<PAGE> 1
[COVER IMAGE]
AIM
CONSTELLATION FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1998
INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
[ COVER IMAGE ]
-------------------------------------
STARRY NIGHT OVER THE RHONE BY VINCENT VAN GOGH
STARS, PARTICULARLY CONSTELLATIONS, HAVE LONG BEEN USED AS
SIGNS BY WHICH PLANTED AND HARVESTED THEIR CROPS AND
SAILORS NAVIGATED THE SEAS. DIFFERENT CONSTELLATIONS
ARE VISIBLE AT DIFFERENT TIMES OF THE YEAR, CONSTANCY IN
THE SKY MAKES THEM RELIABLE FOR MEASURING THE PASSAGE OF TIME
AND DISTANCE. AIM CONSTELLATION FUND SEEKS OUT THE STARS OF
THE -CAPITALIZATION STOCK UNIVERSE.
-------------------------------------
AIM Constellation Fund is for shareholders who seek capital appreciation through
investments in common stocks, with emphasis on medium-size and smaller emerging
growth companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Constellation Fund performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed at net asset value
without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance 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, -17.79%; five years, 10.77%; 10
years, 17.31%. For Class C shares, one year, -14.49%; since inception
(8/4/97), -9.75%. Class B shares produced cumulative total return of -14.47%
from their inception (11/3/97) through 9/30/97.
o During the fiscal year ended 10/31/98 the Fund paid distributions of $2.0964
per share.
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.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o 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. Results shown assume the reinvestment of
dividends.
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 The NASDAQ (National Association of Securities Dealers Automated Quotation
system) Composite Index is a group of more than 4,500 unmanaged
over-the-counter securities widely regarded by investors to be
representative of the small- and medium-sized company stock universe.
o The Russell 2000 Stock Index is an unmanaged index generally considered
representative of small-capitalization stocks.
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
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 CONSTELLATION 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 CONSTELLATION FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
RISK-AVERSE, VOLATILE MARKETS
A CHALLENGE FOR FUND
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?
Fund performance fluctuated considerably during a very volatile fiscal year. The
Fund, like the entire mid-cap stock market, was hard hit during a deep selloff
in August. In October, the Fund rallied strongly, rising more than 23% between
October 8, when many markets hit their low for 1998, and the October 31 close of
the fiscal year.
Despite this comeback, the Fund was unable to recoup its losses completely.
Total returns for the fiscal year were -2.30% for Class A shares and -3.12% for
Class C shares. Class B shares, which commenced operations on November 3, 1997,
produced cumulative total return of -5.86% as of the close of the reporting
period. Net assets stood at $12.93 billion as of the close of the fiscal year.
WHAT MADE MARKETS SO VOLATILE?
As the fiscal year opened, concern about Asia's financial difficulties was
widespread. The smaller and midsize company stocks in which the Fund invests
were especially out of favor as uneasy investors sought the relative safety of
blue-chip stocks. Markets rallied in the spring as investors seemed to shrug off
Asian worries. For the first half of the fiscal year, the Fund produced
impressive returns.
The latter half of the fiscal year was even more volatile. A much-noted
summer rally took many stock indexes to all-time highs by mid-July, but mid-cap
stocks did not really participate. For example, the S&P 400 Midcap Stock Index
was higher in mid-April than it was on July 17, when large-cap indexes such as
the S&P 500 peaked.
In August, another wave of concern washed over markets. Its causes were
multiple: a default on Russian government debt, the collapse of some highly
leveraged hedge funds, and recognition that domestic corporate profit growth was
slipping.
Late in the fiscal year, amid evidence of a worldwide credit crunch, the
Federal Reserve Board (the Fed) lowered the short-term target federal funds rate
from 5.50% to 5.00% in two steps. Equity markets rallied in response. From the
Fed's second interest rate easing on October 15 through the close of the fiscal
year, the Fund was up almost 9%. In the short run at least, the Fed appeared to
have calmed investors.
HOW DID YOU MANAGE THE FUND IN SUCH A CHANGEABLE ENVIRONMENT?
We stuck with our disciplined, earnings-driven stock selection process, looking
at the underlying fundamentals of individual companies, not the overall market.
The portfolio changed considerably during the fiscal year. Energy sector
stocks were reduced from more than 9.00% of net assets to just 3.56% due to the
steep decline in oil and other commodity prices. Our holdings in semiconductors
were also down, from more than 8.00% of net assets to about 3.00%. Semiconductor
makers and equipment manufacturers had a tough year, as the Asian financial
crisis drove down demand for computers and components in Southeast Asia.
YOU ARE STILL HEAVILY INVESTED IN THE TECHNOLOGY SECTOR, HOWEVER, AREN'T YOU?
Yes, especially the computer software and services industry. The computer glitch
that requires reprogramming older computers and software to recognize the year
2000 continues to provide opportunity. The worldwide cost of fixing it could
total between $300 billion and $600 billion, according to the Gartner Group,
Inc., a technology research firm. Among the portfolio's software and services
holdings is Citrix Systems, which for three years running has been cited by
Deloitte & Touche as one of the fastest growing technology companies in the
country.
Of course, we don't limit ourselves to the software side. Hardware holdings
include PMC-Sierra Inc., which produces high-performance semiconductor
components for the broadband and high-bandwidth communications network
industries; and printer maker Lexmark International, recently ranked among the
top 10 best-performing information technology companies by Business Week.
RETAILERS ARE WELL REPRESENTED IN THE PORTFOLIO, TOO. WHY?
While some voiced concern about retailers as consumer confidence declined late
-------------------------------------
WE STUCK WITH OUR DISCIPLINED,
EARNINGS-DRIVEN STOCK SELECTION
PROCESS, LOOKING AT THE UNDERLYING
FUNDAMENTALS OF INDIVIDUAL COMPA-
NIES, NOT THE OVERALL MARKET.
-------------------------------------
-------------------------------------
BECAUSE U.S. DRUG MANUFACTURERS
AND DISTRIBUTORS ARE NOT HEAVILY
DEPENDENT ON ASIAN AND LATIN
AMERICAN MARKETS, THEY MAY BE REL-
ATIVELY IMMUNE TO FOREIGN .
-------------------------------------
See important Fund and index disclosures inside front cover.
AIM CONSTELLATION FUND
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/98, based on total net assets
<TABLE>
<CAPTION>
======================================================================================================
Top 10 Holdings Top 10 Industries
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. America Online, Inc. 1.54% 1. Computers (Software & Services) 10.97%
2. Ascend Communications, Inc. 1.31 2. Health Care (Medical Products & Supplies) 5.07
3. BMC Software, Inc. 1.30 3. Services (Data Processing) 4.36
4. Dell Computer Corp. 1.22 4. Health Care (Drugs-Generic & Other) 3.11
5. Staples, Inc. 1.20 5. Electronics (Semiconductors) 3.05
6. EMC Corp. 1.19 6. Computers (Hardware) 2.94
7. Nokia Oyj A.B. - Class A - ADR 1.16 7. Services (Commercial & Consumer) 2.92
8. Becton, Dickinson & Co. 1.14 8. Communications Equipment 2.78
9. Kroger Co. 1.13 9. Health Care (Specialized Services) 2.77
10. Cardinal Health, Inc. 1.06 10. Distributors (Food & Health) 2.70
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>
in the fiscal year, the retailers in the portfolio held up well. For example,
the discount retail category, which includes portfolio holdings such as Bed Bath
& Beyond Inc., reported a 6.1% increase in same-store sales during October.
Specialty apparel retailers such as Abercrombie & Fitch Co. did even
better--same store sales for that category were up 7.3%.
As always, we seek out the best earnings stories we can find. One of our
major holdings in the retail industry is office-products specialist Staples,
Inc. This company recently announced its 17th consecutive quarter of earnings
per share growth above 30%.
YOU ALSO CONTINUE TO HOLD A LOT OF HEALTH-CARE STOCKS. WHAT MAKES THAT SECTOR
ATTRACTIVE?
At the close of the fiscal year, many of our health-care holdings were in the
medical products and pharmaceuticals industries. We trimmed our exposure to less
promising industries such as HMOs and hospital management. Because U.S. drug
manufacturers and distributors are not heavily dependent on the Asian and Latin
American markets, they may be relatively immune to foreign turmoil. Their strong
earnings growth is expected to continue.
