Inc. 1,276,400 49,380,725
- ---------------------------------------------------------------
Fiserv, Inc.(a) 460,400 30,098,650
- ---------------------------------------------------------------
79,479,375
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.37%
AccuStaff, Inc.(a) 761,200 27,308,050
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.61%
AT&T Corp. 1,050,000 63,065,625
- ---------------------------------------------------------------
MCI Communications Corp. 2,552,400 128,417,625
- ---------------------------------------------------------------
191,483,250
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.96%
Tommy Hilfiger Corp.(a) 630,000 38,430,000
- ---------------------------------------------------------------
Warnaco Group, Inc. (The) 750,000 31,687,500
- ---------------------------------------------------------------
70,117,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-0.59%
Waste Management, Inc. 1,300,000 $ 43,550,000
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $4,509,190,967) 6,340,782,867
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCK-0.57%
FINANCIAL (DIVERSIFIED)-0.57%
MGIC Investment Corp.-$3.12 Conv.
Pfd.
(Cost $27,289,579) 400,000 42,000,000
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE BONDS & PRINCIPAL
NOTES-0.54% AMOUNT
ELECTRICAL EQUIPMENT-0.54%
SCI Systems, Inc., Conv. Sub.
Notes, 5.00%, 05/01/06
(acquired 10/31/96-12/06/96;
cost $27,581,905)(c) $22,050,000 $ 39,380,418
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER
EQUITY INTERESTS-7.42%
CANADA-0.99%
Bank of Montreal (Banks-Major
Regional) 276,000 $ 15,056,124
- ---------------------------------------------------------------
Newcourt Credit Group, Inc.
(Financial-Diversified) 750,000 36,843,750
- ---------------------------------------------------------------
Royal Bank of Canada (Banks-Major
Regional) 344,800 20,593,713
- ---------------------------------------------------------------
72,493,587
- ---------------------------------------------------------------
FINLAND-0.64%
Nokia Oyj A.B.-Class A
(Communications Equipment) 559,000 37,502,642
- ---------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 141,400 9,456,125
- ---------------------------------------------------------------
46,958,767
- ---------------------------------------------------------------
FRANCE-2.37%
Alcatel Alsthom
(Manufacturing-Diversified) 205,000 38,026,119
- ---------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 670,000 56,511,396
- ---------------------------------------------------------------
Renault S.A. (Automobiles)(a) 600,000 27,848,944
- ---------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 245,000 51,029,780
- ---------------------------------------------------------------
173,416,239
- ---------------------------------------------------------------
GERMANY-0.18%
Adidas Salomon A.G. (Footwear) 78,800 13,066,718
- ---------------------------------------------------------------
ITALY-0.81%
Telecom Italia Mobile S.p.A.
(Telecommunications-
Cellular/Wireless) 6,000,000 34,373,783
- ---------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 3,333,333 25,112,671
- ---------------------------------------------------------------
59,486,454
- ---------------------------------------------------------------
NETHERLANDS-0.92%
Akzo Nobel N.V.
(Chemicals-Diversified) 135,750 27,619,054
- ---------------------------------------------------------------
</TABLE>
40
W E I N G A R T E N
<PAGE> 43
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Philips Electronics N.V.
(Household Furniture &
Appliances) 450,000 $ 39,651,502
- ---------------------------------------------------------------
67,270,556
- ---------------------------------------------------------------
SWEDEN-0.54%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 676,700 34,807,755
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-Class B
(Communications Equipment) 98,900 5,211,987
- ---------------------------------------------------------------
40,019,742
- ---------------------------------------------------------------
SWITZERLAND-0.97%
UBS-Union Bank of Switzerland
(Banks-Major Regional) 44,000 70,836,276
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$399,121,244) 543,548,339
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-4.51%(d)
Dean Witter Reynolds, Inc.,
5.55%, 05/01/98(e) $ 698,048 $ 698,048
- ----------------------------------------------------------------
Goldman, Sachs & Co., 5.30%,
05/01/98(f) 300,000,000 300,000,000
- ----------------------------------------------------------------
HSBC Securities, Inc., 5.45%,
05/01/98(g) 30,000,000 30,000,000
- ----------------------------------------------------------------
Total Repurchase Agreements
(Cost $330,698,048) 330,698,048
- ----------------------------------------------------------------
TOTAL INVESTMENTS-99.52% 7,296,409,672
- ----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.48% 35,421,766
- ----------------------------------------------------------------
TOTAL NET ASSETS-100.00% $7,331,831,438
================================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of this security has been determined in
accordance with procedures established by the Board of Directors. The market
value of this security at 04/30/98 represented 0.54% of the Fund's net
assets.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$300,046,250. Collateralized by $307,111,000 U.S. Government obligations, 0%
to 9.40% due 06/10/98 to 09/26/19 with an aggregate market value at 04/30/98
of $306,000,308.
