<PAGE> 1
AIM CHARTER FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT APRIL 30, 1998
<PAGE> 2
----------------------------------
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's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed at net asset value
without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflect the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differing fees and expenses.
o Because Class C shares have been offered for less than one year, all total
return figures for Class C shares reflect cumulative total return that has
not been annualized.
o The Fund's average annual total returns, including sales charges, for
periods ended 3/31/98, (the most recent calendar quarter end) are as
follows. For Class A shares, one year, 33.05%; five years, 16.56%; 10 years,
17.13%. Class B shares, one year, 34.85%; since inception (6/15/95) 23.54%.
Class C shares produced cumulative total return of 9.13% from their
inception (8/4/97) through 3/31/98.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded primarily industrial stocks.
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The Standard
& Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged
securities widely regarded by investors to be representative of the stock
market in general.
o The unmanaged Lipper Growth and Income Fund Index represents an average of
the performance of the 30 largest growth-and-income funds. It is compiled by
Lipper Analytical Services, Inc., an independent mutual funds performance
monitor. Results shown reflect reinvestment of dividends.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
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 the April
Bauer, 30, 1998, end of this six-month reporting period, most
Chairman of markets had recovered nicely, with domestic equities reaching
the Board of new highs and European markets outdoing even the U.S.'s heady
THE FUND pace. Only Asian markets remained in the doldrums. Bonds have
APPEARS HERE] 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, will 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. Of course,
your financial consultant remains your best source of information about how to
allocate your investments based on your particular goals and situation.
AIM FURTHER DIVERSIFIES ITS OFFERINGS
Shortly after the close of this reporting period, AIM broadened its offerings to
shareholders through the addition of the GT Global group of mutual funds. During
the next few months, you will be receiving more details about this transaction
and the products it adds to The AIM Family of Funds--Registered Trademark--.
In addition to making a more varied group of investments available to our
shareholders, this transaction helps strengthen AIM's position as a major
participant in the money-management industry worldwide. Such strength will
enable us to continue expanding both the scope of our fund offerings and our
menu of services for our shareholders.
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
800-959-4246 or visit our Web site at www.aimfunds.com. You can access
information about your account on our Web site and also on our automated AIM
Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of Funds
- --Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 4
The Managers' Overview
FUND GENERATES SOLID RETURNS,
ADOPTS MORE CONSERVATIVE STANCE
================================================================================
GROWTH OF NET ASSETS
- --------------------------------------------------------------------------------
$4.57 $5.35
BILLION BILLION
10/31/97 10/31/98
================================================================================
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, including reinvestment of
quarterly distributions, was 14.01% for Class A shares, 13.58% for Class B
shares, and 13.64% for Class C shares. 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 $4.57 billion at the opening of the
reporting period to $5.35 billion 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.
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%.
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
See important fund and index disclosures inside front cover.
2
<PAGE> 5
PORTFOLIO COMPOSITION
As of 4/30/98, based on total net assets
<TABLE>
<CAPTION>
================================================================================
Top 10 Holdings
- --------------------------------------------------------------------------------
<S> <C>
1. Philip Morris Companies, Inc. 3.73%
2. Chase Manhattan Corp. (The) 2.59
3. Warner-Lambert Co. 1.77
4. Pfizer, Inc. 1.70
5. WorldCom, Inc.-$2.68 Conv.Dep.Pfd. 1.66
6. Intel Corp. 1.51
7. Service Corp. International 1.35
8. American International Group, Inc. 1.23
9. Union Bank of Switzerland (Switzerland) 1.20
10.Morgan Stanley, Dean Witter, Discover & Co. 1.18
================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Number of Holdings: 177
- --------------------------------------------------------------------------------
<S> <C>
Common Stock 75.58%
Convertible Bonds 9.36
Convertible Preferred Stock 9.32
U.S. Government Bonds 3.94
Cash & Cash Equivalents 1.80
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>
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 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?
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. AND FOR THE ECONOMY AND MARKETS IN GENERAL? WHAT'S YOUR OUTLOOK?
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.