Holdings in this area include Becton, Dickinson & Co., whose products
include drug-injection and blood-collection devices; and Cardinal Health, Inc.,
the second largest wholesaler of pharmaceuticals in the U.S. Cardinal expands
its wholesaler role by providing support services such as computerized order
entry and confirmation systems, and consulting services on design and operation
of drug stores.
WHAT IS YOUR NEAR-TERM OUTLOOK ON THE ECONOMY?
We are optimistic that the U.S. will avoid a recession in 1999. The economy will
likely experience annual gross domestic product growth in the 1.5% to 2.00%
range, so low-inflation and low interest rates should continue.
The challenge will be earnings. With global markets in or near recession and
the U.S. economy expanding more slowly, companies will be sorely tested to keep
earnings advancing.
AND WHAT DO YOU THINK ABOUT THE MID-CAP MARKET SECTOR WHERE THE FUND INVESTS?
We believe there are several reasons for optimism about mid-cap stocks.
First, for the quarter ended September 30, 1998, reported earnings growth
for companies in the portfolio averaged more than 25% over the same period last
year, and such double-digit growth is projected for the next year. By contrast,
average earnings growth for the large-cap stocks in the S&P 500 was negative for
the September 30 quarter end.
Second, valuations of the stocks in the mid-cap sector are significantly
lower than in the large-cap sector. These mid-cap stocks also offer some refuge
from Asian woes because they tend to have less international exposure.
Finally, historically, smaller company stocks do better than large-company
stocks when the Fed eases monetary policy, and we were encouraged to note that
this was true after the Fed began lowering interest rates. Though one month is
much too short a period in which to identify a market trend, from the Fed's
first interest rate cut September 29 through the October 31 close of the fiscal
year, midcaps did outperform large caps, with the S&P 400 advancing 6.85% while
the large-cap S&P 500 rose 4.84%. Of course, a favorable environment for
smaller-company stocks is always good for the AIM Constellation Fund.
See important Fund and index disclosures inside front cover.
AIM CONSTELLATION FUND
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
THE AIM CONSTELLATION FUND GROWTH STORY
RESULTS OF A $10,000 INVESTMENT
AIM CONSTELLATION FUND VS. BENCHMARK INDEXES
4/30/76-10/31/98
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/98
CLASS A SHARES
10 years 17.97%
5 years 11.85
1 year -7.67
CLASS B SHARES
Inception (11/3/97) -10.20%*
CLASS C SHARES
Inception (8/4/97) -5.48%
1 year -4.01
*Total return provided is cumulative total return that has not been annualized.
================================================================================
ABOUT THIS CHART
The chart compares your Fund's Class A shares to benchmark indexes. It is
important to understand differences between your Fund and these indexes. An
index measures performance of a hypothetical portfolio.
Market indexes such as the Standard & Poor's 500 and the NASDAQ are 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 that would
affect your investment's return.
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of Class B and Class C shares
AIM CONSTELLATION FUND
<PAGE> 7
ANNUAL REPORT / PERFORMANCE HISTORY
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
- -------------------------------------------------------------
AIM Constellation Fund
Class A Shares S&P 500 NADSAQ
- -------------------------------------------------------------
In thousands
4/30/76 $9,443 $10,000 $10,000
10/76 9,102 10,327 10,030
10/77 8,575 9,704 10,826
10/78 10,329 10,319 12,336
10/79 15,619 11,914 15,045
10/80 31,348 15,734 21,401
10/81 30,638 15,824 21,674
10/82 29,000 18,401 23,604
10/83 40,569 23,543 30,478
10/84 35,867 25,042 27,423
10/85 39,649 29,883 32,475
10/86 58,139 39,800 40,050
10/87 56,748 42,346 35,890
10/88 69,979 48,659 42,458
10/89 94,817 61,446 50,580
10/90 79,482 56,864 36,616
10/91 141,356 75,889 60,277
10/92 162,306 83,435 67,181
10/93 208,732 95,872 86,507
10/94 224,288 99,563 86,311
10/95 299,259 125,834 115,015
10/96 332,949 156,104 135,602
10/97 395,745 206,197 176,910
10/98 386,627 251,568 196,646
=============================================================
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS.
Source: Towers Data Systems HYPO--Registered Trademark--
=============================================================
will differ from that of Class A shares due to differing fees and expenses. For
Fund performance calculations and descriptions of indexes cited on this page,
please refer to the inside front cover.
Use of these indexes is intended to give you a general idea of how your Fund
performed compared to these benchmarks.
AIM CONSTELLATION FUND
<PAGE> 8
ANNUAL REPORT / FOR CONSIDERATION
TAKE A CLOSER LOOK AT MARKET INDEXES
You step into your car after work and hear the radio announcer say, "The market
was down 200 points today." Instantly you start to worry. But should you? The
question is, what exactly is "the market"? And how are your investments going to
be affected by it? You need the facts, and fast. Market indexes are a good place
to start. They can help you gauge how your investments are performing.
"The market" actually is much broader than newspapers and television reports
make it out to be. The media often report movements in the Dow Jones Industrial
Average (the Dow) as indicative of the market as a whole. But the Dow is made up
of just 30 stocks; the U.S. market is made up of more than 12,000 stocks traded
on the New York Stock Exchange, regional exchanges, and over the counter. The
Dow only measures the performance of the largest American companies.
If you're like most investors, you've got a range of investments across
market segments, not just blue-chip stocks. The best way to compare your
investments to their peers in the marketplace is to find the right index. An
index measures the performance of a particular group of stocks. But keep in
mind, there is rarely a perfect match between the stocks in a mutual fund and
the stocks in an index.
Indexes and funds have different purposes. Mutual funds select stocks based
on their past performance or future potential. Indexes pick stocks based on
their ability to act as reliable measuring tools. For example, index makers for
the S&P 500 look for actively traded, widely owned stocks that reflect the
active stock market.
There are other important differences between a fund and an index. You
cannot invest directly in an index. Because indexes are unmanaged, they incur no
sales charges, expenses, or fees. Even if you bought all the securities making
up an index, your transaction expenses would lower your investment returns.
As you follow the various indexes, you'll notice that their tracks often
diverge. When large-caps are up, small-caps or overseas stocks are down--and
THE USUAL INDEXES
THE DOW JONES INDUSTRIAL AVERAGE
WHAT IT IS: In its 102-year history, the Dow always has focused on the largest,
most successful U.S. companies. The types of firms in the index have changed
drastically over the years--from the cotton companies of the 19th century to the
computer icons of the 20th. The 30 stocks now in the Dow include household names
such as International Business Machines Corp., Boeing Co., McDonald's Corp., and
Walt Disney Co.
WHAT IT TELLS YOU: While stocks in the Dow make up about 20% of the value of all
U.S. stocks, the index leaves out many sectors of the market. For most mutual
fund investors, the Dow is an inadequate and often inappropriate measure of
comparison. Use it to check the pulse of American big business, but look
elsewhere for a more inclusive market view.
S&P 500
WHAT IT IS: The S&P 500 (Standard & Poor's Composite Index of 500 Stocks) is
often used as a gauge of the whole market. But it measures only 500 stocks in
the large-capitalization portion of the U.S. stock market. Included in the index
are Apple Computer, Hilton Hotels, NIKE Inc., and Pennzoil Co.
WHAT IT TELLS YOU: The S&P 500 is useful for evaluating a fund that invests in
large-capitalization U.S. stocks. It's a poor gauge for others funds, such as a
small-cap aggressive growth fund.
Keep in mind that the S&P 500 is very concentrated. The top 50 companies
represent half the S&P 500's assets. For the past few years, the total return of
the S&P 500 has been unusually high, but much of this performance can be
attributed to just a few stocks in the index. Most mutual funds are more
diversified than this index.
NASDAQ COMPOSITE INDEX
WHAT IT IS: The NASDAQ (National Association of Securities Dealers Automated
Quotation system) Composite Index measures the performance of all NASDAQ
domestic and foreign stocks. Often associated with the over-the-counter market,
the index also includes some exchange-listed stocks. More than 5,300 stocks are
in the NASDAQ Composite Index.
