<PAGE> 1
[COVER IMAGE]
AIM WEINGARTEN FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1998
INVEST WITH DISCIPLINE--REGISTERED TRADEMARK--
<PAGE> 2
[COVER IMAGE]
---------------------------------------
THE VIOLIN BOX BY SUZANNE VALADON
(1865-1938, FRENCH)
IN THE ART OF INVESTING, SUCCESS DOES NOT ALWAYS COME IN AN
INSTANT--IT IS USUALLY ACHIEVED OVER TIME. VALADON'S UNFORGET-
TABLE OILS MAKE THIS POINT, OFTEN TAKING 13 YEARS OF DEDICATION
AND DILIGENCE TO COMPLETE. HER RICHLY COLORED "VIOLIN BOX"
REMINDS US THAT ALL GOOD THINGS ARE WORTH THE WAIT.
---------------------------------------
AIM Weingarten Fund is for shareholders who seek long-term growth of capital
through investments primarily in common stocks of leading U.S. companies
considered by management to have strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Weingarten Fund 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 During the fiscal year ended October 31, 1998, the Fund paid distributions
of $3.40 per share.
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 reflects the applicable contingent deferred sales
charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The 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 differences in sales charge
structure and Fund expenses.
o The Fund's average annual total returns, including sales charges, for
periods ended 9/30/98 (the most recent calendar quarter-end) are as follows.
For Class A shares, one year, -3.74%; five years, 14.46%; 10 years, 15.44%.
For Class B shares, one year, -3.20%; since inception (6/26/95), 16.13%. For
Class C shares, one year, 0.24%; since inception (8/4/97), 3.21%.
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 (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The unmanaged Lipper Growth Fund Index represents an average of the
performance of the 30 largest growth funds charted by Lipper Analytical
Services, Inc., an independent mutual fund performance monitor. Results
shown reflect reinvestment of dividends.
o The Russell 2000 Stock Index is an unmanaged index generally considered
representative of small-capitalization stocks. s 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 Standard & Poor's 400 Mid-Cap Index (S&P 400) is an unmanaged index
comprising common stocks of approximately 400 mid-capitalization companies.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
AIM WEINGARTEN FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
Throughout the fiscal year covered by this report, markets
[PHOTO OF vacillated between optimism that Asia's woes would be
Charles T. contained and worry that they would become a major drag on
Bauer, the U.S. and other economies. Changes in investor sentiment
Chairman of affected various financial markets differently. The stock
the Board of market was especially volatile. Uncertainty in stocks
THE FUND bolstered U.S. Treasury issues, whose safety attracts
APPEARS HERE] investors in doubtful times.
We understand how unnerving this year's level of
volatility can be. Undoubtedly, many of you were tempted to
simply exit the stock market. Our reaction, of course, is
that you should not. The abrupt reversals of sentiment this
fiscal year reinforce our conviction that markets are
unpredictable in the short term. Since even the best money
managers cannot know when to enter and exit a market, we
think the wisest strategy is to stay fully invested despite
volatility and short-term disappointment.
MARKET RECAP
Financial crises overseas and widespread decline in the rate of U.S. corporate
earnings growth helped foster uncertainty. During the summer of 1998, a
worldwide loss of confidence led to a major market correction for equities,
including the blue chips that had led the market. In August, the Dow Jones
Industrial Average (the Dow) had its worst-performing month in a decade.
Fortunately, the U.S. Federal Reserve Board (the Fed) intervened, cutting
interest rates twice, on September 29 and October 15, to pump liquidity and
confidence into the markets. As investors responded favorably, the fiscal year
closed with domestic equities rallying again and bonds in retreat--a complete
about-face from just a few weeks earlier. October 1998 ended up being the Dow's
best month in 11 years. (After the fiscal year closed, as this report was being
written, the Fed cut rates a third time.)
Some major stock indexes produced excellent total results for the fiscal
year, with the S&P 500 up more than 20%. But focusing on one market benchmark
may give you an incomplete view. The divergence between the S&P 500 and other
market segments was quite dramatic this fiscal year: the midcap S&P 400 rose
only 6.71%, while the Russell 2000 Index of small-company stocks declined
11.84%. Even within the S&P 500 itself, the bigger the company, the better the
performance.
However unsettling markets have been, the fundamental principles of
investing remain unchanged: long-term thinking, broad portfolio diversification,
and realistic expectations, recognizing the potential for downturns. Your
financial consultant is your best resource for helping you construct a
diversified portfolio and weather turbulent markets.
YOUR FUND MANAGERS' COMMENTS
We are pleased to send you this report on your Fund's fiscal year. On the pages
that follow, your Fund's management team offers more detailed discussion of how
markets behaved, how they managed the portfolio, and what they foresee for
markets and your Fund. We hope you find their discussion informative. If you
have any questions or comments, please contact our Client Services department at
800-959-4246, or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or at our Web site, www.aimfunds.com. We often post market updates
on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
---------------------------------------
THE ABRUPT
REVERSALS OF SENTIMENT
THIS FISCAL YEAR REINFORCE
OUR CONVICTION THAT
MARKETS ARE UNPREDICTABLE
IN THE SHORT TERM.
---------------------------------------
AIM WEINGARTEN FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
LARGE CAPS CONTINUE TO BUFFER
MARKET TURMOIL
THE MARKET EXPERIENCED ALL-TIME HIGHS AND ONE OF ITS MOST VICIOUS CORRECTIONS
DURING 1998. HOW DID THE FUND PERFORM IN THIS UNSETTLING ENVIRONMENT?
The Fund continued to deliver solid performance, despite record market
volatility. For the fiscal year ended October 31, 1998, total return was 12.34%
for Class A shares, 11.45% for Class B shares, and 11.54% for Class C shares.
That bested the performance of other growth funds tracked by Lipper Analytical
Services, Inc., which produced total returns averaging 9.61% over the same
period. Long-term performance for the Fund remains excellent, as shown on the
following pages.
Net assets under management grew approximately $500 million during the last
12 months, for a total of $6.89 billion at the close of the fiscal year.
WHAT WERE THE MAJOR TRENDS IN THE STOCK MARKET SINCE YOUR APRIL REPORT TO
SHAREHOLDERS?
Stock performance was greatly affected by the second wave of "Asian contagion"
in July when currency troubles in Asia made their way to the U.S. market. A
month later, Russia's bond default and the downturn that ensued involved even
the very large, very liquid stocks that were chiefly responsible for the U.S.
market's earlier rise. Domestically, the market was hit by the collapse of
several hedge funds. The ensuing "flight to quality and liquidity" gave bond
markets their 15 minutes in the spotlight as investors rushed out of the equity
market.