(f) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$434,638,319. Collateralized by $432,438,000 U.S. Government obligations,
3.625% to 7.125% due 09/30/99 to 08/15/23 with an aggregate market value at
04/30/98 of $443,699,960.
(g) Joint repurchase agreement entered into 04/30/98 with a maturing value of
$30,004,542. Collateralized by $31,320,000 U.S. Government obligations, 0%
due 10/08/98 with an aggregate market value at 04/30/98 of $30,601,206.
See Notes to Financial Statements.
41
W E I N G A R T E N
<PAGE> 44
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$5,293,881,743) $7,296,409,672
- --------------------------------------------------------
Foreign currencies, at value (cost
$1,200,210) 1,190,746
- --------------------------------------------------------
Receivables for:
Investments sold 53,437,831
- --------------------------------------------------------
Capital stock sold 7,062,678
- --------------------------------------------------------
Dividends and interest 5,219,566
- --------------------------------------------------------
Investment for deferred compensation
plan 90,768
- --------------------------------------------------------
Other assets 156,485
- --------------------------------------------------------
Total assets 7,363,567,746
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 11,467,275
- --------------------------------------------------------
Options written 501,572
- --------------------------------------------------------
Capital stock reacquired 11,731,770
- --------------------------------------------------------
Deferred compensation 90,768
- --------------------------------------------------------
Accrued advisory fees 3,538,625
- --------------------------------------------------------
Accrued administrative services fees 28,529
- --------------------------------------------------------
Accrued directors' fees 11,324
- --------------------------------------------------------
Accrued distribution fees 2,166,265
- --------------------------------------------------------
Accrued transfer agent fees 1,024,930
- --------------------------------------------------------
Accrued operating expenses 1,175,250
- --------------------------------------------------------
Total liabilities 31,736,308
- --------------------------------------------------------
Net assets applicable to shares
outstanding $7,331,831,438
========================================================
NET ASSETS:
Class A $6,585,111,025
========================================================
Class B $ 659,963,917
========================================================
Class C $ 12,914,474
========================================================
Institutional Class $ 73,842,022
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 288,013,829
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 29,551,565
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 578,077
========================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 3,168,169
========================================================
Class A:
Net asset value and redemption price
per share $ 22.86
========================================================
Offering price per share:
(Net asset value of
$22.86 divided
by 94.50%) $ 24.19
========================================================
Class B:
Net asset value and offering price per
share $ 22.33
========================================================
Class C:
Net asset value and offering price per
share $ 22.34
========================================================
Institutional Class:
Net asset value, offering and
redemption price per share $ 23.31
========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $530,841 foreign
withholding tax) $ 27,729,747
- ----------------------------------------------------------
Interest 13,884,800
- ----------------------------------------------------------
Total investment income 41,614,547
- ----------------------------------------------------------
EXPENSES:
Advisory fees 21,094,936
- ----------------------------------------------------------
Administrative services fees 134,422
- ----------------------------------------------------------
Custodian fees 452,161
- ----------------------------------------------------------
Directors' fees 34,008
- ----------------------------------------------------------
Distribution fees-Class A 9,063,792
- ----------------------------------------------------------
Distribution fees-Class B 2,767,704
- ----------------------------------------------------------
Distribution fees-Class C 34,347
- ----------------------------------------------------------
Transfer agent fees-Class A 3,725,436
- ----------------------------------------------------------
Transfer agent fees-Class B 566,561
- ----------------------------------------------------------
Transfer agent fees-Class C 9,240
- ----------------------------------------------------------
Transfer agent fees-Institutional Class 2,970
- ----------------------------------------------------------
Other 688,670
- ----------------------------------------------------------
Total expenses 38,574,247
- ----------------------------------------------------------
Less: Fees waived by advisor (1,385,142)
- ----------------------------------------------------------
Expenses paid indirectly (46,271)
- ----------------------------------------------------------
Net expenses 37,142,834
- ----------------------------------------------------------
Net investment income 4,471,713
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 573,504,010
- ----------------------------------------------------------
Foreign currencies 338,057
- ----------------------------------------------------------
Futures contracts 20,742,644
- ----------------------------------------------------------
Option contracts (10,168,430)
- ----------------------------------------------------------
584,416,281
- ----------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 533,325,625
- ----------------------------------------------------------
Foreign currencies (22,793)
- ----------------------------------------------------------
Futures contracts 264,000
- ----------------------------------------------------------
Option contracts 957,635
- ----------------------------------------------------------
534,524,467
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 1,118,940,748
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $1,123,412,461
========================================================
</TABLE>
42
W E I N G A R T E N
<PAGE> 45
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1998 and the year ended October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,471,713 $ 1,100,893
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 584,416,281 933,882,009
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 534,524,467 438,536,902
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,123,412,461 1,373,519,804
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (14,688,010)
- ----------------------------------------------------------------------------------------------
Institutional Class -- (444,894)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (849,671,209) (552,547,910)
- ----------------------------------------------------------------------------------------------
Class B (74,924,739) (32,151,485)
- ----------------------------------------------------------------------------------------------