WHAT IT TELLS YOU: Many consider NASDAQ a barometer for small- and mid-cap
stocks. However, the index is market-value weighted--each company's stock
affects the index in proportion to that company's market value. Large-cap
technology stocks such as Microsoft, Intel, and Dell Computer dominate it.
The NASDAQ is not a good measure of small- and mid-cap stock performance. It
basically tells you how large-cap technology stocks are doing. It is not a
suitable index for most mutual funds.
AIM CONSTELLATION FUND
<PAGE> 9
ANNUAL REPORT / FOR CONSIDERATION
vice versa. The chart at the right shows calendar-year returns for two domestic
and one foreign equity index for the decade 12/31/87 through 12/31/97. The
market segments often move out of synch, and performance leadership often
rotates from one segment to another.
By positioning your investments strategically in various market segments,
you're less likely to miss out on the peaks, and you'll be more protected from
the valleys. Remember, patience is the key. If you jump in and out of
investments, you could miss out on some of the market's best moments. See your
financial adviser to build a diversified portfolio suited to fluctuating
markets.
DIVERGING INDEXES
Total Return per Calendar Year
1987-1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
S&P 500 Index Europe-Australasia-Far Russell 2000 Stock Index
with Monthly Dividends East Index with Dividends*
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12/88 16.55% 25.02% 28.59%
12/89 31.64 16.26 10.8
12/90 -3.09 19.48 23.2
12/91 30.41 46.04 12.5
12/92 7.61 18.41 11.85
12/93 10.06 18.88 32.94
12/94 1.32 -1.82 8.06
12/95 37.54 28.45 11.55
12/96 22.95 16.49 6.36
12/97 33.35 22.36 2.06
Past performance is no guarantee of future investment results.
=================================================================================================
</TABLE>
*International investing presents risks not associated with investing solely in
the United States. These include risks relating to fluctuation in the value of
the U.S. dollar, custody arrangements made for a Fund's foreign holdings,
differences in accounting, political risks, and the lesser degree of public
information required to be provided by non-U.S. companies.
===============================================================================
A FEW MORE INDEXES
S&P 400
WHAT IT IS: The Standard & Poor's 400 Mid-Cap Index is a relatively new index
that dates to 1981 and measures performance of 400 stocks in the
mid-capitalization sector of the domestic stock market. Companies in the index
include America Online, Inc., CompuWare Corp., Starbucks Corp., and Office
Depot. As of July 31, the median market capitalization in the S&P 400 was
approximately $1.8 billion, but some stocks in the index have capitalizations as
large as $5 billion.
WHAT IT TELLS YOU: If your fund invests primarily in mid-caps, this is one of
the best benchmarks to use. But keep in mind that the index may include
companies smaller or larger than the ones in your fund.
RUSSELL 2000 INDEX
WHAT IT IS: The Russell 2000 Index measures the performance of small-cap stocks.
A total of 2,000 U.S. companies are represented in the index, including such
well-known firms as Bally Total Fitness, Bethlehem Steel, Coca-Cola Bottling
Co., and Coors Brewing Co. The index, which is cap-weighted, represents about
10% of the U.S. stock market. More than 900 of the stocks in the Russell 2000
trade on either the New York Stock Exchange or the American Stock Exchange.
WHAT IT TELLS YOU: The Russell 2000 Index is a very good indicator of small-cap
stock performance. It is a true small-cap index with the market value of
companies represented in this index ranging from $171.7 million to $1.1 billion.
Many mutual funds investing in small-cap stocks use the Russell 2000 as their
benchmark index.
EUROPE, AUSTRALASIA, AND THE
FAR EAST INDEX (EAFE--Registered Trademark--)
WHAT IT IS: The EAFE consists of approximately 1,600 foreign stocks tracked by
Morgan Stanley Capital International (MSCI). They are listed on stock exchanges
in 20 developed countries. Stocks are chosen to reflect 60% of the market
capitalization of each country and of each major industry group.
WHAT IT TELLS YOU: As international investing has grown, a need has arisen to
measure global stock-market performance. The EAFE fulfills this need for
developed markets in Europe, Australia and the Far East. It is frequently used
as a benchmark for mutual funds investing in stocks in these markets. MSCI also
has developed indexes for specific countries and regions and for emerging
markets. Since your fund's country allocation may be different from EAFE, you
may need to look at a more specific index.
An index is not an investment product available for purchase. An index measures
the performance of a hypothetical portfolio. An index is not managed, incurring
no sales charges, expenses, or fees. If you could buy all the securities that
make up a particular index, you would incur expenses that would affect the
return on your investment.
AIM CONSTELLATION FUND
<PAGE> 10
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-91.01%
AEROSPACE/DEFENSE-0.60%
AAR Corp. 1,000,000 $ 23,125,000
- ---------------------------------------------------------------
BE Aerospace, Inc.(a) 500,000 10,750,000
- ---------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 400,000 17,700,000
- ---------------------------------------------------------------
Sundstrand Corp. 557,400 26,162,963
- ---------------------------------------------------------------
77,737,963
- ---------------------------------------------------------------
AIRLINES-0.15%
Southwest Airlines Co. 900,000 19,068,750
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.39%
Danaher Corp. 1,250,000 49,921,875
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.29%
Northern Trust Corp. 500,000 36,875,000
- ---------------------------------------------------------------
BANKS (REGIONAL)-2.54%
AmSouth Bancorporation 750,000 30,046,875
- ---------------------------------------------------------------
First Tennessee National Corp. 510,200 16,166,963
- ---------------------------------------------------------------
Golden State Bancorp, Inc.(a) 1,350,000 25,903,125
- ---------------------------------------------------------------
Hibernia Corp.-Class A 1,250,000 20,859,375
- ---------------------------------------------------------------
Mercantile Bankshares Corp. 500,000 16,312,500
- ---------------------------------------------------------------
North Fork Bancorporation, Inc. 2,500,000 49,687,500
- ---------------------------------------------------------------
Star Banc Corp. 1,575,000 119,109,375
- ---------------------------------------------------------------
TCF Financial Corp. 1,000,000 23,562,500
- ---------------------------------------------------------------
Zions Bancorp 500,000 26,531,250
- ---------------------------------------------------------------
328,179,463
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.71%
Biogen, Inc.(a) 1,000,000 69,500,000
- ---------------------------------------------------------------
Curative Health Services,
Inc.(a)(b) 795,000 21,663,750
- ---------------------------------------------------------------
91,163,750
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-2.08%
Chancellor Media Corp.(a) 280,002 10,745,077
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 800,000 36,450,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 1,500,000 74,062,500
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 500,000 27,437,500
- ---------------------------------------------------------------
Heftel Broadcasting Corp.(a) 501,000 20,603,625
- ---------------------------------------------------------------
Liberty Media Group(a) 1,500,000 57,093,750
- ---------------------------------------------------------------
Univision Communications Inc.(a) 1,465,400 43,229,300
- ---------------------------------------------------------------
269,621,752
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.49%
Andrew Corp.(a) 563,400 9,225,675
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Comverse Technology, Inc.(a) 850,000 $ 39,100,000
- ---------------------------------------------------------------
General Instrument Corp.(a) 2,000,000 51,375,000
- ---------------------------------------------------------------
Global TeleSystems Group,
Inc.(a) 1,176,400 47,129,525
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 586,000 32,596,250
- ---------------------------------------------------------------
Tellabs, Inc.(a) 250,000 13,750,000
- ---------------------------------------------------------------
193,176,450
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-2.94%
Apple Computer, Inc.(a) 750,000 27,843,750
- ---------------------------------------------------------------
Comdisco, Inc. 4,200,000 64,837,500
- ---------------------------------------------------------------
Dell Computer Corp.(a) 2,400,000 157,500,000
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 1,500,000 83,718,750
- ---------------------------------------------------------------
IDX Systems Corp.(a) 670,800 28,425,150
- ---------------------------------------------------------------
Micron Electronics, Inc.(a) 884,000 18,508,750
- ---------------------------------------------------------------
380,833,900
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.54%
Ascend Communications, Inc.(a) 3,500,000 168,875,000
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 525,000 33,075,000
- ---------------------------------------------------------------
3Com Corp.(a) 3,500,000 126,218,750
- ---------------------------------------------------------------
328,168,750