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
THE AIM CHARTER FUND GROWTH STORY
AIM CHARTER FUND CLASS A SHARES VS. BENCHMARK INDEXES
The chart compares your Fund's Class A shares to indexes. It is important to
understand differences between your Fund and these indexes. An index measures
performance of a hypothetical portfolio. A market index, such as the S&P 500, is
not managed, incurring no sales charges, expenses or fees. If you could buy all
the securities that make up an index, you would incur expenses that would affect
your investment's return. An index of funds, such as the Lipper Growth and
Income Fund Index, includes a number of mutual funds grouped by investment
objective. Each of those funds interprets that objective differently, and each
employs a different management style and investment strategy. Use of these
indexes is intended to give you a general idea of how your Fund performed
compared to these benchmarks.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 4/30/98, including sales charges
Class A Shares
Since inception (11/26/68) 14.18%
20 Years 17.20
10 Years 17.14
5 Years 17.00
1 Year 26.71
Class B Shares
Since inception (6/15/95) 22.73%
1 Year 28.06
Class C Shares
Since Inception (8/4/97) 8.97%*
*Total return is cumulative total return that has not been annualized.
================================================================================
<PAGE> 7
GROWTH OF A $10,000 INVESTMENT: NOVEMBER 26, 1968-APRIL 30, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
AIM CHARTER FUND LIPPER GROWTH &
CLASS A SHARES S&P 500 INCOME FUND INDEX
- ----------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
11/26/68 9,446 10,000 10,000
4/69 9,420 9,818 9,479
4/70 7,230 7,985 7,638
4/71 9,140 10,556 9,923
4/72 12,871 11,268 10,469
4/73 11,186 11,515 9,767
4/74 10,702 10,058 9,023
4/75 11,601 10,215 9,565
4/76 13,902 12,374 11,594
4/77 16,535 12,476 12,173
4/78 19,521 12,903 12,828
4/79 25,341 14,287 14,486
4/80 33,864 15,761 16,150
4/81 46,299 20,683 21,598
4/82 44,675 19,171 20,616
4/83 62,718 28,555 30,339
4/84 56,584 29,029 30,545
4/85 64,013 34,146 35,527
4/86 84,852 46,503 48,039
4/87 107,058 58,842 58,055
4/88 95,921 55,053 55,965
4/89 116,633 67,593 67,510
4/90 133,780 74,650 71,146
4/91 173,261 87,764 81,080
4/92 199,916 100,095 91,810
4/93 212,799 109,320 103,502
4/94 221,415 115,142 111,222
4/95 245,436 135,197 125,153
4/96 317,362 175,938 159,002
4/97 368,214 220,117 188,441
4/98 495,298 309,282 254,164
====================================================================================================
</TABLE>
Past performance is no guarantee of comparable future results.
Source: Towers Data Systems HYPO--Registered Trademark--; FundStation. Your
Fund's total return includes sales charges, expenses, and management fees. The
performance of Class B and C shares of the Fund will differ from that of Class A
shares due to differing fees and expenses. For Fund performance calculations and
descriptions of indexes cited on this page, please refer to the inside front
cover.
<PAGE> 8
For Consideration
THE ROTH IRA: THE POWER TO KEEP MORE
Contribute After-Tax Dollars Now . . . So You Can Get Federally Tax-Free Savings
Later
A new and potentially more powerful type of IRA--the Roth IRA--became available
on January 1, 1998. What makes it more powerful? The Roth IRA gives you the
opportunity to keep more of what you earn.
Are you eligible to open a Roth IRA? The answer is yes if you or your spouse
has earned income for the tax year for which you want to make the contribution,
and your adjusted gross income is below $110,000 if you are a single tax filer,
$160,000 if you file jointly.
TWO KEY ROTH IRA BENEFITS:
TAX-FREE AND PENALTY-FREE WITHDRAWALS
o Of earnings after five years. Earnings on your Roth IRA are federally
tax-free if your Roth IRA account has been open for five years and you are
at least 59 1/2 years old, or in the case of death or disability. You may
also use up to $10,000 of your earnings to buy a first home (after five
years).
o Of contributions at any time. For instance, if you make annual contributions
of $2,000 for the next three years, you may take out up to $6,000 and use
that money for any purpose.
