<PAGE> 1
AIM CAPITAL DEVELOPMENT FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1998
Cover Image
INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
------------------------------------
UNION SQUARE GREENMARKET BY PATTI MOLLICA
SMALL-BUSINESS ENTERPRISES ARE FREQUENTLY FOUND NESTLED AMONG
TALL SKYSCRAPERS HOUSING LARGE MULTINATIONAL CORPORATIONS.
SOME OF THESE SMALLER BUSINESSES EVENTUALLY CARVE OUT THEIR
OWN PARTICULAR NICHES IN THE MARKET AND EXPERIENCE STRONG
EARNINGS GROWTH. THAT'S THE KIND OF COMPANY WE ENDEAVOR TO
OWN IN AIM CAPITAL DEVELOPMENT FUND, SMALL FIRMS WITH
STRONG LONG-TERM GROWTH PROSPECTS.
------------------------------------
AIM Capital Development Fund is for shareholders who seek long-term growth
through investments in the stocks of small- and medium-size companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Capital Development Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed at net asset
value without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance 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 investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Investing in smaller companies may involve greater risk and potential reward
than investing in more established companies.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper Small Cap Funds Index represents an average of the
performance of the 30 largest small-capitalization growth funds.
o The unmanaged Russell 2000 Index is generally considered representative of
the performance of stocks of small-capitalization companies.
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks
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. The Standard & Poor's 400 Mid-Cap Index (S&P
400) is an unmanaged index comprising common stocks of approximately 400
mid-capitalization companies.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT
INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE
NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
AIM CAPITAL DEVELOPMENT 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 CAPITAL DEVELOPMENT FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND ENDURES STEEP DECLINE
IN SMALL-CAP STOCKS
SMALL-CAP STOCKS WERE IN A BEAR MARKET FOR MUCH OF THE REPORTING PERIOD. HOW DID
AIM CAPITAL DEVELOPMENT FUND PERFORM?
The sharp selloff in small-cap stocks from mid-April through early October 1998
took its toll on the Fund's performance. For the fiscal year ended October 31,
1998, total return was -11.53%, -12.17%, and -12.18% for Class A, B, and C
shares, respectively. By comparison, total return was -11.84% for the Russell
2000 Index and -13.64% for the Lipper Small Cap Funds Index.
The Fund rebounded strongly during the final weeks of the fiscal year. Class
A, B, and C shares posted stunning gains of 25.39%, 25.37%, and 25.27%,
respectively, from the market low on October 8 through the end of the reporting
period. That beat the 21.96% total return of the Russell 2000 Index and the
22.50% total return of the Lipper Small Cap Funds Index for the same period.
WHAT WERE MARKET CONDITIONS LIKE DURING THE FISCAL YEAR?
During the first half of the reporting period, markets shook off initial
concerns about the potential global impact of the economic turmoil in Asia and
soared to new heights in April. Although renewed fears about Asia's impact on
the world economy halted the rally, large-cap stocks rebounded and the Dow Jones
Industrial Average (the Dow) set a record in July. The Dow then lost 16.82% of
its value between July 17 and October 8. Severe economic dislocations in Russia
and Latin America as well as Asia, combined with political controversy in the
U.S., prompted the selloff.
However, the market rebounded impressively in October as the Dow posted its
best percentage gain for a single month in more than 11 years. The Federal
Reserve Board (the Fed) cut interest rates at the end of September and again in
mid-October. These Fed moves, combined with encouraging economic indicators,
sparked the rally in the stock market.
HOW DID SMALL-CAP STOCKS FARE IN THIS ENVIRONMENT?
For much of the reporting period, small-cap stocks were in the grip of a severe
bear market, generally defined as a drop in value of at least 20%. After hitting
a record high on April 21, the Russell 2000 Index lost 36.49% of its value by
October 8, when it sank to its lowest level in more than two years. In the
unsettled market environment stemming from foreign and domestic concerns,
investors favored more liquid assets, such as large-cap stocks and U.S. Treasury
bonds.
During the last three weeks of the reporting period, however, small-cap
stocks rallied strongly, benefiting from the Fed's interest rate cuts. Investors
also found small-cap stocks attractive because earnings growth projections for
smaller companies remained in the double-digit range while the corresponding
figures for larger companies were gravitating toward the single-digit level.
Finally, small-cap stocks represented one of the best bargains in the equity
market as their prices relative to large-cap stocks were at their lowest levels
in decades.