The Federal Reserve Board cut interest rates in September, hoping to
shelter the U.S. from a potential global recession. Boosted by the Fed easing,
the U.S. market halted its downturn and rebounded. Many stocks that had
experienced losses earlier in the year were able to recover and post slight
gains due to the upswing. At the close of the fiscal year, the U.S. market
continued to rebound as investors welcomed reassuring news about the outlook of
the global economy. The change of heart came after the Group of Seven, composed
of the world's seven richest industrialized nations, agreed on measures to
rescue flailing economies with a three-year, $90-billion financial aid package.
HOW DID DOMESTIC LARGE-CAP STOCKS FARE IN THIS UNCERTAIN MARKET?
Large-cap stocks did well in this changing environment, as they have for the
past couple of years. Mid-sized and small-company stocks bore the brunt of the
market's summer correction as investors shifted their focus to large,
well-established companies better able to weather the volatile market.
GIVEN CURRENT MARKET CONDITIONS, DID YOU ALTER THE PORTFOLIO?
The Fund holds both core and earnings-momentum stocks. When we say "core"
holdings, we are referring to companies with long-term records of robust and
reliable earnings growth. Earnings-momentum stocks refer to those seeing a
recent burst of earnings growth. When the economy accelerates and most companies
exhibit strong earnings growth, we tend to increase our holdings of
earnings-momentum stocks. However, in the current market environment, when the
economy is expected to slow, we have reduced the number of earnings-momentum
holdings and invested in the more stable and more predictable core holdings.
These include such well-known names as Microsoft and the pharmaceutical giant
Pfizer. Core holdings now represent 50% of the Fund, compared to less than 25% a
year ago.
At the close of the fiscal year, the Fund's top sector holdings included:
heath care, 24.4%; technology, 22.6%; and financial, 13.5%. We believe these
three sectors continue to have excellent long-term growth potential. During the
reporting period, we reduced our financial holdings significantly while
increasing our holdings in the technology sector.
FINANCIAL STOCKS DID VERY WELL DURING THE LAST REPORTING PERIOD. WHY DID YOU
REDUCE THE FUND'S HOLDINGS IN THE FINANCIAL SECTOR?
Financial stocks, which represented the largest sector weighting six months ago
at
================================================================================
CLASS A SHARES VS. PEER GROUP
As of 10/31/98
Growth Funds 9.61%
Tracked by Lipper
AIM Weingarten Fund 12.34%
================================================================================
---------------------------------------
LARGE-CAP STOCKS DID WELL IN THIS
CHANGING ENVIRONMENT, AS THEY HAVE
FOR THE PAST COUPLE OF YEARS.
---------------------------------------
See important Fund and index disclosures inside front cover.
AIM WEINGARTEN FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/98, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. MCI WorldCom, Inc. 4.34% 1. Computers (Software & Services) 9.77%
2. Microsoft Corp. 3.33 2. Health Care (Drugs-Major Pharmaceuticals) 7.92
3. Bristol-Myers Squibb Co. 2.94 3. Financial (Diversified) 7.83
4. America Online, Inc. 2.49 4. Health Care (Diversified) 6.39
5. Freddie Mac 2.27 5. Broadcasting (Television, Radio & Cable) 5.48
6. International Business Machines Corp. 2.23 6. Health Care (Medical Products & Supplies) 4.84
7. Pfizer, Inc. 2.05 7. Computers (Hardware) 4.45
8. Pharmacia & Upjohn, Inc. 2.01 8. Telecommunications (Long Distance) 4.34
9. Becton, Dickinson & Co. 1.93 9. Health Care (Drugs-Generic & Other) 3.15
10. Home Depot, Inc. (The) 1.77 10. Retail (Building Supplies) 2.84
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
===================================================================================================================
</TABLE>
approximately 20%, were reduced to 13.5% largely because of volatility in the
global financial market. Financial services stocks have been among the hardest
hit during the market downturn and their earnings have been hurt by recent
global economic developments. Big money-center banks, such as Chase Manhattan,
also sustained huge losses due to their involvement with the much-publicized
collapse of several hedge funds.
We follow earnings growth for individual companies, so our model picks up
sectors that are showing relative earnings momentum. These market-sensitive
financial stocks no longer qualified as good holdings on an earnings-momentum
basis.
The financial holdings that are left in the Fund are largely
credit-sensitive companies, such as Fannie Mae and Freddie Mac, with less
exposure to international woes.
WHAT MAKES TECHNOLOGY STOCKS ATTRACTIVE?
Earnings momentum has begun to improve for this sector. We increased the
sector's weighting from about 19% six months ago to 22.6% at the close of the
fiscal year. Additionally, strong sales of personal computers in the U.S. and
western Europe have helped to offset the economic weakness in other regions.
Sales of personal computers were up 15% for the third quarter. Two of the Fund's
top holdings--Microsoft and IBM--reported better-than-expected third quarter
earnings, despite their international exposure.
As the end of the millennium nears, we also expect the computer software and
services industry to profit from the so-called Y2K problem--the need to
reprogram older computers to recognize the year 2000. Despite the potential
effects of decreased demand overseas, we still think the technology sector's
long-term growth prospects are excellent.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
By and large, we are optimistic that the U.S. market has performed a turnaround,
coming back from its steep declines in the summer. Market analysts are
optimistic that the U.S. will avoid a recession in 1999. Economic growth seems
to be decelerating, so low inflation and low interest rates should continue.
Although large-cap stocks should still perform well, many analysts believe that
growth may be returning to the small- and mid-cap markets. The narrowness of the
market in the past is beginning to give way to better performance from smaller
companies. Given AIM Weingarten Fund's sizable stake in the mid-cap portion of
the market, we believe the Fund is well positioned to take advantage of this
trend.
---------------------------------------
BY AND LARGE, WE ARE OPTIMISTIC
THAT THE U.S. MARKET HAS PERFORMED
A TURNAROUND, COMING BACK FROM
ITS STEEP DECLINES IN THE SUMMER.
---------------------------------------
See important Fund and index disclosures inside front cover.
AIM WEINGARTEN FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98, including sales charges
A SHARES
10 Years 15.92%
5 Years 15.50
1 Year 6.17*
*12.34%, excluding sales charges
B SHARES
Since Inception (6/26/95) 17.49%
1 Year 6.72*
*11.45%, excluding sales charges
C SHARES
Since Inception (8/4/97) 7.31%
1 Year 10.60*
*11.54%, excluding sales charges
================================================================================
The chart compares your Fund's Class A shares to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to these
benchmarks over the period 6/17/69- 10/31/98. (Please note that performance
figures for the indexes are from 6/30/69 to 10/31/98.) It is important to
understand differences between your Fund and these indexes. An index measures
performance of a hypothetical portfolio.