HOW YOU MIGHT PUT BOTH BENEFITS TO WORK FOR YOU
Here's an example of how you may take full advantage of a Roth IRA. You are
39 1/2 years old. You contribute $2,000 after-tax annually in your Roth IRA
every year for 20 years, earning an average annual return of 10%. After 20
years, your account has grown to $126,005. Now at age 59 1/2 you can begin
taking withdrawals and pay no federal income tax or penalty on any of your
$126,005. Or you can keep your money invested and take it out whenever you need
it.
THE ROTH IRA: TO CONVERT OR NOT TO CONVERT
Can you convert your Traditional IRA to a Roth IRA? The answer is yes if you
meet these requirements:
You must pay taxes on the amount you convert. If you convert in 1998, you
can spread your tax payments over the next four years. This four-year allowance
will not be available after December 31, 1998.
You cannot convert to a Roth IRA if you are married and file your tax return
separately, or if your annual gross income is over $100,000.
SOME ROTH IRA CONVERSION GUIDELINES
If you can check most of these boxes, converting your Traditional IRA to a Roth
IRA may make sense for you.
o You have assets outside your retirement savings with which you can easily
afford to pay the taxes due when you convert.
o You have 10 years or more before you retire. The longer you invest tax-free,
the more you benefit.
o Your tax rate will probably be higher in retirement than it is now. If so,
you'll pay less taxes now to convert than you would pay at retirement if you
withdrew from a traditional IRA.
o You plan to convert in 1998. On January 1, 1999, the ability to spread tax
payments over four years disappears.
o You want to keep making contributions after age 70 1/2 and may wish to pass
your IRA assets on to your heirs after your death.
The Roth IRA
Analyzer & Calculator at AIM's
Internet Web site--
www.aimfunds.com--
can help you determine
your IRA eligibility
status and whether it
makes sense for you to
convert an existing IRA
into a Roth IRA.
MAKE YOUR IRA CONVERSION DECISION A TRULY
INFORMED ONE
Talk to your financial consultant, who knows your specific needs and goals. You
may also wish to talk with a tax adviser.
This discussion does not constitute tax advice. Your tax adviser can provide
guidance concerning your particular situation.
6
<PAGE> 9
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>
7
<PAGE> 10
<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>
8
<PAGE> 11
<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
- ---------------------------------------------------------------
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
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
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
- ---------------------------------------------------------------
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
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
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
- ---------------------------------------------------------------
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
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
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
- ---------------------------------------------------------------
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 for 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.
11
<PAGE> 14
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.
12
<PAGE> 15
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.
13
<PAGE> 16
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
14
<PAGE> 17
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.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the
15
<PAGE> 18
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
==============================================================
</TABLE>
Cost of investments for tax purposes is $4,058,496,984.
16
<PAGE> 19
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)
- --------------------------------------------------------------------------------
49,856,195 $612,896,453 55,661,943 $655,112,463
================================================================================
</TABLE>
* Class C commenced sales on August 4, 1997.