Class C (567,891) --
- ----------------------------------------------------------------------------------------------
Institutional Class (9,053,017) (6,655,833)
- ----------------------------------------------------------------------------------------------
Net equalization credits (charges) (See Note 1):
Class A -- 436,828
- ----------------------------------------------------------------------------------------------
Class B -- 62,469
- ----------------------------------------------------------------------------------------------
Class C -- --
- ----------------------------------------------------------------------------------------------
Institutional Class -- (91,147)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 605,894,028 126,373,106
- ----------------------------------------------------------------------------------------------
Class B 156,244,190 166,861,272
- ----------------------------------------------------------------------------------------------
Class C 9,914,560 2,401,569
- ----------------------------------------------------------------------------------------------
Institutional Class 9,445,736 (7,373,537)
- ----------------------------------------------------------------------------------------------
Net increase in net assets 970,694,119 1,055,702,232
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,361,137,319 5,305,435,087
- ----------------------------------------------------------------------------------------------
End of period $7,331,831,438 $6,361,137,319
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,747,625,830 $3,937,446,869
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 4,307,555 28,516,289
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 575,813,993 925,614,568
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 2,004,084,060 1,469,559,593
- ----------------------------------------------------------------------------------------------
$7,331,831,438 $6,361,137,319
==============================================================================================
</TABLE>
See Notes to Financial Statements.
43
W E I N G A R T E N
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten 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 separate portfolios: AIM
Weingarten Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund and AIM Constellation Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. 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. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to seek growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last 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. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which would not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair market value as determined in good faith by or
under the supervision of the Board of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of that security. The Fund could be exposed to
risk if counterparties to the contracts are unable to meet the terms of
their contracts.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contracts at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that the change in the value of the contracts may not correlate with
changes in the value of the securities being hedged.
E. Covered Call Options--The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-
44
W E I N G A R T E N
<PAGE> 47
market" to reflect the current market value of the option written. The
current market value of a written option is the mean between the last bid and
asked prices on that day. If a written call option expires on the stipulated
expiration date, or if the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or a loss if the closing purchase transaction
exceeds the premium received when the option was written) without regard to
any unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised, the
Fund realizes a gain or a loss from the sale of the underlying security and
the proceeds of the sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Put options--The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, a
Fund pays an option premium. The option's underlying instrument may be a
security, or a futures contract. Put options may be used by a Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
G. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
H. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
I. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated among the
classes.
J. Equalization--The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective November 1, 1997, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of
$28,680,447 from undistributed net investment income to paid-in capital. This
change has no effect on the net assets, the results of operations or the net
asset value per share of the Fund.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of 1.0%
of the first $30 million of the Fund's average daily net assets, plus 0.75% of
the Fund's average daily net assets in excess of $30 million to and including
$350 million, plus 0.625% of the Fund's average daily net assets in excess of
$350 million. AIM is currently voluntarily waiving a portion of its advisory
fees payable by the Fund to AIM to the extent necessary to reduce the fees paid
by the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver of fees is entirely voluntary but approval is
required by the Board of Directors of the Company for any decision by AIM to
discontinue the waiver. During the six months ended April 30, 1998, AIM waived
fees of $1,385,142. Under the terms of a master sub-advisory agreement between
AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50%
of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1998, AIM
was reimbursed $134,422 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. On September 20, 1997, the Board of Directors
approved appointment of AFS as transfer agent of the Institutional Class
effective December 29, 1997. During the six months ended April 30, 1998, AFS was
paid $3,350,741 with respect to the Class A, Class B, and Class C shares and for
the period December 29, 1997 through April 30, 1998, AFS was paid $2,018 with
respect to the Institu-
45
W E I N G A R T E N
<PAGE> 48
tional Class. Prior to the effective date of the agreement with AFS, the Fund
paid A I M Institutional Fund Services, Inc. $952 pursuant to a transfer agency
and shareholder services agreement with respect to the Institutional Class for
the period November 1, 1997 through December 28, 1997.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for 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 and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan")(collectively, the "Plans"). The Fund,
pursuant to the Class A and C Plan, pays AIM Distributors compensation at an
annual rate of 0.30% of the average daily net assets of the Class A shares and
1.00% of the average daily net assets of Class C shares. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer, or pledge to
one or more designees, its rights to all or a designated portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges received by AIM Distributors
related to the Class B shares. During the six months ended April 30, 1998, the
Class A, Class B and Class C shares paid AIM Distributors $9,063,792,
$2,767,704, and $34,347, respectively, as compensation under the Plans.