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.11%
Adaptec, Inc.(a) 987,500 15,985,156
- ---------------------------------------------------------------
EMC Corp.(a) 2,400,000 154,500,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 1,000,000 69,937,500
- ---------------------------------------------------------------
Seagate Technology , Inc.(a) 1,250,000 32,968,750
- ---------------------------------------------------------------
273,391,406
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-10.97%
America Online, Inc. 1,564,700 198,814,693
- ---------------------------------------------------------------
Aspect Development, Inc.(a) 976,000 30,835,500
- ---------------------------------------------------------------
BMC Software, Inc.(a) 3,500,000 168,218,750
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 1,250,000 26,718,750
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 1,500,000 106,312,500
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 750,000 39,562,500
- ---------------------------------------------------------------
Compuware Corp.(a) 2,500,000 135,468,750
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 4,780,100 136,232,850
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 500,000 20,562,500
- ---------------------------------------------------------------
HBO & Co. 1,000,000 26,250,000
- ---------------------------------------------------------------
Intuit, Inc.(a) 725,000 36,612,500
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 1,050,000 34,387,500
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Learning Company, Inc. (The)(a) 2,000,000 $ 51,625,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 300,000 31,762,500
- ---------------------------------------------------------------
Network Associates, Inc.(a) 704,700 29,949,750
- ---------------------------------------------------------------
Parametric Technology Co.(a) 2,500,000 41,562,500
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 1,450,000 51,112,500
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 1,250,000 32,734,375
- ---------------------------------------------------------------
Synopsys, Inc.(a) 1,500,000 67,875,000
- ---------------------------------------------------------------
Veritas Software Corp.(a) 859,700 43,092,463
- ---------------------------------------------------------------
Wind River Systems(a) 1,000,000 43,812,500
- ---------------------------------------------------------------
Yahoo! Inc.(a) 500,000 65,421,875
- ---------------------------------------------------------------
1,418,925,256
- ---------------------------------------------------------------
CONSUMER FINANCE-2.28%
Capital One Financial Corp. 800,000 81,400,000
- ---------------------------------------------------------------
Countrywide Credit Industries,
Inc. 636,900 27,506,118
- ---------------------------------------------------------------
MBNA Corp. 1,875,000 42,773,438
- ---------------------------------------------------------------
Providian Financial Corp. 1,304,000 103,505,000
- ---------------------------------------------------------------
SLM Holding Corp. 1,000,000 40,062,500
- ---------------------------------------------------------------
295,247,056
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.30%
Action Performance Companies,
Inc.(a) 500,000 14,937,500
- ---------------------------------------------------------------
Blyth Industries, Inc.(a) 806,200 22,271,275
- ---------------------------------------------------------------
37,208,775
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-2.70%
Bergen Brunswig Corp.-Class A 1,000,000 48,812,500
- ---------------------------------------------------------------
Cardinal Health, Inc. 1,445,445 136,684,892
- ---------------------------------------------------------------
JP Foodservice, Inc. 547,900 26,025,250
- ---------------------------------------------------------------
McKesson Corp. 1,422,400 109,524,800
- ---------------------------------------------------------------
Patterson Dental Co.(a) 18,500 763,125
- ---------------------------------------------------------------
SUPERVALU, INC 1,125,900 27,021,600
- ---------------------------------------------------------------
348,832,167
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.55%
American Power Conversion
Corp.(a) 2,000,000 84,875,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 387,400 15,883,400
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 1,000,000 39,500,000
- ---------------------------------------------------------------
Solectron Corp.(a) 1,500,000 85,875,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 1,750,000 78,312,500
- ---------------------------------------------------------------
Uniphase Corp.(a) 500,000 24,750,000
- ---------------------------------------------------------------
329,195,900
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.17%
Arrow Electronics, Inc.(a) 1,000,000 21,812,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS
(INSTRUMENTATION)-0.40%
Perkin-Elmer Corp. 176,300 $ 14,864,293
- ---------------------------------------------------------------
Waters Corp.(a) 500,000 36,750,000
- ---------------------------------------------------------------
51,614,293
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-3.05%
Altera Corp.(a) 1,321,400 55,003,275
- ---------------------------------------------------------------
Linear Technology Corp. 1,000,000 59,625,000
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 2,000,000 71,375,000
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 2,500,175 67,660,985
- ---------------------------------------------------------------
Micron Technology, Inc.(a) 1,750,000 66,500,000
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 1,000,000 44,875,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 650,000 29,026,563
- ---------------------------------------------------------------
394,065,823
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.57%
FINOVA Group, Inc. 706,400 34,437,000
- ---------------------------------------------------------------
MGIC Investment Corp. 1,000,000 39,000,000
- ---------------------------------------------------------------
73,437,000
- ---------------------------------------------------------------
FOODS-0.36%
Earthgrains Co. (The) 260,300 7,809,000
- ---------------------------------------------------------------
Quaker Oats Co. (The) 650,000 38,390,625
- ---------------------------------------------------------------
46,199,625
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.30%
Alpharma, Inc. 254,967 7,059,399
- ---------------------------------------------------------------
Forest Laboratories, Inc.(a) 750,000 31,359,375
- ---------------------------------------------------------------
Jones Medical Industries,
Inc.(b) 2,350,850 75,961,840
- ---------------------------------------------------------------
Medicis Pharmaceutical-Class
A(a) 826,900 41,448,363
- ---------------------------------------------------------------
Mylan Laboratories, Inc. 2,500,000 86,093,750
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 1,000,000 55,625,000
- ---------------------------------------------------------------
297,547,727
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.31%
Health Management Associates,
Inc.-Class A(a) 4,500,045 80,157,051
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a)(b) 1,750,000 89,796,875
- ---------------------------------------------------------------
169,953,926
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.47%
HCR Manor Care, Inc.(a) 751,700 24,430,250
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 3,000,000 36,375,000
- ---------------------------------------------------------------
60,805,250
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.84%
Express Scripts, Inc.-Class
A(a)(b) 700,000 68,381,250
- ---------------------------------------------------------------
PacifiCare Health Systems,
Inc.-Class B(a) 150,000 11,812,500
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MANAGED CARE)-(CONTINUED)
Trigon Healthcare, Inc.(a) 750,000 $ 28,125,000
- ---------------------------------------------------------------
108,318,750
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-5.07%
Allegiance Corp. 2,540,400 94,471,125
- ---------------------------------------------------------------
Arterial Vascular Engineering,
Inc.(a) 1,000,000 30,750,000
- ---------------------------------------------------------------
Bausch & Lomb Inc. 59,700 2,488,743
- ---------------------------------------------------------------
Becton, Dickinson & Co. 3,500,000 147,437,500
- ---------------------------------------------------------------
Biomet, Inc. 2,500,000 84,843,750
- ---------------------------------------------------------------
Boston Scientific Corp.(a)(c) 750,000 40,828,125
- ---------------------------------------------------------------
Guidant Corp. 1,708,500 130,700,250
- ---------------------------------------------------------------
Henry Schein, Inc.(a) 900,000 34,818,750
- ---------------------------------------------------------------
Safeskin Corp.(a) 362,100 8,011,462
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 500,000 50,812,500
- ---------------------------------------------------------------
Sybron International Corp.(a) 1,250,000 30,937,500
- ---------------------------------------------------------------
656,099,705
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-2.77%
Alza Corp.(a) 1,200,000 57,450,000
- ---------------------------------------------------------------
Covance, Inc.(a) 1,609,600 44,867,600
- ---------------------------------------------------------------
Lincare Holdings, Inc.(a) 1,000,000 39,937,500