HOW DID YOU REACT TO THE BEAR MARKET IN SMALL-CAP STOCKS?
The market downturn provided us with an excellent opportunity to purchase the
stocks of attractive companies at relatively low prices. We believe that our
disciplined, earnings-driven stock selectionprocess is strongest in a
challenging market environment. In choosing stocks, we look at the underlying
fundamentals of companies, not the overall market. We also look for issues that
are underpriced relative to the rest of the market. We endeavor to own the best
small-cap companies at a reasonable price because we are very optimistic about
the long-term outlook for small-cap stocks. A considerable amount of money that
is normally invested in small-cap stocks has been on the sidelines in recent
months. We are confident this cash will re-enter the small-cap sector if market
conditions continue to improve.
WHAT CHANGES HAVE YOU MADE IN THE PORTFOLIO?
Since our last report six months ago, we have reduced the number of holdings in
the portfolio from about 500 to 400 as we sold the stocks of companies that
failed to meet our earnings criteria. Simultaneously, we enhanced our positions
in the stocks of companies we believe have solid long-term growth prospects.
With regard to specific sectors, we modestly decreased our holdings in
technology stocks while moderately increasing our stake in the consumer-cyclical
and health-care sectors. As of October 31, 1998, consumer-cyclical, technology,
and health-care stocks composed 25%, 23%, and 13% of the portfolio,
respectively.
HOW DID CONSUMER-CYCLICAL STOCKS PERFORM?
Consumer cyclicals is a broad category that includes advertising, airlines,
hotels,
------------------------------------
THE FUND REBOUNDED STRONGLY DURING
THE FINAL WEEKS OF THE FISCAL YEAR.
------------------------------------
See important Fund and index disclosures inside front cover.
AIM CAPITAL DEVELOPMENT FUND
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
and certain retailers. Our focus in this sector was on retail stocks. For most
of the fiscal year, the nation's retailers benefited from healthy consumer
spending, stemming from low unemployment and rising wages. Toward the end of the
period, however, consumer confidence was shaken over concerns that troubles in
developing markets would result in an economic slowdown in the U.S. Although the
domestic economy remained healthy, consumers became more cautious in their
spending, a trend that benefited discount stores.
Retail stocks that performed well for the Fund included Linen 'N Things, Inc.
and Family Dollar Stores. Linens 'N Things, the nation's second largest
household goods chain, emphasizes low-priced, brand-name merchandise. Family
Dollar Stores, which offers discount prices on a wide variety of items ranging
from apparel to automotive supplies, operates about 3,000 discount stores in 38
states.
WHAT WERE SOME OF THE THEMES IN THE TECHNOLOGY SECTOR?
Despite volatility, technology stocks generally posted solid gains for the
fiscal year. Within this sector, we especially liked the stocks of companies
that provide technology services. The computer glitch that requires
reprogramming older computers and software to recognize the year 2000 continues
to provide opportunities for these companies. The worldwide cost of correcting
this problem could total between $300 billion and $600 billion, according to the
Gartner Group, a technology research firm. More companies also are outsourcing a
variety of functions to information technology companies.
Our technology holdings include some of the most successful companies in the
business. The BISYS Group, Inc., provides outsourcing services for more than
6,000 financial institutions and corporations throughout the U.S. SunGard Data
MERGERS AND ACQUISITIONS--
AND "GRADUATES"
Despite difficult market conditions for small-cap stocks, the wave of mergers
and acquisitions involving companies represented in the portfolio continued
virtually unabated. We believe this attests to the attractiveness of companies
found in the portfolio. During the fiscal year ended October 31, 1998, 42
companies in the portfolio were involved in mergers or acquisitions, generally
boosting their stock prices. These companies included Dominick's Super Market
and Jacor Communications, a broadcasting company. Since the Fund's inception on
June 17, 1996, through the end of the latest fiscal year, 103 companies
represented in the portfolio have been takeover targets.
We also sold the stocks of companies when they exceeded $10 billion in market
valuation and could no longer be considered smaller companies. During the first
10 months of the 1998 calendar year, there were 22 "graduates" from the Fund.