A market index such as the Standard & Poor's 500 is not managed, incurring
no sales charges, expenses, or fees. If you could buy all the securities that
make up a market index, you would incur expenses
AIM WEINGARTEN FUND
4
<PAGE> 7
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM WEINGARTEN FUND VS. BENCHMARK INDEX
6/17/69-10/31/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
AIM Weingarten Fund,
Class A Shares S&P 500 Index Lipper Growth Fund Index
- ------------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
6/17/69 $9,444 $10,000 $10,000
10/31/69 9,416 10,090 10,495
10/31/70 8,321 8,972 8,293
10/31/71 11,486 10,484 10,426
10/31/72 14,252 12,781 12,908
10/31/73 12,910 12,784 11,878
10/31/74 8,113 9,103 7,597
10/31/75 10,274 11,469 9,311
10/31/76 10,507 13,781 10,681
10/31/77 12,927 12,949 10,325
10/31/78 15,588 13,771 11,599
10/31/79 21,780 15,899 14,306
10/31/80 40,449 20,996 20,539
10/31/81 40,792 21,116 20,710
10/31/82 46,299 24,555 23,894
10/31/83 65,474 31,417 30,474
10/31/84 63,091 33,418 29,783
10/31/85 75,468 39,877 35,261
10/31/86 107,220 53,111 45,589
10/31/87 113,346 56,510 45,974
10/31/88 127,855 64,933 53,984
10/31/89 172,770 81,997 66,366
10/31/90 165,806 75,883 57,852
10/31/91 240,228 101,271 81,831
10/31/92 256,684 111,341 88,217
10/31/93 272,524 127,937 104,963
10/31/94 282,781 132,863 107,109
10/31/95 362,527 167,920 132,790
10/31/96 416,216 208,316 155,352
10/31/97 527,890 275,163 199,432
10/31/98 592,904 335,709 227,110
</TABLE>
=======================================================================
PAST PERFORMANCE IS NO GUAUARANTEE OF COMPARABLE FUTURE RESULTS.
Source: Towers Data Systemems HYPO--Registered Trademark--
=======================================================================
that would affect your investment's return. An index of funds such as the Lipper
Growth Fund Index includes a number of mutual funds grouped by investment
objective. Each of those funds interprets that objective differently, and each
employs a different management style and investment strategy.
Your Fund's total return includes sales charges, expenses, and management fees.
The performance of the Fund's Class B and Class C shares will differ from Class
A shares due to differing fees and expenses. For Fund data performance
calculations and descriptions of indexes cited on this page, please refer to the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
AIM WEINGARTEN FUND
5
<PAGE> 8
ANNUAL REPORT / FOR CONSIDERATION
PENALTY FOR MISSING THE MARKET
S&P 500
=================================================
Average annual total returns 10/31/93-10/31/98
Fully Invested 21.30%
(1,264 Days)
Miss the 10 Best Days 13.05%
Miss the 20 Best Days 8.38%
Miss the 30 Best Days 4.46%
Miss the 40 Best Days 1.02%
Miss the 60 Best Days -4.83%
The unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is
widely regarded by investors as representative of the stock market in general.
Source: Standard & Poor's, Bloomberg.
=================================================
WHY STAYING FULLY INVESTED
HAS BEEN THE WISEST COURSE
When the stock market turns volatile, many investors feel the impulse to pull
their money out of mutual funds. The question then becomes when to get back in.
Trying to guess the answer could be very costly.
No one, not even expert market watchers, can consistently predict what the
market will do next. That's why AIM Funds stay fully invested even in a down
market, and we encourage investors to do the same.
For long-term investing, the stock market historically has offered the
highest returns. For example, the Standard & Poor's Composite Index of 500
Stocks (S&P 500) has reported an annualized total return of 13.15% for the 50
years ending October 31, 1998. Those were five decades of wars, recessions, and
political upheaval.
If you pull your money out whenever markets decline, you could miss some of
the market's best days. In August 1998, investors withdrew $11 billion from U.S.
mutual funds. Chances are, many of those investors did not put their money back
into the market in time for the October rally. In fact, October 1998 turned out
to be the strongest month for the Dow Jones Industrial Average in 11 years.
Here's another way to look at market timing: If you had invested a
hypothetical $10,000 in the S&P 500 on October 31, 1993, your money would have
grown to $26,255 by October 31, 1998, an average annual total return of 21.30%.
But suppose that during that five-year period, there were times when you decided
to get out of the market. If you missed the market's 10 best single-day
performances, your return would have fallen to 13.05%, and your investment would
be worth $18,468. If you had missed the market's 20 best days, your return would
have dropped to 8.38% and your investment would be worth $14,950.
The more you try to time the market, the greater your chances of missing its
biggest single-day gains. Keep focused on your financial goals and remember that
time, not timing, is key to successful investing. Now may be a good time to
visit your financial adviser to talk about your portfolio. Remember:
o think long-term
o diversify your investments
o avoid market timing
o maintain realistic expectations
AIM WEINGARTEN FUND
6
<PAGE> 9
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-87.33%
BANKS (REGIONAL)-0.46%
North Fork Bancorporation, Inc. 1,600,000 $ 31,800,000
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.34%
PepsiCo, Inc. 702,100 23,695,875
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.74%
Amgen, Inc.(a) 650,000 51,065,625
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-5.48%
Chancellor Media Corp.(a) 1,200,000 46,050,000
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 1,030,460 46,950,334
- ---------------------------------------------------------------
Comcast Corp.-Class A 1,500,000 74,062,500
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 281,400 15,441,825
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 925,000 50,875,000
- ---------------------------------------------------------------
Liberty Media Group(a) 299,800 11,411,137
- ---------------------------------------------------------------
MediaOne Group, Inc.(a) 950,500 40,218,031
- ---------------------------------------------------------------
Tele-Communications, Inc.-Class
A(a) 2,200,000 92,675,000
- ---------------------------------------------------------------
377,683,827
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.59%
Monsanto Co. 1,000,000 40,625,000
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.61%
Lucent Technologies, Inc.(b) 525,000 42,098,438
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-4.45%
Dell Computer Corp.(a)(b) 1,700,000 111,562,500
- ---------------------------------------------------------------
International Business Machines
Corp. 1,034,800 153,603,125
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 713,400 41,555,550
- ---------------------------------------------------------------
306,721,175
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.91%
Ascend Communications, Inc.(a) 1,444,000 69,673,000
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 850,000 53,550,000
- ---------------------------------------------------------------
3Com Corp.(a) 236,900 8,543,206
- ---------------------------------------------------------------
131,766,206
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.90%
EMC Corp.(a) 959,000 61,735,625
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-9.75%
America Online, Inc.(a)(b) 1,350,000 171,534,375
- ---------------------------------------------------------------
BMC Software, Inc.(a) 1,500,000 72,093,750
- ---------------------------------------------------------------
Cadence Design Systems,
Inc.(a)(b) 600,000 12,825,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Computer Sciences Corp.(a)(b) 685,500 $ 36,160,125
- ---------------------------------------------------------------
Compuware Corp.(a) 1,100,000 59,606,250
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 1,013,300 28,879,050
- ---------------------------------------------------------------
HBO & Co. 1,200,000 31,500,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 2,166,500 229,378,188
- ---------------------------------------------------------------
Unisys Corp.(a) 1,150,000 30,618,750
- ---------------------------------------------------------------
672,595,488
- ---------------------------------------------------------------
CONSUMER FINANCE-0.50%
Providian Financial Corp. 434,500 34,488,437
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-2.32%
AmeriSource Health Corp.-Class
A(a) 600,000 31,462,500
- ---------------------------------------------------------------
Cardinal Health, Inc. 1,000,000 94,562,500
- ---------------------------------------------------------------
McKesson Corp. 149,600 11,519,200
- ---------------------------------------------------------------
Sysco Corp. 835,700 22,511,668
- ---------------------------------------------------------------
160,055,868
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.68%
AMP Inc.(b) 1,000,000 41,062,500