17
<PAGE> 20
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A 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, for a share of Class B capital
stock outstanding during the six months ended April 30, 1998, each of the years
in the two-year period ended October 31, 1997 and the period June 26, 1995 (date
sales commenced) through October 31, 1995, and for a share of Class C capital
stock outstanding during the six months ended April 30, 1998 and the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
OCTOBER 31,
APRIL 30, ------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.41 $ 11.19 $ 10.63 $ 8.90 $ 9.46 $ 8.36
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.06 0.10 0.19 0.15 0.21 0.17
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net gains (losses) on securities (both
realized and unrealized) 1.63 2.91 1.43 2.11 (0.45) 1.22
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.69 3.01 1.62 2.26 (0.24) 1.39
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.04) (0.12) (0.16) (0.20) (0.16) (0.29)
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (1.34) (0.67) (0.90) (0.33) (0.16) --
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions (1.38) (0.79) (1.06) (0.53) (0.32) (0.29)
- --------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 13.72 $ 13.41 $ 11.19 $ 10.63 $ 8.90 $ 9.46
============================================= ========== ========== ========== ========== ========== ==========
Total return(a) 14.01% 28.57% 16.70% 27.03% (2.55)% 16.92%
============================================= ========== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,909,504 $3,466,912 $2,647,208 $1,974,417 $1,579,074 $1,690,482
============================================= ========== ========== ========== ========== ========== ==========
Ratio of expenses (exclusive of interest) to
average net assets(b) 1.08%(c)(d) 1.09% 1.12% 1.17% 1.17% 1.17%
============================================= ========== ========== ========== ========== ========== ==========
Ratio of net investment income to average net
assets(e) 0.99%(c) 0.79% 1.81% 1.55% 2.32% 1.89%
============================================= ========== ========== ========== ========== ========== ==========
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) $ 9,531 -- -- -- -- --
============================================= ========== ========== ========== ========== ========== ==========
Average number of shares outstanding during
the period (000s omitted)(g) 278,737 -- -- -- -- --
============================================= ========== ========== ========== ========== ========== ==========
Average amount of debt per share during the
period $ 0.0340 -- -- -- -- --
============================================= ========== ========== ========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges and are 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
1.09% (annualized) and 1.10% for 1998-1997.
(c) Ratios are annualized and based on average net assets of $3,645,743,696.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been 1.07%
(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 0.98% (annualized) and 0.78% for 1998-1997.
(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.
18
<PAGE> 21
NOTE 10-FINANCIAL HIGHLIGHTS-continued
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------- --------------------------
OCTOBER 31,
APRIL 30, --------------------------------- APRIL 30, OCTOBER 31,
1998 1997 1996 1995 1998 1997
---------- ---------- -------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.37 $ 11.18 $ 10.62 $ 9.81 $ 13.39 $ 13.86
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Income from investment operations:
Net investment income 0.01(a) 0.01 0.10 0.03 0.01(a) --
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Net gains on securities (both realized and
unrealized) 1.62 2.89 1.45 0.80 1.63 (0.45)
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Total from investment operations 1.63 2.90 1.55 0.83 1.64 (0.45)
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.02) (0.04) (0.09) (0.02) (0.02) --
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Distributions from net realized gains (1.34) (0.67) (0.90) -- (1.34) (0.02)
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Total distributions (1.36) (0.71) (0.99) (0.02) (1.36) (0.02)
- ---------------------------------------------- ---------- ---------- -------- ------- ------- -------
Net asset value, end of period $ 13.64 $ 13.37 $ 11.18 $ 10.62 $ 13.67 $ 13.39
============================================== ========== ========== ======== ======= ======= =======
Total return(b) 13.58% 27.54% 15.90% 8.48% 13.64% (3.24)%
============================================== ========== ========== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,376,995 $1,056,094 $515,672 $67,592 $22,242 $ 5,669
============================================== ========== ========== ======== ======= ======= =======
Ratio of expenses to average net assets(c) 1.83%(d)(e) 1.85% 1.94% 1.98%(g) 1.83%(d)(e) 1.82%(g)
============================================== ========== ========== ======== ======= ======= =======
Ratio of net investment income to average net
assets(f) 0.24%(d) 0.03% 0.99% 0.74%(g) 0.24%(d) 0.06%(g)
============================================== ========== ========== ======== ======= ======= =======
Portfolio turnover rate 74% 170% 164% 161% 74% 170%
============================================== ========== ========== ======== ======= ======= =======
Average brokerage commission rate(h) $ 0.0601 $ 0.0615 $ 0.0638 N/A $0.0601 $0.0615
============================================== ========== ========== ======== ======= ======= =======
Borrowings for the period:
Amount of debt outstanding at end of period
(000s omitted) -- -- -- -- -- --
============================================== ========== ========== ======== ======= ======= =======
Average amount of debt outstanding during the
period (000s omitted)(i) $ 3,126 -- -- -- $ 34 --
============================================== ========== ========== ======== ======= ======= =======
Average number of shares outstanding during
the period (000s omitted)(i) 91,829 -- -- -- 985 --
============================================== ========== ========== ======== ======= ======= =======
Average amount of debt per share during the
period $ 0.0340 -- -- -- $0.0340 --
============================================== ========== ========== ======== ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and are not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.85% (annualized) and 1.86% for 1998-1997 for Class B and 1.85%
(annualized) and 1.83% (annualized) for 1998-1997 for Class C.