- ---------------------------------------------------------------
Omnicare, Inc. 2,950,100 101,962,832
- ---------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 524,200 9,927,037
- ---------------------------------------------------------------
Quintiles Transnational Corp.(a) 1,000,000 45,250,000
- ---------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 2,417,933 59,239,358
- ---------------------------------------------------------------
358,634,327
- ---------------------------------------------------------------
HOMEBUILDING-0.69%
Clayton Homes, Inc. 3,090,000 47,701,875
- ---------------------------------------------------------------
Fleetwood Enterprises, Inc. 750,000 24,187,500
- ---------------------------------------------------------------
Kaufman and Broad Home Corp. 616,900 17,620,206
- ---------------------------------------------------------------
89,509,581
- ---------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES-0.65%
Leggett & Platt, Inc. 2,000,000 46,750,000
- ---------------------------------------------------------------
Maytag Corp. 750,000 37,078,125
- ---------------------------------------------------------------
83,828,125
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.35%
Clorox Co. 300,000 32,775,000
- ---------------------------------------------------------------
Dial Corp. (The) 450,900 12,427,931
- ---------------------------------------------------------------
45,202,931
- ---------------------------------------------------------------
HOUSEWARES-0.17%
Central Garden and Pet Co.(a) 485,500 9,588,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEWARES-(CONTINUED)
Helen of Troy Ltd.(a) 846,400 $ 12,590,200
- ---------------------------------------------------------------
22,178,825
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.16%
AFLAC Inc. 925,000 35,265,625
- ---------------------------------------------------------------
Provident Companies, Inc. 1,500,000 43,593,750
- ---------------------------------------------------------------
ReliaStar Financial Corp. 1,502,500 65,828,281
- ---------------------------------------------------------------
Torchmark Corp. 129,200 5,652,500
- ---------------------------------------------------------------
150,340,156
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.11%
Progressive Corp. 96,800 14,253,800
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.04%
Edwards (A.G.), Inc. 750,000 25,921,875
- ---------------------------------------------------------------
Lehman Brothers Holdings, Inc. 350,000 13,278,125
- ---------------------------------------------------------------
Schwab (Charles) Corp. 2,000,000 95,875,000
- ---------------------------------------------------------------
135,075,000
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.46%
T. Rowe Price Associates, Inc. 1,658,600 58,983,963
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.77%
Harley-Davidson, Inc. 2,350,000 91,062,500
- ---------------------------------------------------------------
Speedway Motorsports, Inc.(a) 400,000 8,400,000
- ---------------------------------------------------------------
99,462,500
- ---------------------------------------------------------------
LODGING-HOTELS-0.10%
Host Marriott Corp.(a) 896,000 12,992,000
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.02%
Applied Power, Inc.-Class A 95,000 2,618,438
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-0.76%
Corning Inc. 1,000,000 36,312,500
- ---------------------------------------------------------------
Crane Co. 464,550 13,384,846
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 500,000 29,593,750
- ---------------------------------------------------------------
Pentair, Inc. 500,000 18,812,500
- ---------------------------------------------------------------
98,103,596
- ---------------------------------------------------------------
MANUFACTURING
(SPECIALIZED)-0.15%
Avery Dennison Corp. 471,000 19,517,063
- ---------------------------------------------------------------
NATURAL GAS-0.80%
El Paso Energy Corp. 1,500,000 53,156,250
- ---------------------------------------------------------------
KN Energy, Inc. 1,000,000 49,687,500
- ---------------------------------------------------------------
102,843,750
- ---------------------------------------------------------------
OFFICE EQUIPMENT &
SUPPLIES-0.27%
Herman Miller, Inc. 1,100,000 24,268,750
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OFFICE EQUIPMENT & SUPPLIES-(CONTINUED)
HON INDUSTRIES, Inc. 529,000 $ 11,208,187
- ---------------------------------------------------------------
35,476,937
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.04%
Baker Hughes, Inc. 2,000,000 44,125,000
- ---------------------------------------------------------------
BJ Services Co.(a) 1,500,000 30,656,250
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 1,500,000 52,125,000
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 1,000,000 30,687,500
- ---------------------------------------------------------------
Global Industries Ltd.(a) 2,450,000 23,581,250
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 2,000,000 29,125,000
- ---------------------------------------------------------------
Transocean Offshore Inc. 500,000 18,468,750
- ---------------------------------------------------------------
Varco International, Inc.(a)(b) 3,225,000 34,870,312
- ---------------------------------------------------------------
263,639,062
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.44%
Apache Corp. 1,500,000 42,468,750
- ---------------------------------------------------------------
Santa Fe Energy Resources,
Inc.(a) 1,750,000 14,218,750
- ---------------------------------------------------------------
56,687,500
- ---------------------------------------------------------------
PERSONAL CARE-0.26%
Rexall Sundown, Inc.(a) 1,891,800 33,934,163
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.32%
AES Corp.(a) 1,000,000 40,937,500
- ---------------------------------------------------------------
PUBLISHING-0.38%
McGraw-Hill Companies, Inc.
(The) 550,000 49,465,625
- ---------------------------------------------------------------
RAILROADS-0.37%
Kansas City Southern Industries,
Inc. 1,250,000 48,281,250
- ---------------------------------------------------------------
RESTAURANTS-1.58%
Brinker International, Inc.(a) 2,000,000 48,375,000
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(a) 1,125,000 38,953,125
- ---------------------------------------------------------------
Papa John's International,
Inc.(a) 689,300 26,171,859
- ---------------------------------------------------------------
Starbucks Corp.(a) 1,000,000 43,375,000
- ---------------------------------------------------------------
Tricon Global Restaurants,
Inc.(a) 1,100,000 47,850,000
- ---------------------------------------------------------------
204,724,984
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.33%
Lowe's Companies, Inc. 1,250,000 42,109,375
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.90%
Best Buy Co., Inc.(a) 500,000 24,000,000
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 1,000,000 74,937,500
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 750,000 34,125,000
- ---------------------------------------------------------------
Tandy Corp. 1,250,000 61,953,125
- ---------------------------------------------------------------
Tech Data Corp.(a) 1,299,300 51,159,938
- ---------------------------------------------------------------
246,175,563
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-0.46%
Kohl's Corp.(a) 1,250,000 $ 59,765,625
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.27%
Consolidated Stores Corp.(a) 1,000,000 16,437,500
- ---------------------------------------------------------------
Dollar General Corp. 1,000,000 23,875,000
- ---------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 1,810,600 69,821,262
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 2,100,000 38,062,500
- ---------------------------------------------------------------
Ross Stores, Inc. 500,000 16,250,000
- ---------------------------------------------------------------
164,446,262
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.80%
Rite Aid Corp. 2,600,040 103,189,088
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.62%
Kroger Co.(a) 2,637,400 146,375,700
- ---------------------------------------------------------------
Safeway, Inc.(a) 1,325,000 63,351,563
- ---------------------------------------------------------------
209,727,263
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.86%
Dayton Hudson Corp. 750,000 31,781,250
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 1,500,000 79,968,750
- ---------------------------------------------------------------
111,750,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-2.60%
Bed Bath & Beyond, Inc.(a) 2,750,100 75,799,631
- ---------------------------------------------------------------
Linens 'N Things, Inc.(a) 285,300 8,826,468
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 1,000,000 20,000,000
- ---------------------------------------------------------------
Office Depot, Inc.(a) 2,000,000 50,000,000
- ---------------------------------------------------------------
Staples, Inc.(a) 4,750,000 154,968,750
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,000,000 27,250,000
- ---------------------------------------------------------------
336,844,849
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.53%
Abercrombie & Fitch Co.-Class
A(a) 795,000 31,551,563
- ---------------------------------------------------------------
Gap, Inc. (The) 1,000,000 60,125,000
- ---------------------------------------------------------------
Men's Wearhouse, Inc.