- ---------------------------------------------------------------
General Electric Co. 912,100 79,808,750
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 612,800 24,205,600
- ---------------------------------------------------------------
Symbol Technologies, Inc. 885,450 39,623,887
- ---------------------------------------------------------------
184,700,737
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.49%
Altera Corp.(a) 266,100 11,076,413
- ---------------------------------------------------------------
Intel Corp. 898,000 80,090,375
- ---------------------------------------------------------------
Xilinx, Inc.(a) 255,700 11,418,603
- ---------------------------------------------------------------
102,585,391
- ---------------------------------------------------------------
ENTERTAINMENT-0.83%
Time Warner, Inc. 408,800 37,941,750
- ---------------------------------------------------------------
Viacom, Inc.-Class B(a) 326,500 19,549,187
- ---------------------------------------------------------------
57,490,937
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-7.83%
American Express Co. 400,000 35,350,000
- ---------------------------------------------------------------
Citigroup, Inc. 405,050 19,062,666
- ---------------------------------------------------------------
Federal National Mortgage
Association 1,340,700 94,938,319
- ---------------------------------------------------------------
Freddie Mac 2,725,000 156,687,500
- ---------------------------------------------------------------
Heller Financial, Inc. 965,400 23,169,600
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL
(DIVERSIFIED)-(CONTINUED)
MBIA, Inc. 1,375,000 $ 84,046,875
- ---------------------------------------------------------------
MGIC Investment Corp. 1,127,940 43,989,660
- ---------------------------------------------------------------
SunAmerica, Inc. 1,175,000 82,837,500
- ---------------------------------------------------------------
540,082,120
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-6.39%
Abbott Laboratories 1,287,400 60,427,338
- ---------------------------------------------------------------
American Home Products Corp. 390,200 19,022,250
- ---------------------------------------------------------------
Bristol-Myers Squibb Co.(b) 1,836,100 203,003,806
- ---------------------------------------------------------------
Johnson & Johnson 500,000 40,750,000
- ---------------------------------------------------------------
Warner-Lambert Co. 1,495,000 117,170,625
- ---------------------------------------------------------------
440,374,019
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.03%
ICN Pharmaceuticals, Inc. 1,310,200 30,625,925
- ---------------------------------------------------------------
Mylan Laboratories, Inc. 1,350,000 46,490,625
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 1,130,600 62,889,625
- ---------------------------------------------------------------
140,006,175
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-7.92%
Lilly (Eli) & Co. 1,498,900 121,317,219
- ---------------------------------------------------------------
Merck & Co., Inc. 525,000 71,006,250
- ---------------------------------------------------------------
Pfizer, Inc. 1,316,800 141,309,100
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 2,615,000 138,431,563
- ---------------------------------------------------------------
Schering-Plough Corp.(b) 717,200 73,781,950
- ---------------------------------------------------------------
545,846,082
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.09%
Universal Health Services,
Inc.-Class B(a) 114,000 5,849,625
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.17%
HEALTHSOUTH Corp.(a) 985,300 11,946,763
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-4.84%
Baxter International, Inc. 1,000,000 59,937,500
- ---------------------------------------------------------------
Becton, Dickinson & Co. 3,160,400 133,131,850
- ---------------------------------------------------------------
Biomet, Inc. 1,098,500 37,280,343
- ---------------------------------------------------------------
Guidant Corp. 850,000 65,025,000
- ---------------------------------------------------------------
Stryker Corp. 684,900 28,722,993
- ---------------------------------------------------------------
Sybron International Corp.(a) 393,200 9,731,700
- ---------------------------------------------------------------
333,829,386
- ---------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES-0.06%
Furniture Brands International,
Inc.(a)(b) 191,800 4,123,700
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.66%
Dial Corp. (The) 574,700 15,840,169
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEHOLD PRODUCTS (NON-DURABLES)-(CONTINUED)
Procter & Gamble Co. (The) 330,000 $ 29,328,750
- ---------------------------------------------------------------
45,168,919
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.71%
Equitable Companies, Inc. 670,000 32,830,000
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 389,500 16,164,250
- ---------------------------------------------------------------
48,994,250
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.41%
American International Group,
Inc. 330,000 28,132,500
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.42%
Paine Webber Group, Inc. 875,000 29,257,813
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.94%
Franklin Resources, Inc. 900,000 34,031,250
- ---------------------------------------------------------------
T. Rowe Price Associates, Inc. 867,100 30,836,244
- ---------------------------------------------------------------
64,867,494
- ---------------------------------------------------------------
LODGING-HOTELS-1.76%
Carnival Corp. 3,750,000 121,406,250
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-0.72%
Tyco International Ltd. 800,000 49,550,000
- ---------------------------------------------------------------
NATURAL GAS-0.47%
Enron Corp. 620,000 32,705,000
- ---------------------------------------------------------------
PERSONAL CARE-0.42%
Avon Products, Inc. 729,600 28,956,000
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-2.84%
Home Depot, Inc. (The) 2,800,000 121,800,000
- ---------------------------------------------------------------
Lowe's Companies, Inc. 2,200,000 74,112,500
- ---------------------------------------------------------------
195,912,500
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.97%
Best Buy Co., Inc.(a) 775,000 37,200,000
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 648,200 29,493,100
- ---------------------------------------------------------------
66,693,100
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.28%
Saks, Inc.(a) 855,700 19,467,175
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.14%
Ross Stores, Inc. 300,000 9,750,000
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.95%
CVS Corp. 700,000 31,981,250
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DRUG STORES)-(CONTINUED)
Rite Aid Corp. 848,500 $ 33,674,844
- ---------------------------------------------------------------
65,656,094
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.17%
Albertson's, Inc. 154,000 8,556,625
- ---------------------------------------------------------------
Kroger Co.(a) 1,000,000 55,500,000
- ---------------------------------------------------------------
Safeway, Inc.(a) 340,600 16,284,937
- ---------------------------------------------------------------
80,341,562
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-2.08%
Costco Companies, Inc.(a)(b) 725,000 41,143,750
- ---------------------------------------------------------------
Dayton Hudson Corp. 670,000 28,391,250
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 1,075,000 74,175,000
- ---------------------------------------------------------------
143,710,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-2.10%
Office Depot, Inc.(a) 2,850,000 71,250,000
- ---------------------------------------------------------------
Staples, Inc.(a) 2,250,000 73,406,250
- ---------------------------------------------------------------
144,656,250
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.54%
Gap, Inc. (The) 625,000 37,578,125
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.00%
Outdoor Systems, Inc.(a) 3,131,625 69,091,477
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.34%
Service Corp. International 650,000 23,156,250
- ---------------------------------------------------------------
SERVICES (COMPUTER
SYSTEMS)-0.48%
Keane, Inc.(a) 1,000,000 33,250,000
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.21%
Equifax, Inc. 1,332,300 51,543,356
- ---------------------------------------------------------------
Fiserv, Inc.(a) 690,600 32,112,900
- ---------------------------------------------------------------
83,656,256
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-4.34%
MCI WorldCom, Inc.(a) 5,410,965 298,955,816
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $4,374,224,596) 6,022,079,330
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS & NOTES-0.26%
RETAIL (DEPARTMENT STORES)-0.26%
Saks Holdings, Inc., Conv. Sub.