(d) Ratios are annualized and based on average net assets of $1,195,797,973 and
$12,913,355 for Class B and Class C, respectively.
(e) Ratios include indirectly paid expenses. Excluding indirectly paid expenses,
the ratios of expenses to average net assets would have been 1.82%
(annualized) and 1.82% (annualized) for Class B and Class C, respectively.
(f) 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 0.22% (annualized) and 0.02% for 1998-1997 for Class B
and 0.22% (annualized) and 0.04% (annualized) for 1998-1997 for Class C.
(g) Annualized.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold.
(i) Averages computed on a daily basis.
19
<PAGE> 22
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 P.O. Box 4739
Chief Executive Officer Vice President Houston, TX 77210-4739
Texana Global, Inc.;
Formerly Member Renee A. Bamford CUSTODIAN
of the U.S. House of Representatives Assistant Secretary
State Street Bank and Trust Company
Carl Frischling P. Michelle Grace 225 Franklin Street
Partner Assistant Secretary Boston, MA 02110
Kramer, Levin, Naftalis & Frankel
Jeffrey H. Kupor COUNSEL TO THE FUND
Robert H. Graham Assistant Secretary
President and Chief Executive Officer Ballard Spahr
A I M Management Group Inc. Nancy L. Martin Andrews & Ingersoll, LLP
Assistant Secretary 1735 Market Street
John F. Kroeger Philadelphia, PA 19103
Formerly Consultant Ofelia M. Mayo
Wendell & Stockel Associates, Inc. Assistant Secretary COUNSEL TO THE DIRECTORS
Lewis F. Pennock Lisa A. Moss Kramer, Levin, Naftalis & Frankel
Attorney Assistant Secretary 919 Third Avenue
New York, NY 10022
Ian W. Robinson Kathleen J. Pflueger
Consultant; Formerly Executive Assistant Secretary DISTRIBUTOR
Vice President and
Chief Financial Officer Samuel D. Sirko A I M Distributors, Inc.
Bell Atlantic Management Assistant Secretary 11 Greenway Plaza
Services, Inc. Suite 100
Stephen I. Winer Houston, TX 77046
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests Mary J. Benson
Limited Partnership Assistant Treasurer
</TABLE>
20
<PAGE> 23
----------------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
----------------------------------
HOW AIM MAKES INVESTING
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<PAGE> 24
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
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AIM Global Aggressive Growth Fund
[PHOTO OF GROWTH OF CAPITAL
11 GREENWAY PLAZA AIM Advisor International Value Fund
APPEARS HERE] AIM Blue Chip Fund
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A I M Management Group Inc. has provided leadership in the AIM Limited Maturity Treasury Fund
mutual fund industry since 1976 and managed approximately AIM Money Market Fund
$89 billion in assets for more than 4.4 million shareholders, AIM Tax-Exempt Cash Fund
including individual investors, corporate clients, and financial
institutions as of March 31, 1998. The AIM Family of *AIM Aggressive Growth Fund was closed to new investors on
Funds--Registered Trademark-- is distributed nationwide, and June 5, 1997. ** On May 1, 1998 AIM Growth Fund was renamed
AIM today ranks among the nation's top 15 mutual fund AIM Select Growth Fund. For more complete information
companies in assets under management, according to Lipper about any AIM Fund(s), including sales charges and expenses,
Analytical Services, Inc. ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully
before you invest or send money.
INVEST WITH DISCIPLINE-SM-
</TABLE>