(The)(a)(b) 2,250,075 54,564,318
- ---------------------------------------------------------------
TJX Companies, Inc. 2,700,000 51,131,250
- ---------------------------------------------------------------
197,372,131
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.72%
Dime Bancorp, Inc. 2,541,500 60,519,469
- ---------------------------------------------------------------
GreenPoint Financial Corp. 1,000,000 32,812,500
- ---------------------------------------------------------------
93,331,969
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.89%
Interpublic Group of Companies,
Inc. 500,000 29,250,000
- ---------------------------------------------------------------
Lamar Advertising Co.(a) 450,000 14,048,439
- ---------------------------------------------------------------
Omnicom Group, Inc. 2,500,000 123,593,750
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-(CONTINUED)
Outdoor Systems, Inc.(a) 1,500,000 $ 33,093,750
- ---------------------------------------------------------------
Snyder Communications, Inc.(a) 1,250,000 44,609,375
- ---------------------------------------------------------------
244,595,314
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.92%
Apollo Group, Inc.(a) 1,000,000 32,125,000
- ---------------------------------------------------------------
ChoicePoint, Inc.(a) 467,300 22,079,926
- ---------------------------------------------------------------
Cintas Corp. 1,315,900 70,400,650
- ---------------------------------------------------------------
G & K Services, Inc.-Class A 350,000 16,012,500
- ---------------------------------------------------------------
IMS Health Inc. 677,000 45,020,500
- ---------------------------------------------------------------
Service Corp. International 2,626,500 93,569,062
- ---------------------------------------------------------------
Stewart Enterprises, Inc.- Class
A 2,600,000 59,962,500
- ---------------------------------------------------------------
Viad Corp. 1,382,400 37,929,600
- ---------------------------------------------------------------
377,099,738
- ---------------------------------------------------------------
SERVICES (COMPUTER
SYSTEMS)-1.23%
Ciber, Inc.(a) 500,000 9,812,500
- ---------------------------------------------------------------
Gartner Group, Inc.-Class A(a) 1,300,000 25,837,500
- ---------------------------------------------------------------
Keane, Inc.(a) 1,050,000 34,912,500
- ---------------------------------------------------------------
Policy Management Systems
Corp.(a) 474,400 21,555,550
- ---------------------------------------------------------------
SunGard Data Systems Inc.(a) 2,000,000 67,500,000
- ---------------------------------------------------------------
159,618,050
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-4.36%
Affiliated Computer Services,
Inc.(a) 1,000,000 37,000,000
- ---------------------------------------------------------------
Billing Concepts Corp.(a) 1,596,800 22,554,800
- ---------------------------------------------------------------
Ceridian Corp.(a) 1,300,000 74,587,500
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 903,100 49,218,950
- ---------------------------------------------------------------
DST Systems, Inc.(a) 750,000 37,500,000
- ---------------------------------------------------------------
Equifax, Inc. 1,750,000 67,703,125
- ---------------------------------------------------------------
Fiserv, Inc.(a) 2,500,000 116,250,000
- ---------------------------------------------------------------
National Data Corp. 1,000,200 33,881,775
- ---------------------------------------------------------------
NOVA Corp.(a) 893,750 25,807,032
- ---------------------------------------------------------------
Paychex, Inc. 2,000,000 99,500,000
- ---------------------------------------------------------------
564,003,182
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.23%
Robert Half International,
Inc.(a) 750,000 30,093,750
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.23%
Valassis Communications, Inc.(a) 750,000 29,906,250
- ---------------------------------------------------------------
TELEPHONE-0.86%
Century Telephone Enterprises,
Inc. 1,499,950 85,215,909
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 1,000,000 25,937,500
- ---------------------------------------------------------------
111,153,409
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TEXTILES (APPAREL)-0.61%
Jones Apparel Group, Inc.(a) 1,250,000 $ 21,562,500
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 1,000,000 20,687,500
- ---------------------------------------------------------------
Russell Corp. 912,900 22,423,107
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 300,000 13,931,250
- ---------------------------------------------------------------
78,604,357
- ---------------------------------------------------------------
TEXTILES (HOME
FURNISHINGS)-0.22%
Shaw Industries, Inc. 1,650,000 28,668,750
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.53%
Allied Waste Industries, Inc.(a) 2,693,230 58,241,099
- ---------------------------------------------------------------
Republic Services, Inc.(a) 1,225,000 26,796,876
- ---------------------------------------------------------------
Waste Management, Inc. 2,500,000 112,812,501
- ---------------------------------------------------------------
197,850,476
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $8,593,150,443) 11,770,399,289
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.90%
CANADA-0.41%
CanWest Global Communications
Corp.
(Broadcasting-Television,
Radio & Cable) 1,500,000 17,531,250
- ---------------------------------------------------------------
Newcourt Credit Group, Inc.
(Financial-Diversified) 1,087,500 35,751,562
- ---------------------------------------------------------------
53,282,812
- ---------------------------------------------------------------
FINLAND-1.16%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 1,610,300 149,858,544
- ---------------------------------------------------------------
FRANCE-0.09%
Coflexip S.A.-ADR
(Manufacturing-Specialized) 239,500 11,525,938
- ---------------------------------------------------------------
IRELAND-0.81%
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 1,500,000 105,093,750
- ---------------------------------------------------------------
ISRAEL-0.13%
ECI Telecommunications Ltd.
(Communications Equipment) 500,000 16,562,500
- ---------------------------------------------------------------
NETHERLANDS-0.14%
Core Laboratories N.V. (Oil &
Gas-Drilling & Equipment)(a) 800,000 18,050,000
- ---------------------------------------------------------------
UNITED KINGDOM-0.16%
Stolt Comex Seaway, S.A. (Oil &
Gas-Exploration &
Production)(a)(b) 1,150,000 14,662,500
- ---------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Stolt Comex Seaway, S.A. - ADR
(Oil & Gas-Exploration &
Production)(a) 575,000 $ 5,929,687
- ---------------------------------------------------------------
20,592,187
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$240,390,852) 374,965,731
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.39%
COMPUTERS (PERIPHERALS)-0.39%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Cost
$23,700,075) $ 17,500,000 50,553,125
- ---------------------------------------------------------------
SHARES
WARRANTS-0.03%
BANKS (REGIONAL)-0.04%
Golden State Bancorp,
Litigation Wts., expiring
01/01/01 (Cost $5,682,639) 1,000,000 4,875,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
MASTER NOTE AGREEMENT-1.00%
Merrill Lynch Co. Inc.,
5.9675%(d)(Cost $129,000,000) $129,000,000 $ 129,000,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-3.28%(E)
Dresdner Kleinwort, Benson,
North America LLC, 5.55%,
11/02/98(f) $ 9,350,759 $ 9,350,759
- ---------------------------------------------------------------
Goldman, Sachs & Co., 5.55%,
11/02/98(g) 115,090,451 115,090,451
- ---------------------------------------------------------------
Salomon Smith Barney, Inc.,
5.55%(h) 300,000,000 300,000,000
- ---------------------------------------------------------------
Total Repurchase Agreements
(Cost $424,441,210) 424,441,210
- ---------------------------------------------------------------
TIME DEPOSITS-2.09%
Societe Generale Bank, 5.25%,
11/02/98 108,141,977 108,141,977
- ---------------------------------------------------------------
State Street Cayman, 5.00%,
11/02/98 161,909,549 161,909,549
- ---------------------------------------------------------------
Total Time Deposits (Cost
$270,051,526) 270,051,526
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.71% 13,024,285,881
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(0.71%) (91,205,266)
- ---------------------------------------------------------------
NET ASSETS-100.00% $12,933,080,615
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has never owned enough of the outstanding voting securities of any
issuer to have control (as defined in the Investment Company Act of 1940) of
that issuer. The aggregate market value of these securities as of 10/31/98
was $359,900,845 which represented 2.78% of the Fund's net assets.
(c) A portion of this security is subject to call options written. See Note 8.
(d) Master Note Purchase Agreement may be terminated by either party upon two
business days' prior written notice, at which time all amounts outstanding
under notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on 10/31/98.
(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 is 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) 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.
(g) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$277,128,113. Collateralized by $273,207,000 U.S. Government obligations
5.00% to 9.40% due 11/10/98 to 12/15/43 with an aggregate market value at
10/31/98 of $282,540,300.