Notes, 5.50%, 09/15/06 (Cost
$18,304,125) $ 18,350,000 $ 18,235,313
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED FOREIGN BONDS & NOTES-0.61%
SWITZERLAND-0.61%
Nestle Holding Inc. (Foods),
Conv. Bond, 3.00%, 06/17/02
(Cost $40,041,900) 30,000,000 42,165,810
- ---------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.30%
FRANCE-0.37%
Renault S.A. (Automobiles) 600,000 25,658,570
- ---------------------------------------------------------------
IRELAND-1.12%
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 1,100,000 77,068,750
- ---------------------------------------------------------------
ITALY-0.86%
Telecom Italia Mobile S.p.A.
(Telephone) 6,000,000 34,868,132
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 3,333,333 24,106,632
- ---------------------------------------------------------------
58,974,764
- ---------------------------------------------------------------
SWITZERLAND-1.95%
UBS A.G. (Banks-Major
Regional)(a) 242,500 66,505,795
- ---------------------------------------------------------------
Nestle S.A. (Foods) 32,000 68,034,844
- ---------------------------------------------------------------
134,540,639
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$237,913,241) 296,242,723
- ---------------------------------------------------------------
OPTIONS PURCHASED-0.10%
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
PUTS-0.10%
Cadence Design Systems,
Inc. (Computers-Software
& Services) 6,000 22.50 Nov-98 $1,387,500
- -------------------------------------------------------------------------
Lucent Technologies, Inc.
(Communications
Equipment) 3,625 95.00 Jan-99 5,709,375
- -------------------------------------------------------------------------
Total Options
Purchased (Cost
$3,914,290) 7,096,875
- --------------------------------------------------
</TABLE>
9
<PAGE> 12
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY
BILLS-1.94%(c)
3.998%, 12/24/98 (Cost
$133,693,439) 13$4,435,000(d) 1$33,693,439
- ------------------------------------------------------------
REPURCHASE
AGREEMENTS-6.79%(e)
Bear, Stearns & Co.,
5.52%(f) 180,000,000 180,000,000
- ------------------------------------------------------------
Dresdner Kleinwort,
Benson, North America
LLC, 5.55%, 11/2/98(g) 88,091,453 88,091,453
- ------------------------------------------------------------
SBC Warburg Dillon Read
Inc., 5.55%, 11/2/98(h) 200,000,000 200,000,000
- ------------------------------------------------------------
Total Repurchase
Agreements (Cost
$468,091,453) 468,091,453
- ------------------------------------------------------------
TOTAL INVESTMENTS-101.33% 6$,987,604,943
- ------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(1.33)% (91,686,170)
- ------------------------------------------------------------
TOTAL NET ASSETS-100.00% 6$,895,918,773
============================================================
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Sub - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 8.
(c) U.S. Treasury Bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(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 to ensure its market value as being at least 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates are redetermined daily. Collateralized by
$353,825,000 U.S. Government obligations, 0% to 6.745% due 01/15/99 to
08/03/18 with an aggregate market value at 10/31/98 of $357,771,886.
(g) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$300,138,750. Collateralized by $485,457,284 U.S. Government obligations, 0%
to 8.50% due 01/07/99 to 08/01/37 with an aggregate market value at 10/31/98
of $306,003,830.