PORTFOLIO COMPOSITION
As of 10/31/98, based on total net assets
<TABLE>
<CAPTION>
========================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 SunGard Data Systems Inc. 0.92% 1 Computers (Software & Services) 9.12%
2 Medical Manager Corp. 0.79 2 Services (Commercial & Consumer) 7.21
3 Linens 'N Things, Inc. 0.76 3 Retail (Specialty) 5.62
4 BISYS Group, Inc. 0.69 4 Services (Data Processing) 3.64
5 Best Software, Inc. 0.69 5 Health Care (Specialized Services) 3.62
6 CSG Systems International, Inc. 0.65 6 Services (Advertising/Marketing) 3.46
7 Metzler Group, Inc. 0.60 7 Health Care (Medical Products & Supplies 3.39
8 Advance Paradigm, Inc. 0.58 8 Services (Computer Systems) 3.07
9 Learning Company, Inc. (The) 0.56 9 Real Estate Investment Trust 2.67
10 SEI Corp. 0.56 10 Manufacturing (Specialized) 2.55
========================================================================================================================
</TABLE>
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.
See important Fund and index disclosures inside front cover.
AIM CAPITAL DEVELOPMENT FUND
<PAGE> 6
ANNUAL REPORT / MANAGERS' OVERVIEW
Systems, Inc., the Fund's largest holding, provides data processing and disaster
recovery services for banks and mutual fund companies while Best Software, Inc.,
provides software for asset, human resources, and payroll management
WHAT ABOUT HEALTH-CARE STOCKS?
As the U.S. population ages, the demand for medical services, supplies, and
devices has increased. This demand for health-care products and services is
expected to grow, regardless of economic trends.
The Fund benefited from owning the stocks of Advanced Paradigm, Inc., which
provides pharmacy benefit management services for health plans; Watson
Pharmaceuticals, Inc., which offers generic versions of brand-name drugs; and
Sofamor Danek Group, Inc., which manufactures products to treat degenerative
diseases. After the reporting period ended, Sofamor Danek Group, Inc., joined a
growing list of companies in the portfolio that have been the targets of
takeovers (see sidebar on previous page).
WHAT IS YOUR OUTLOOK?
We believe there are several reasons to be optimistic about small-cap stocks. In
recent years, after the Fed has embarked on a series of interest rate cuts,
small-cap stocks have been among the top-performing equity classes. While past
performance cannot guarantee comparable future results, we believe if the Fed
continues to cut interest rates, it could bode well for small-cap stocks.
Moreover, the valuations of small-cap stocks relative to large-cap stocks are
very compelling. And while profits for the largest companies are dropping, they
remain robust for smaller companies. Since smaller companies conduct most of
their business in the U.S., their earnings are less susceptible to foreign
economic downturns. We believe small-cap stocks could continue to attract
investors if these trends continue.
WHY STAYING FULLY INVESTED HAS BEEN THE WISEST COURSE
When the stock market turns volatile, many investors feel the impulse to pull
their money out of mutual funds. The question then becomes when to get back in.
Trying to guess the answer could be very costly.
The more you try to time the market, the greater your chances of missing its
biggest single-day gains. The chart below illustrates this point. Keep focused
on your financial goals and remember that time, not timing, is key to successful
investing.
DISCIPLINE: PENALTY FOR MISSING THE MARKET
5 Years Ending October 31, 1998 (1,264 Trading Days)
RUSSELL 2000 INDEX + DIVIDENDS
- ------------------------------------------------------------------
AVERAGE
ANNUALIZED CUMULATIVE GROWTH OF
TOTAL RETURNS TOTAL RETURNS $10,000
- ------------------------------------------------------------------
Fully Invested 9.40% 56.68% $ 15,668
Miss the 10 Best Days 3.42 18.33 $ 11,833
Miss 20 Best Days -0.83 -4.06 $ 9,594
Miss 30 Best Days -3.96 -18.28 $ 8,172
Miss 40 Best Days -6.51 -28.60 $ 7,140
Miss 60 Best Days -10.89 -43.82 $ 5,618
==================================================================
See important Fund and index disclosures inside front cover.