(h) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates are redetermined daily. Collateralized by
$1,159,504,000 U.S. Government obligations 0% to 10.70% due 11/01/98 to
07/15/45 with an aggregate market value at 10/31/98 of $1,020,000,062.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Sub. - Subordinated
Wts. - Warrants
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$9,686,416,745) $13,024,285,881
- ------------------------------------------------------------
Receivables for:
Investments sold 81,487,021
- ------------------------------------------------------------
Capital stock sold 25,412,005
- ------------------------------------------------------------
Dividends and interest 2,838,985
- ------------------------------------------------------------
Investment for deferred compensation plan 142,702
- ------------------------------------------------------------
Other assets 20,271
- ------------------------------------------------------------
Total assets 13,134,186,865
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 131,879,165
- ------------------------------------------------------------
Capital stock reacquired 53,735,073
- ------------------------------------------------------------
Deferred compensation 142,702
- ------------------------------------------------------------
Options written (premiums received
$357,644) 210,938
- ------------------------------------------------------------
Accrued advisory fees 6,134,883
- ------------------------------------------------------------
Accrued administrative services fees 26,319
- ------------------------------------------------------------
Accrued directors' fees 6,500
- ------------------------------------------------------------
Accrued distribution fees 4,590,417
- ------------------------------------------------------------
Accrued transfer agent fees 3,529,174
- ------------------------------------------------------------
Accrued operating expenses 851,079
- ------------------------------------------------------------
Total liabilities 201,106,250
- ------------------------------------------------------------
Net assets applicable to shares outstanding $12,933,080,615
- ------------------------------------------------------------
NET ASSETS:
Class A $12,391,844,029
============================================================
Class B $ 275,675,564
============================================================
Class C $ 76,521,669
============================================================
Institutional Class $ 189,039,353
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 470,007,075
============================================================
Class B:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 10,558,108
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 2,931,610
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,936,768
============================================================
Class A:
Net asset value and redemption price per
share $ 26.37
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $26.37
divided by 94.50%) $ 27.90
============================================================
Class B:
Net asset value and offering price per
share $ 26.11
============================================================
Class C:
Net asset value and offering price per
share $ 26.10
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 27.25
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $564,597 foreign
withholding tax) $ 40,677,717
- ------------------------------------------------------------
Interest 48,508,823
- ------------------------------------------------------------
Total investment income 89,186,540
- ------------------------------------------------------------
EXPENSES:
Advisory fees 89,630,173
- ------------------------------------------------------------
Administrative services fees 295,926
- ------------------------------------------------------------
Custodian fees 637,815
- ------------------------------------------------------------
Directors' fees 96,730
- ------------------------------------------------------------
Distribution fees-Class A 41,684,536
- ------------------------------------------------------------
Distribution fees-Class B 1,576,409
- ------------------------------------------------------------
Distribution fees-Class C 506,546
- ------------------------------------------------------------
Transfer agent fees-Class A 24,340,018
- ------------------------------------------------------------
Transfer agent fees-Class B 601,845
- ------------------------------------------------------------
Transfer agent fees-Class C 169,272
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 17,618
- ------------------------------------------------------------
Other 1,734,916
- ------------------------------------------------------------
Total expenses 161,291,804
- ------------------------------------------------------------
Less: Fees waived by advisor (3,074,705)
- ------------------------------------------------------------
Expenses paid indirectly (332,613)
- ------------------------------------------------------------
Net expenses 157,884,486
- ------------------------------------------------------------
Net investment income (loss) (68,697,946)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 482,260,826
- ------------------------------------------------------------
Foreign currencies 1,025,913
- ------------------------------------------------------------
Futures contracts (24,781,162)
- ------------------------------------------------------------
Option contracts written 819,195
- ------------------------------------------------------------
459,324,772
- ------------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (664,462,047)
- ------------------------------------------------------------
Foreign currencies (1,413)
- ------------------------------------------------------------
Futures contracts 16,400,635
- ------------------------------------------------------------
Option contracts written 146,706
- ------------------------------------------------------------
(647,916,119)
- ------------------------------------------------------------
Net gain (loss) from investment
securities, foreign currencies,
futures and option contracts (188,591,347)
- ------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ (257,289,293)
============================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
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 (loss) $ (68,697,946) $ (51,626,612)
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 459,324,772 1,046,160,029
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies, futures and option
contracts (647,916,119) 1,234,273,644
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (257,289,293) 2,228,807,061
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (1,023,550,465) (401,536,883)
- -------------------------------------------------------------------------------------------------
Class B (2,750,431) --
- -------------------------------------------------------------------------------------------------
Class C (2,040,204) --
- -------------------------------------------------------------------------------------------------
Institutional Class (13,510,099) (10,336,039)
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (667,156,467) 1,280,740,251
- -------------------------------------------------------------------------------------------------
Class B 292,437,630 --
- -------------------------------------------------------------------------------------------------
Class C 60,444,760 22,611,449
- -------------------------------------------------------------------------------------------------
Institutional Class 17,436,212 (139,767,829)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,595,978,357) 2,980,518,010
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 14,529,058,972 11,548,540,962
- -------------------------------------------------------------------------------------------------
End of period $12,933,080,615 $14,529,058,972
=================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 9,156,848,152 $ 9,520,633,579
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (994,714) (270,243)
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 439,210,537 1,022,762,877
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 3,338,016,640 3,985,932,759
- -------------------------------------------------------------------------------------------------
$12,933,080,615 $14,529,058,972
=================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of six separate portfolios: AIM
Constellation Fund, AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund and AIM Weingarten Fund. The Fund currently
offers four different classes of shares: Class A shares, Class B shares, Class C
shares and the Institutional Class. Class B shares commenced sales on November
3, 1997. Class A shares are sold with a front-end sales charge. Class B shares
and Class C shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is to seek capital appreciation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
15
<PAGE> 18
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York
Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which
would not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair market value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1998,
paid in capital was decreased by $66,947,562, undistributed net investment
income was increased by $67,973,475 and undistributed net realized gains
decreased by $1,025,913 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.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses--Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
E. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract 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.
G. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contracts are open, changes in the
value of the contracts are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contracts at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contracts are closed, the Fund recognizes a realized
gain or loss equal to the difference between the proceeds from, or cost of,
the closing transaction and the Fund's basis in the contract. Risks include
the possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the
16
<PAGE> 19
underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at
the stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at
such earlier time at which the Fund effects a closing purchase transaction
by purchasing (at a price which may be higher than that received when the
call option was written) a call option identical to the one originally
written.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the master investment advisory agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
agreed to voluntarily waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the voluntary waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. During the year
ended October 31, 1998, AIM waived fees of $3,074,705. The waiver is entirely
voluntary but approval is required by the Board of Directors for any decision by
AIM to discontinue the waiver. Under the terms of a master sub-advisory
agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM
pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1998, AIM was
reimbursed $295,926 for such services.
The Fund, pursuant to a transfer agent and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency and shareholder services to the Fund. On September 20, 1997, the Board of
Directors approved appointment of AFS as transfer agent of the Institutional
Class effective December 29, 1997. During the year ended October 31, 1998, AFS
was paid $11,110,534 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 $14,933
with respect to the Institutional Class. Prior to the effective date of the
agreement with AFS, the Fund paid A I M Institutional Fund Services, Inc. $2,685
pursuant to a transfer agency and shareholder services agreement with respect to
the Institutional Class for the period November 1, 1997 through December 28,
1997.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.30% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. The Fund, pursuant
to the Class B Plan, pays AIM Distributors compensation at an annual rate of
1.00% of the average daily net assets 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 shares, Class B shares and Class C shares paid AIM
Distributors $41,684,536, $1,576,409, and $506,546, respectively as compensation
under the Plans.
AIM Distributors received commissions of $5,261,392 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 $510,316 in contingent deferred sales
charges imposed on the redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AIM Capital, AIM
Distributors, AFS, and FMC.
During the year ended October 31, 1998, the Fund paid legal fees of $31,902
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
$147,814 and $184,799, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $332,613 during the year ended October 31, 1998.
17
<PAGE> 20
NOTE 4-DIRECTOR'S FEES
Director's fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $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 by the Fund during the year ended October 31, 1998 was
$10,221,437,067 and $11,626,322,625, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1998, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $3,684,499,221
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (373,354,606)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $3,311,144,615
==========================================================
</TABLE>
Cost of investments for tax purposes is $9,713,141,266.