AIM Distributors received commissions of $863,459 from sales of the Class A
shares of the Fund during the six months ended April 30, 1998. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the six months ended April 30,
1998, AIM Distributors received commissions of $20,702 in contingent deferred
sales charges imposed on redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AIM Capital, AIM
Distributors, AFS and FMC.
During the six months ended April 30, 1998, the Fund paid legal fees of $5,831
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
During the six months ended April 30, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $37,433 and $8,838, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $46,271 during the six months ended April 30, 1998.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1998, 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.
Pursuant to an amendment to the line of credit agreement effective May 1,
1998, the Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the
limits set by the prospectus for borrowings.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended April 30, 1998 was $3,608,085,490
and $3,861,426,587, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of April 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,059,851,632
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (63,648,258)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,996,203,374
==========================================================
</TABLE>
Cost of investments for tax purposes is $5,300,206,298.
46
W E I N G A R T E N
<PAGE> 49
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended April 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 3,000 $ 1,216,939
- ---------------------------------------------------------------------------------------
Written 123,193 38,537,794
- ---------------------------------------------------------------------------------------
Closed (65,164) (23,494,987)
- ---------------------------------------------------------------------------------------
Exercised (36,794) (8,353,416)
- ---------------------------------------------------------------------------------------
Expired (16,592) (5,830,183)
- ---------------------------------------------------------------------------------------
End of period 7,643 $ 2,076,147
=======================================================================================
</TABLE>
Open call option contracts written at April 30, 1998 were as follows:
<TABLE>
<CAPTION>
APRIL 30,
CONTRACT STRIKE NUMBER OF PREMIUM 1998 UNREALIZED
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
ISSUE -------- ------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Arterial Vascular Engineering, Inc. May 40 7,643 $2,076,147 $501,572 $1,574,575
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-PUT OPTIONS PURCHASED
Transactions in put options purchased during the six months ended April 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
--------------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ------------
<S> <C> <C>
Beginning of period -- --
- ----------------------------------------------------------------------------------------
Purchased 55,429 $ 15,868,426
- ----------------------------------------------------------------------------------------
Closed (33,432) (10,182,918)
- ----------------------------------------------------------------------------------------
Expired (21,997) (5,685,508)
- ----------------------------------------------------------------------------------------
End of period 0 $ 0
- ----------------------------------------------------------------------------------------
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in the capital stock outstanding during the six months ended April 30,
1998 and the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 31,189,960 $ 669,765,639 36,066,523 $ 748,100,033
- -----------------------------------------------------------------------------------------------------------------------------
Class B 5,690,989 119,693,104 9,401,446 192,004,936
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 519,820 10,957,161 117,736 2,708,502
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class 224,814 5,023,383 377,655 7,900,669
- -----------------------------------------------------------------------------------------------------------------------------
Issued as a reinvestment of dividends:
Class A 41,124,131 799,035,141 29,415,559 528,061,835
- -----------------------------------------------------------------------------------------------------------------------------
Class B 3,748,457 71,332,604 1,715,350 30,687,644
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 28,544 543,474 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class 448,039 8,857,736 313,585 5,650,803
- -----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (40,094,880) (862,906,752) (56,267,501) (1,149,788,762)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (1,645,109) (34,781,518) (2,748,694) (55,831,308)
- -----------------------------------------------------------------------------------------------------------------------------
Class C* (74,391) (1,586,075) (13,632) (306,933)
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class (199,970) (4,435,383) (951,830) (20,925,009)
- -----------------------------------------------------------------------------------------------------------------------------
40,960,404 $ 781,498,514 17,426,197 $ 288,262,410