AIM CAPITAL DEVELOPMENT FUND
<PAGE> 7
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM CAPITAL DEVELOPMENT FUND, CLASS A SHARES VS. BENCHMARK INDEXES
6/17/96-10/31/98
- -------------------------------------------------------------------------------
AIM CAPITAL LIPPER SMALL CAP RUSSELL 2000
DEVELOPMENT FUND FUNDS INDEX STOCK INDEX
- -------------------------------------------------------------------------------
6/17/96 10,000 10,000 10,000
10/96 10,482 9,816 9,879
1/97 11,134 10,258 10,767
4/97 9,650 9,009 10,038
7/97 12,769 11,243 12,174
10/97 13,771 11,633 12,777
1/98 13,507 11,317 12,713
4/98 15,747 12,828 14,294
7/98 13,800 11,423 12,456
10/98 12,183 10,046 11,264
===============================================================================
Past performance cannot guarantee comparable future results.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98, including sales charges
CLASS A SHARES
Inception (6/17/96) 8.68%
1 Year -16.41*
*-11.53% excluding sales charges
CLASS B SHARES
Inception (10/1/97) 4.59%
1 Year -16.56**
**-12.17% excluding sales charges
CLASS C SHARES
Inception (8/4/97) -4.75
1 Year -13.06***
***-12.18 excluding sales charges
===============================================================================
Source: Towers Data Systems HYPO--Registered Trademark--.
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of Class B and Class C shares of the Fund will differ from
that of Class A shares due to differing fees and expenses. For Fund performance
calculations and descriptions of indexes cited on this page, please refer to the
inside front cover.
ABOUT THIS CHART
The chart compares Class A shares of your Fund to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to the
stock market over the period 6/17/96- 10/31/98. Index returns are from 6/30/96-
10/31/98. It is important to understand the difference between your Fund and an
index. An index measures the performance of a hypothetical portfolio, in this
case the Russell 2000 Index and the Lipper Small Cap Funds Index. A market index
such as the Russell 2000 Index is not managed, incurring no sales charges,
expenses, or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return. An
index of funds such as the Lipper Small Cap Funds Index includes a number of
mutual funds grouped by investment objective. Each of those funds interprets
that objective differently, and each employs a different management style and
investment strategy. Use of these indexes is intended to give you a general idea
of how your Fund performed compared to these benchmarks.
AIM CAPITAL DEVELOPMENT 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?
"The market" is much broader than news 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.
Here are the most widely followed indexes and what they represent:
THE USUAL INDEXES
THE DOW JONES INDUSTRIAL AVERAGE
WHAT IT IS: The 30 stocks in the Dow represent the largest, most successful U.S.
companies, including International Business Machines Corp., Boeing Co.,
McDonald's Corp., and Walt Disney Co.
WHAT IT TELLS YOU: For most mutual fund investors, the Dow is an inadequate
investment gauge because it only measures 30 major stocks. 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 Standard & Poor's Composite Index of 500 Stocks measures stocks
in the large-capitalization portion of the U.S. market. Stocks in the index
include Hilton Hotels, NIKE Inc., and Pennzoil Co.
WHAT IT TELLS YOU: The S&P 500 can be useful for evaluating a fund that invests
in large-capitalization U.S. stocks. Most mutual funds are more diversified than
this index, because the S&P 500 is very concentrated. The top 50 companies
represent half the S&P 500's assets. Much of the S&P 500's recent excellent
performance can be attributed to just a few stocks.
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. 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, large-cap technology stocks such as Microsoft, Intel, and Dell
Computer dominate the index.
The NASDAQ is not a very 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.
A FEW MORE INDEXES
S&P 400
WHAT IT IS: The relatively new Standard & Poor's 400 Mid-Cap Index 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.
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 is designed to measure the performance of
small-cap stocks. A total of 2,000 U.S. companies are represented, including
Bally Total Fitness, Bethlehem Steel, Coca-Cola Bottling Co., and Coors Brewing
Co. 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 good indicator of small-cap stock
performance. Many mutual funds investing in small-cap stocks use the Russell
2000 as their benchmark index.
THE EUROPE, AUSTRALASIA, AND 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: The EAFE measures stock market performance in Europe,
Australia and the Far East. It is frequently used as a benchmark for mutual
funds investing in stocks in these markets.