(h) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$200,092,500. Collateralized by $339,879,000 U.S. Government obligations, 0%
to 8.50% due 07/15/01 to 01/15/30 with an aggregate market value at 10/31/98
of $204,017,333.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$5,276,183,044) $6,987,604,943
- --------------------------------------------------------
Foreign currencies, at value (cost
$2,570,450) 2,565,915
- --------------------------------------------------------
Cash 3,996,858
- --------------------------------------------------------
Receivables for:
Investments sold 31,213,312
- --------------------------------------------------------
Capital stock sold 8,295,922
- --------------------------------------------------------
Dividends and interest 4,152,383
- --------------------------------------------------------
Variation margin 1,111,425
- --------------------------------------------------------
Investment for deferred compensation
plan 105,518
- --------------------------------------------------------
Other assets 163,186
- --------------------------------------------------------
Total assets 7,039,209,462
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 91,742,610
- --------------------------------------------------------
Capital stock reacquired 6,659,959
- --------------------------------------------------------
Deferred compensation 105,518
- --------------------------------------------------------
Options written (premiums received
$44,508,416) 37,381,847
- --------------------------------------------------------
Accrued advisory fees 3,226,589
- --------------------------------------------------------
Accrued administrative services fees 16,296
- --------------------------------------------------------
Accrued directors' fees 3,500
- --------------------------------------------------------
Accrued distribution fees 2,769,404
- --------------------------------------------------------
Accrued transfer agent fees 948,313
- --------------------------------------------------------
Accrued operating expenses 436,653
- --------------------------------------------------------
Total liabilities 143,290,689
- --------------------------------------------------------
Net assets applicable to shares
outstanding $6,895,918,773
========================================================
NET ASSETS:
Class A $6,094,177,561
========================================================
Class B $ 705,750,126
========================================================
Class C $ 23,107,031
========================================================
Institutional Class $ 72,884,055
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 280,643,682
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 33,416,157
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 1,093,306
========================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 3,285,920
========================================================
Class A:
Net asset value and redemption price
per share $ 21.72
- --------------------------------------------------------
Offering price per share:
(Net asset value of
$21.72 divided by 94.50%) $ 22.98
========================================================
Class B:
Net asset value and offering price per
share $ 21.12
========================================================
Class C:
Net asset value and offering price per
share $ 21.14
========================================================
Institutional Class:
Net asset value, offering and
redemption price per share $ 22.18
========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,357,955 foreign
withholding tax) $ 49,728,636
- ---------------------------------------------------------
Interest 26,746,186
- ---------------------------------------------------------
Total investment income 76,474,822
- ---------------------------------------------------------
EXPENSES:
Advisory fees 43,574,677
- ---------------------------------------------------------
Administrative services fees 179,633
- ---------------------------------------------------------
Custodian fees 667,786
- ---------------------------------------------------------
Directors' fees 45,123
- ---------------------------------------------------------
Distribution fees-Class A 18,567,575
- ---------------------------------------------------------
Distribution fees-Class B 6,185,890
- ---------------------------------------------------------
Distribution fees-Class C 125,198
- ---------------------------------------------------------
Transfer agent fees-Class A 7,790,643
- ---------------------------------------------------------
Transfer agent fees-Class B 1,316,441
- ---------------------------------------------------------
Transfer agent fees-Class C 35,743
- ---------------------------------------------------------
Transfer agent fees-Institutional Class 6,988
- ---------------------------------------------------------
Other 984,467
- ---------------------------------------------------------
Total expenses 79,480,164
- ---------------------------------------------------------
Less: Fees waived by advisor (2,917,461)
- ---------------------------------------------------------
Expenses paid indirectly (177,097)
- ---------------------------------------------------------
Net expenses 76,385,606
- ---------------------------------------------------------
Net investment income 89,216
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 510,689,133
- ---------------------------------------------------------
Foreign currencies 4,256,163
- ---------------------------------------------------------
Futures contracts 9,427,467
- ---------------------------------------------------------
Option contracts purchased 735,202
- ---------------------------------------------------------
Option contracts written (10,831,861)
- ---------------------------------------------------------
514,276,104
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 239,037,008
- ---------------------------------------------------------
Foreign currencies (41,394)
- ---------------------------------------------------------
Futures contracts 7,020,866
- ---------------------------------------------------------
Option contracts purchased 3,182,585
- ---------------------------------------------------------
Option contracts written 6,509,630
- ---------------------------------------------------------
255,708,695
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 769,984,799
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $770,074,015
=========================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 89,216 $ 1,100,893
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 514,276,104 933,882,009
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 255,708,695 438,536,902
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 770,074,015 1,373,519,804
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (14,688,010)
- ----------------------------------------------------------------------------------------------
Institutional Class -- (444,894)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (864,947,763) (552,547,910)
- ----------------------------------------------------------------------------------------------
Class B (76,736,323) (32,151,485)
- ----------------------------------------------------------------------------------------------
Class C (626,936) --
- ----------------------------------------------------------------------------------------------
Institutional Class (9,231,714) (6,655,833)
- ----------------------------------------------------------------------------------------------
Net equalization credits (charges) (See Note 1):
Class A -- 436,828
- ----------------------------------------------------------------------------------------------
Class B -- 62,469
- ----------------------------------------------------------------------------------------------
Class C -- --
- ----------------------------------------------------------------------------------------------
Institutional Class -- (91,147)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 442,079,076 126,373,106
- ----------------------------------------------------------------------------------------------
Class B 240,674,117 166,861,272
- ----------------------------------------------------------------------------------------------
Class C 21,194,188 2,401,569
- ----------------------------------------------------------------------------------------------
Institutional Class 12,302,794 (7,373,537)
- ----------------------------------------------------------------------------------------------
Net increase in net assets 534,781,454 1,055,702,232
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,361,137,319 5,305,435,087
- ----------------------------------------------------------------------------------------------
End of period $6,895,918,773 $6,361,137,319
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,682,377,491 $3,937,446,869
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 4,034,739 28,516,289
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 484,238,255 925,614,568
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 1,725,268,288 1,469,559,593
- ----------------------------------------------------------------------------------------------
$6,895,918,773 $6,361,137,319
==============================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six separate portfolios: AIM
Weingarten Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund and AIM Constellation Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to seek growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date or absent a last sales price, at the mean of the closing bid
and asked prices. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market quotations
are not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors of
the Company. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which would not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair market value as determined in good faith by or
under the supervision of the Board of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may enter into a foreign currency contract for
the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts.
D. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contracts are open, changes in the
value of the contracts are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contracts at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contracts are closed, the Fund recognizes a realized gain
or loss equal to the difference between the proceeds from, or cost of, the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options--The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-
13
<PAGE> 16
market" to reflect the current market value of the option written. The
current market value of a written option is the mean between the last bid
and asked prices on that day. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. If a written
option is exercised, the Fund realizes a gain or a loss from the sale of the
underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Put Options--The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, a
Fund pays an option premium. The option's underlying instrument may be a
security, or a futures contract. Put options may be used by a Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or
a portion of the Fund's resulting losses. At the same time, because the
maximum the Fund has at risk is the cost of the option, purchasing put
options does not eliminate the potential for the Fund to profit from an
increase in the value of the securities hedged.
G. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the specific identification of securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1998,
undistributed net investment income was increased by $4,109,681 and
undistributed net realized gains decreased by $4,109,681 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
H. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
I. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated among the
classes.
J. Equalization--The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective November 1, 1997, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of
$28,680,447 from undistributed net investment income to paid-in capital.
This change has no effect on the net assets, the results of operations or
the net asset value per share of the Fund.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). The terms of the master investment advisory agreement
provide that the Fund shall pay an advisory fee to AIM at an annual rate of 1.0%
of the first $30 million of the Fund's average daily net assets, plus 0.75% of
the Fund's average daily net assets in excess of $30 million to and including
$350 million, plus 0.625% of the Fund's average daily net assets in excess of
$350 million. AIM is currently voluntarily waiving a portion of its advisory
fees payable by the Fund to AIM to the extent necessary to reduce the fees paid
by the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver of fees is entirely voluntary but approval is
required by the Board of Directors of the Company for any decision by AIM to
discontinue the waiver. During the year ended October 31, 1998, AIM waived fees
of $2,917,461. Under the terms of a master sub-advisory agreement between AIM
and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of
the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1998, AIM was
reimbursed $179,633 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
14
<PAGE> 17
of AFS as transfer agent of the Institutional Class effective December 29, 1997.