=============================================================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
47
W E I N G A R T E N
<PAGE> 50
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during the six months ended April 30, 1998 and each of
the years in the five-year period ended October 31, 1997.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, -------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 23.05 $ 20.46 $ 20.48 $ 17.94 $ 17.69 $ 16.73
- -------------------------------- ------- ------- -------- -------- -------- --------
Income from investment
operations:
Net investment income 0.06 0.08 0.17 0.10 0.17 0.16
- -------------------------------- ------- ------- -------- -------- -------- --------
Net gains on securities (both
realized and unrealized) 3.55 4.90 2.52 4.35 0.58 0.93
- -------------------------------- ------- ------- -------- -------- -------- --------
Total from investment
operations 3.61 4.98 2.69 4.45 0.75 1.09
- -------------------------------- ------- ------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income -- (0.15) -- (0.13) (0.17) (0.13)
- -------------------------------- ------- ------- -------- -------- -------- --------
Distributions from net
realized gains (3.35) (2.24) (2.71) (1.78) (0.33) --
- -------------------------------- ------- ------- -------- -------- -------- --------
Total distributions (3.35) (2.39) (2.71) (1.91) (0.50) (0.13)
- -------------------------------- ------- ------- -------- -------- -------- --------
Net asset value, end of period $ 23.31 $ 23.05 $ 20.46 $ 20.48 $ 17.94 $ 17.69
================================ ======= ======= ======== ======== ======== ========
Total return(a) 18.24% 27.37% 15.34% 28.69% 4.37% 6.53%
================================ ======= ======= ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $73,842 $62,124 $ 60,483 $ 54,332 $ 40,486 $ 39,821
================================ ======= ======= ======== ======== ======== ========
Ratio of expenses to average net
assets(b) 0.64%(c)(d) 0.64% 0.65% 0.70% 0.65% 0.78%
================================ ======= ======= ======== ======== ======== ========
Ratio of net investment income
to average net assets(e) 0.61%(c) 0.50% 0.80% 0.45% 1.00% 0.97%
================================ ======= ======= ======== ======== ======== ========
Portfolio turnover rate 57% 128% 159% 139% 136% 109%
================================ ======= ======= ======== ======== ======== ========
Average broker commission rate
paid(f) $0.0607 $0.0618 $ 0.0615 N/A N/A N/A
================================ ======= ======= ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) -- -- -- -- -- --
================================ ======= ======= ======== ======== ======== ========
Average amount of debt
outstanding during the period
(000s omitted)(g) -- -- -- $ 6 -- --
================================ ======= ======= ======== ======== ======== ========
Average number of shares
outstanding during the period
(000s omitted)(g) 3,039 3,146 2,908 2,526 2,256 1,826
================================ ======= ======= ======== ======== ======== ========
Average amount of debt per share
during the period -- -- -- $ 0.0024 -- --
================================ ======= ======= ======== ======== ======== ========
</TABLE>
(a) Total return is not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68% (annualized), 0.68%, 0.68%, 0.72%, 0.68%, and 0.81% for 1998-1993.
(c) Ratios are annualized and based on average net assets of $66,663,221.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been 0.64%
(annualized).
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 0.57% (annualized), 0.46%, 0.77%, 0.43%, 0.98%, and
0.94%, for 1998-1993.
(f) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
(g) Averages computed on a daily basis.
48
W E I N G A R T E N
<PAGE> 51
Directors & Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
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 Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Capital Management, Inc.
11 Greenway Plaza
Edward K. Dunn Jr. Jonathan C. Schoolar Suite 100
Chairman, Mercantile Mortgage Corp.; Senior Vice President Houston, TX 77046
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and Dana R. Sutton TRANSFER AGENT
President, Mercantile Bankshares Vice President and Assistant Treasurer
A I M Fund Services, Inc.
Jack Fields Melville B. Cox 11 Greenway Plaza
Chief Executive Officer Vice President Suite 100
Texana Global, Inc.; Houston, TX 77046
Formerly Member Renee A. Bamford
of the U.S. House of Representatives Assistant Secretary CUSTODIAN
Carl Frischling P. Michelle Grace State Street Bank and Trust Company
Partner Assistant Secretary 225 Franklin Street
Kramer, Levin, Naftalis & Frankel Boston, MA 02110
Jeffrey H. Kupor
Robert H. Graham Assistant Secretary COUNSEL TO THE FUND
President and Chief Executive Officer
A I M Management Group Inc. Nancy L. Martin Ballard Spahr
Assistant Secretary Andrews & Ingersoll, LLP
John F. Kroeger 1735 Market Street
Formerly Consultant Ofelia M. Mayo Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Assistant Secretary
COUNSEL TO THE DIRECTORS
Lewis F. Pennock Lisa A. Moss
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 Fund Management Company
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
Limited Partnership Assistant Treasurer
</TABLE>
W E I N G A R T E N
<PAGE> 52
[AIM LOGO APPEARS HERE]
Fund Management Company
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1188