NOTE 7-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 271,511,337 $ 7,555,171,888 211,624,665 $ 5,717,830,615
- --------------------------------------------------------------------------------------
Class B* 12,877,388 356,713,527 -- --
- --------------------------------------------------------------------------------------
Class C** 2,960,570 81,123,332 745,655 22,872,597
- --------------------------------------------------------------------------------------
Institutional Class 2,149,830 60,442,629 5,274,034 141,917,489
- --------------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 38,633,795 977,878,833 15,529,296 381,406,093
- --------------------------------------------------------------------------------------
Class B* 104,498 2,643,686 -- --
- --------------------------------------------------------------------------------------
Class C** 76,723 1,938,518 -- --
- --------------------------------------------------------------------------------------
Institutional Class 494,582 12,886,955 387,258 9,720,186
- --------------------------------------------------------------------------------------
Reacquired:
Class A (330,045,727) (9,200,207,188) (178,999,514) (4,818,496,457)
- --------------------------------------------------------------------------------------
Class B* (2,423,778) (66,919,583) -- --
- --------------------------------------------------------------------------------------
Class C** (842,846) (22,617,090) (8,492) (261,148)
- --------------------------------------------------------------------------------------
Institutional Class (1,977,243) (55,893,372) (10,657,023) (291,405,504)
- --------------------------------------------------------------------------------------
(6,480,871) $ (296,837,865) 43,895,879 $ 1,163,583,871
======================================================================================
</TABLE>
*Class B Shares commenced sales on November 3, 1997.
**Class C Shares commenced sales on August 4, 1997.
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period -- --
- ----------------------------------- ------- -----------
Written 29,238 $ 7,032,081
- ----------------------------------- ------- -----------
Closed (17,332) (3,926,728)
- ----------------------------------- ------- -----------
Expired (6,031) (484,785)
- ----------------------------------- ------- -----------
Exercised (4,000) (2,262,924)
- ----------------------------------- ------- -----------
End of Period 1,875 $ 357,644
=================================== ======= ===========
</TABLE>
Open call option contracts written at October 31, 1998 were as follows:
<TABLE>
<CAPTION>
CONTRACT STRIKE NUMBER OF PREMIUM OCTOBER 31, 1998 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
- ----- -------- ------ --------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. Dec. 98 $65 1,875 $357,644 $210,938 $146,706
======================== ======== === ===== ======== ======== ========
</TABLE>
18
<PAGE> 21
NOTE 9-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 the period
November 3, 1997 (date sales commenced) through October 31, 1998 and for a share
of Class C capital stock outstanding during the year ended October 31, 1998 and
the period August 4, 1997 (dates 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 $ 29.23 $ 25.48 $ 23.69 $ 18.31 $ 17.04
- ----------------------------------------------------------- ----------- ----------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.14) (0.11) (0.06) (0.05) (0.02)
- ----------------------------------------------------------- ----------- ----------- ----------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) (0.62) 4.75 2.60 5.95 1.29
- ----------------------------------------------------------- ----------- ----------- ----------- ---------- ----------
Total from investment operations (0.76) 4.64 2.54 5.90 1.27
- ----------------------------------------------------------- ----------- ----------- ----------- ---------- ----------
Distributions from net realized gains (2.10) (0.89) (0.75) (0.52) --
- ----------------------------------------------------------- ----------- ----------- ----------- ---------- ----------
Net asset value, end of period $ 26.37 $ 29.23 $ 25.48 $ 23.69 $ 18.31
=========================================================== =========== =========== =========== ========== ==========
Total return(a) (2.30)% 18.86% 11.26% 33.43% 7.45%
=========================================================== =========== =========== =========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $12,391,844 $14,319,441 $11,255,506 $7,000,350 $3,726,029
=========================================================== =========== =========== =========== ========== ==========
Ratio of expenses to average net assets(b) 1.10%(c) 1.11%() 1.14% 1.16% 1.20%
=========================================================== =========== =========== =========== ========== ==========
Ratio of net investment income (loss) to average net
assets(d) (0.47)%(c) (0.40)%() (0.27)% (0.32)% (0.15)%
=========================================================== =========== =========== =========== ========== ==========
Portfolio turnover rate 76% 67% 58% 45% 79%
=========================================================== =========== =========== =========== ========== ==========
</TABLE>
<TABLE>
<S> <C>
(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 1.12%, 1.13%, 1.16%, 1.18% and
1.21% for 1998-1994.
(c) Ratios are based on average net assets of $13,894,845,349.
(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 reimbursement were (0.50)%,
(0.42)%, (0.29)%, (0.34)% and (0.16)% for 1998-1994.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
--------- -------------------------
1998 1998 1997
--------- --------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 30.04 $ 29.18 $ 30.32
- ------------------------------------------------------------ -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.37)(a) (0.37)(a) (0.04)
- ------------------------------------------------------------ -------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (1.46) (0.61) (1.10)
- ------------------------------------------------------------ -------- ------- -------
Total from investment operations (1.83) (0.98) (1.14)
- ------------------------------------------------------------ -------- ------- -------
Distributions from net realized gains (2.10) (2.10) --
- ------------------------------------------------------------ -------- ------- -------
Net asset value, end of period $ 26.11 $ 26.10 $ 29.18
============================================================ ======== ======= =======
Total return(b) (5.86)% (3.12)% (3.76)%
============================================================ ======== ======= =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $275,676 $76,522 $21,508
============================================================ ======== ======= =======
Ratio of expenses to average net assets(c) 1.98%(d)(e) 1.97%(d) 1.84%(e)
============================================================ ======== ======= =======
Ratio of net investment income (loss) to average net
assets(f) (1.36)%(d)(e) (1.35)%(d) (1.12)%(e)
============================================================ ======== ======= =======
Portfolio turnover rate 76% 76% 67%
============================================================ ======== ======= =======
</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
2.00% (annualized) for 1998 for Class B and 1.99% and 1.86% (annualized) for
1998-1997 for Class C.
(d) Ratios are based on average net assets of $158,509,468 and $50,654,588 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 (1.38)% (annualized) for 1998 for Class B and (1.37)%
and (1.15)% (annualized), for 1998-1997 for Class C.
19
<PAGE> 22
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 the AIM Constellation Fund (a portfolio of
AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1998, and 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 the 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
Constellation Fund as of October 31, 1998, and 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
20
<PAGE> 23
<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 TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Jonathan C. Schoolar Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Senior Vice President
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Dana R. Sutton
President, Mercantile Bankshares Vice President and Assistant Treasurer State Street Bank and Trust Company
225 Franklin Street
Jack Fields Melville B. Cox Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Renee A. Friedli
of the U.S. House of Representatives Assistant Secretary Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling P. Michelle Grace 1735 Market Street
Partner Assistant Secretary Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel
Jeffrey H. Kupor COUNSEL TO THE DIRECTORS
Robert H. Graham Assistant Secretary
President and Chief Executive Officer Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Nancy L. Martin 919 Third Avenue
Assistant Secretary New York, NY 10022
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A. Ofelia M. Mayo DISTRIBUTOR
Commissioner, New York City Dept. for the Assistant Secretary
Aging; and member of the Board of Directors A I M Distributors, Inc.
Metropolitan Transportation Authority of Lisa A. Moss 11 Greenway Plaza
New York State Assistant Secretary Suite 100
Houston, TX 77046
Lewis F. Pennock Kathleen J. Pflueger
Attorney Assistant Secretary AUDITORS
Ian W. Robinson Samuel D. Sirko KPMG Peat Marwick LLP
Consultant; Formerly Executive Assistant Secretary 700 Louisiana
Vice President and Houston, TX 77002
Chief Financial Officer Stephen I. Winer
Bell Atlantic Management Assistant Secretary
Services, Inc.
Mary J. Benson
Louis S. Sklar Assistant Treasurer
Executive Vice President
Hines Interests
Limited Partnership
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Constellation Fund distributed long-term capital gains of $2.0964 per share
during its tax year ended October 31, 1988.
<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 Trademark--
AIM Small Cap Opportunities Fund AIM International Growth Fund(2) is distributed nationwide, and AIM today is the
AIM Value Fund AIM Japan Growth Fund(2) 11th-largest mutual fund complex in the U.S. in
AIM Weingarten Fund AIM Latin American Growth Fund(2) assets under management, according to Strategic
AIM New Pacific Growth Fund(2) Insight, an independent mutual fund monitor.
GROWTH & INCOME FUNDS
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.