During the year ended October 31, 1998, AFS was paid $4,650,330 with respect to
the Class A, Class B, and Class C shares and for the period December 29, 1997
through October 31, 1998, AFS was paid $5,316 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. $952 pursuant to a transfer agency and
shareholder services agreement with respect to the Institutional Class for the
period November 1, 1997 through December 28, 1997.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan")(collectively, the "Plans"). The Fund,
pursuant to the Class A and C Plan, pays AIM Distributors compensation at an
annual rate of 0.30% of the average daily net assets of the Class A shares and
1.00% of the average daily net assets of Class C shares. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets of the Class B shares. Of these amounts, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
A, Class B or C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. The
Plans also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by the respective classes. During the year ended
October 31, 1998, the Class A, Class B and Class C shares paid AIM Distributors
$18,567,575, $6,185,890, and $125,198, respectively, as compensation under the
Plans.
AIM Distributors received commissions of $1,654,675 from sales of the Class A
shares of the Fund during the year ended October 31, 1998. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1998,
AIM Distributors received commissions of $55,685 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 year ended October 31, 1998, the Fund paid legal fees of $16,595
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 year ended October 31, 1998, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$71,260 and $105,837, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $177,097 during the year ended October 31, 1998.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended October 31, 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.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended October 31, 1998 was $7,912,654,088 and
$8,399,566,587, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,717,839,274
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (45,966,154)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,671,873,120
==========================================================
</TABLE>
Cost of investments for tax purposes is $5,315,731,823.
NOTE 7-FUTURES CONTRACTS
On October 31, 1998, $7,665,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACTS CONTRACTS MONTH/COMMITMENT APPRECIATION
- --------------------- --------- ---------------- --------------
<S> <C> <C> <C>
S&P 500 Index 511 Dec. 98/Buy $6,756,866
- --------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 3,000 $ 1,216,939
- -------------------------------------------------------------- --------- ------------
Written 298,491 124,583,917
- -------------------------------------------------------------- --------- ------------
Closed (159,249) (64,917,081)
- -------------------------------------------------------------- --------- ------------
Exercised (36,794) (8,353,416)
- -------------------------------------------------------------- --------- ------------
Expired (29,215) (8,021,943)
- -------------------------------------------------------------- --------- ------------
End of period 76,233 $ 44,508,416
============================================================== ========= ============
</TABLE>
Open call option contracts written at October 31, 1998 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1998 APPRECIATION
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
ISSUE -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Jan-99 120 3,375 $ 4,922,273 $ 5,906,250 $ (983,977)
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Amp, Inc. Feb-99 35 10,000 6,560,980 8,312,500 (1,751,520)
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Bristol-Myers Squibb Co. Dec-98 110 13,038 6,498,312 7,170,900 (672,588)
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Cadence Design Systems, Inc. Nov-98 25 6,000 1,143,861 262,500 881,361
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Computer Sciences Corp. Dec-98 70 6,855 4,770,920 407,015 4,363,905
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Costco Companies, Inc. Jan-99 55 7,250 4,411,478 4,168,750 242,728
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Dell Computer Corp. Jan-99 70 17,000 9,706,674 10,306,250 (599,576)
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Furniture Brands International, Inc. Jan-99 20 959 200,904 272,716 (71,812)
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Furniture Brands International, Inc. Jan-99 25 959 284,813 80,916 203,897
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Lucent Technologies, Inc. Jan-99 110 3,625 3,111,958 90,625 3,021,333
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
Schering-Plough Corp. Nov-98 110 7,172 2,896,243 403,425 2,492,818
- --------------------------------------------- -------- ------ --------- ----------- ------------ --------------
76,233 $44,508,416 $ 37,381,847 $ 7,126,569
============================================= ========= =========== ============ ==============
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in the capital stock outstanding during the years ended October 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 62,788,326 $ 1,368,867,407 36,066,523 $ 748,100,033
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Class B 12,056,594 257,385,548 9,401,446 192,004,936
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Class C* 1,204,025 25,772,311 117,736 2,708,502
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Institutional Class 593,328 13,533,791 377,655 7,900,669
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Issued as a reinvestment of dividends:
Class A 41,795,514 813,441,370 29,415,559 528,061,835
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Class B 3,831,332 73,061,374 1,715,350 30,687,644
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Class C* 31,251 600,022 -- --
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Institutional Class 456,144 9,035,386 313,585 5,650,803
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Reacquired:
Class A (79,734,776) (1,740,229,701) (56,267,501) (1,149,788,762)
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Class B (4,228,997) (89,772,805) (2,748,694) (55,831,308)
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Class C* (246,074) (5,178,145) (13,632) (306,933)
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
Institutional Class (458,838) (10,266,383) (951,830) (20,925,009)
- -------------------------------------------------------- ----------- --------------- ----------- ---------------
38,087,829 $ 716,250,175 17,426,197 $ 288,262,410
======================================================== =========== =============== =========== ===============
</TABLE>
* Class C shares commenced sales on August 4, 1997.
16
<PAGE> 19
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1998, for a share of Class B capital stock outstanding during each of the years
in the three-year period ended October 31, 1998 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 year ended October 31, 1998 and the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.72 $ 20.19 $ 20.33 $ 17.82 $ 17.62
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.02 0.01 0.06 -- 0.07
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) 2.38 4.82 2.51 4.36 0.57
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.40 4.83 2.57 4.36 0.64
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income -- (0.06) -- (0.07) (0.11)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (3.40) (2.24) (2.71) (1.78) (0.33)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions (3.40) (2.30) (2.71) (1.85) (0.44)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 21.72 $ 22.72 $ 20.19 $ 20.33 $ 17.82
============================================================ ========== ========== ========== ========== ==========
Total return(a) 12.34% 26.83% 14.81% 28.20% 3.76%
============================================================ ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,094,178 $5,810,582 $4,977,493 $4,564,730 $3,965,858
============================================================ ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(b) 1.04%(c) 1.07% 1.12% 1.17% 1.21%
============================================================ ========== ========== ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(d) 0.07%(c) 0.07% 0.33% (0.02)% 0.45%
============================================================ ========== ========== ========== ========== ==========
Portfolio turnover rate 125% 128% 159% 139% 136%
============================================================ ========== ========== ========== ========== ==========
Borrowings for the period:
Amount of debt outstanding at end of period (000s omitted) -- -- -- -- --
============================================================ ========== ========== ========== ========== ==========
Average amount of debt outstanding during the period (000s
omitted)(e) -- -- -- $ 593 --
============================================================ ========== ========== ========== ========== ==========
Average number of shares outstanding during the period (000s
omitted)(e) 282,998 262,563 248,189 229,272 249,351
============================================================ ========== ========== ========== ========== ==========
Average amount of debt per share during the period -- -- -- $ 0.0026 --
============================================================ ========== ========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.09%, 1.11%, 1.15%, 1.19% and 1.24% for 1998-1994.
(c) Ratios are based on average net assets of $6,189,191,748.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.02%, 0.03%, 0.30%, (0.04%) and 0.42% for 1998-1994.
(e) Averages computed on a daily basis.
17
<PAGE> 20
NOTE 10-FINANCIAL HIGHLIGHTS-continued
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------- -------------------
1998 1997 1996 1995 1998 1997
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.34 $ 19.98 $ 20.28 $ 18.56 $ 22.34 $ 22.83
- ----------------------------------------------------- -------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.15)(a) (0.05)(a) (0.03) (0.15)(a) (0.04)(a)
- ----------------------------------------------------- -------- -------- -------- ------- ------- -------
Net gains (losses) on securities (both realized
and unrealized) 2.33 4.75 2.46 1.75 2.35 (0.45)
- ----------------------------------------------------- -------- -------- -------- ------- ------- -------
Total from investment operations 2.18 4.60 2.41 1.72 2.20 (0.49)
- ----------------------------------------------------- -------- -------- -------- ------- ------- -------
Distributions from net realized gains (3.40) (2.24) (2.71) -- (3.40) --
- ----------------------------------------------------- -------- -------- -------- ------- ------- -------
Net asset value, end of period $ 21.12 $ 22.34 $ 19.98 $ 20.28 $ 21.14 $ 22.34
===================================================== ======== ======== ======== ======= ======= =======
Total return(b) 11.45% 25.78% 13.95% 9.27% 11.54% (2.15)%
===================================================== ======== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000's omitted) $705,750 $486,105 $267,459 $42,238 $23,107 $ 2,326
===================================================== ======== ======== ======== ======= ======= =======
Ratio of expenses to average net assets(c) 1.83%(d) 1.87% 1.95% 1.91%(e) 1.83%(d) 1.84%(e)
===================================================== ======== ======== ======== ======= ======= =======
Ratio of net investment income (loss) to average
net assets(f) (0.72)%(d) (0.73)% (0.50)% (0.76)%(e) (0.72)%(d) (0.70)%(e)
===================================================== ======== ======== ======== ======= ======= =======
Portfolio turnover rate 125% 128% 159% 139% 125% 128%
===================================================== ======== ======== ======== ======= ======= =======
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) -- -- -- $ 3 -- --
===================================================== ======== ======== ======== ======= ======= =======
Average number of shares outstanding during the
period (000s omitted)(g) 28,946 18,505 7,956 1,036 586 41,282
===================================================== ======== ======== ======== ======= ======= =======
Average amount of debt per share during the
period -- -- -- $0.0029 -- --
===================================================== ======== ======== ======== ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is 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
1.87%, 1.91%, 1.98% and 1.94% (annualized) for 1998-1995 for Class B and
1.87% and 1.88% (annualized) for 1998-1997 for Class C.
(d) Ratios are based on average net assets of $618,589,002 and $12,519,780 for
Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.76)%, (0.77)%, (0.53)% and (0.79)% (annualized) for
1998-1995 for Class B and (0.76)% and (0.74)% (annualized) for 1998-1997
for Class C.
(g) Averages computed on a daily basis.
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1998, the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended, and financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Weingarten Fund as of October 31, 1998, the results of
its operations for the year then ended, the changes in
its net assets for each of the years in the two-year
period then ended, and the financial highlights for each
of the years in the five-year period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 4, 1998
19
<PAGE> 22
<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. Friedli 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
Prema Mathai-Davis Philadelphia, PA 19103
Chief Executive Officer, YWCA of the U.S.A.; Ofelia M. Mayo
Commissioner, New York City Dept. for the Assistant Secretary COUNSEL TO THE DIRECTORS
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of Lisa A. Moss Kramer, Levin, Naftalis & Frankel
New York State Assistant Secretary 919 Third Avenue
New York, NY 10022
Lewis F. Pennock Kathleen J. Pflueger
Attorney Assistant Secretary DISTRIBUTOR
Ian W. Robinson Samuel D. Sirko A I M Distributors, Inc.
Consultant; Formerly Executive Assistant Secretary 11 Greenway Plaza
Vice President and Suite 100
Chief Financial Officer Stephen I. Winer Houston, TX 77046
Bell Atlantic Management Assistant Secretary
Services, Inc. AUDITORS
Mary J. Benson
Louis S. Sklar Assistant Treasurer KPMG Peat Marwick LLP
Executive Vice President 700 Louisiana
Hines Interests Houston, TX 77002
Limited Partnership
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Weingarten Fund Retail Class paid ordinary dividends in the amount of
$1.3100 per share to shareholders of Class A, Class B, and Class C shares during
its tax year ended October 31, 1998. Of this amount 12.47% is eligible for the
dividends received deduction for corporations. The Fund also distributed
long-term capital gains of $2.2983 per share for Class A, Class B, and Class C
shares during its tax year ended October 31, 1998.
20
<PAGE> 23
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds(R). The exchange privilege may be modified or discontinued
for any of the AIM funds. Certain restrictions apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your Individual
Retirement Account (IRA), Roth IRA, or any other type of retirement plan,
and earn tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
---------------------------------------
CURRENT SHAREHOLDERS
CAN CALL OUR
AIM INVESTOR LINE AT
800-246-5463
FOR 24-HOUR-A-DAY
ACCOUNT INFORMATION.
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AIM WEINGARTEN FUND
<PAGE> 24
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Asian Growth Fund since 1976 and managed approximately $91
AIM Capital Development Fund AIM Developing Markets Fund(2) billion in assets for more than 5.5 million
AIM Constellation Fund AIM Emerging Markets Fund(2) shareholders, including individual investors,
AIM Mid Cap Equity Fund(2), (A) AIM Europe Growth Fund(2) corporate clients, and financial institutions,
AIM Select Growth Fund(3) AIM European Development Fund as of September 30, 1998.
AIM Small Cap Growth Fund(2), (B) AIM International Equity Fund The AIM Family of Funds--Registered
AIM Small Cap Opportunities Fund AIM International Growth Fund(2) Trademark--is distributed nationwide, and
AIM Value Fund AIM Japan Growth Fund(2) today is the 11th-largest mutual fund complex
AIM Weingarten Fund AIM Latin American Growth Fund(2) in the U.S. in assets under management,
AIM New Pacific Growth Fund(2) according to Strategic Insight, an independent
GROWTH & INCOME FUNDS mutual fund monitor.
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Basic Value Fund(2), (C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
MONEY MARKET FUNDS AIM Global Trends Fund(2), (E)
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