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 CAPITAL DEVELOPMENT FUND
<PAGE> 9
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-93.06%
AEROSPACE/DEFENSE-0.99%
Gulfstream Aerospace Corp.(a) 75,000 $ 3,318,750
- ---------------------------------------------------------------
Hawk Corp.(a) 120,700 1,207,000
- ---------------------------------------------------------------
Kroll-O'Gara Co. (The)(a) 210,000 5,171,250
- ---------------------------------------------------------------
Moog Inc.(a) 22,200 681,262
- ---------------------------------------------------------------
Tri Star Aerospace Co.(a) 200,000 2,050,000
- ---------------------------------------------------------------
12,428,262
- ---------------------------------------------------------------
AIR FREIGHT-0.11%
Dynamex Inc.(a) 201,000 1,394,438
- ---------------------------------------------------------------
AIRLINES-0.72%
Atlantic Coast Airlines
Holdings(a) 120,000 2,880,000
- ---------------------------------------------------------------
Midway Airlines, Corp.(a) 220,000 2,970,000
- ---------------------------------------------------------------
Ryanair Holdings PLC-ADR
(Ireland)(a) 110,000 3,231,250
- ---------------------------------------------------------------
9,081,250
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.58%
Aftermarket Technology Corp.(a) 134,300 839,375
- ---------------------------------------------------------------
Keystone Automotive Industries,
Inc.(a) 247,900 4,632,631
- ---------------------------------------------------------------
Stoneridge, Inc.(a) 126,300 1,886,606
- ---------------------------------------------------------------
7,358,612
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.49%
Banknorth Group, Inc. 32,000 1,020,000
- ---------------------------------------------------------------
Bank United Corp.-Class A 100,000 3,984,375
- ---------------------------------------------------------------
Golden State Bancorp, Inc.(a) 225,000 4,317,188
- ---------------------------------------------------------------
Golden State Bancorp, Litigation
Warrants, expiring 01/01/01(a) 75,000 365,625
- ---------------------------------------------------------------
Independence Community Bank Corp. 227,000 3,107,062
- ---------------------------------------------------------------
Marshall & Ilsley Corp. 35,000 1,706,250
- ---------------------------------------------------------------
North Fork Bancorporation, Inc. 175,000 3,478,125
- ---------------------------------------------------------------
Southwest Bancorp. of Texas,
Inc.(a) 50,000 765,625
- ---------------------------------------------------------------
18,744,250
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.24%
Triarc Companies, Inc.(a) 190,000 2,968,750
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.71%
Genzyme Corp.(a) 30,000 1,261,875
- ---------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 160,000 3,650,000
- ---------------------------------------------------------------
Pharmaceutical Product
Development, Inc.(a) 150,000 4,050,000
- ---------------------------------------------------------------
8,961,875
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.28%
Capstar Broadcasting Corp.-Class
A(a) 228,200 3,964,975
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
Chancellor Media Corp.(a) 100,000 $ 3,837,500
- ---------------------------------------------------------------
Cox Radio, Inc.-Class A(a) 85,000 3,182,188
- ---------------------------------------------------------------
Emmis Broadcasting Corp.-Class
A(a) 110,000 3,602,500
- ---------------------------------------------------------------
Hearst-Argyle Television Inc.(a) 35,070 973,192
- ---------------------------------------------------------------
Heftel Broadcasting Corp.(a) 85,000 3,495,625
- ---------------------------------------------------------------
Metro Networks, Inc.(a) 120,000 4,395,000
- ---------------------------------------------------------------
Univision Communications, Inc.(a) 178,000 5,251,000
- ---------------------------------------------------------------
28,701,980
- ---------------------------------------------------------------
BUILDING MATERIALS-0.30%
Pameco Corp.(a) 130,000 1,820,000
- ---------------------------------------------------------------
Pentacon, Inc.(a) 100,000 512,500
- ---------------------------------------------------------------
White Cap Industries, Inc.(a) 140,000 1,470,000
- ---------------------------------------------------------------
3,802,500
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.95%
ADC Telecommunications, Inc.(a) 165,000 3,795,000
- ---------------------------------------------------------------
Aspect Telecommunications
Corp.(a) 110,600 1,672,825
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 140,000 6,440,000
- ---------------------------------------------------------------
DSET Corp.(a) 92,200 1,152,500
- ---------------------------------------------------------------
Excel Switching Corp.(a) 155,000 3,138,750
- ---------------------------------------------------------------
NICE-Systems Ltd.-ADR (Israel)(a) 125,000 2,375,000
- ---------------------------------------------------------------
North East Optic Network, Inc.(a) 400,000 2,450,000
- ---------------------------------------------------------------
Tekelec(a) 200,000 3,587,500
- ---------------------------------------------------------------
24,611,575
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.60%
Bell & Howell Co.(a) 125,000 3,312,500
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 65,000 3,627,813
- ---------------------------------------------------------------
National Instruments Corp.(a) 25,000 684,375
- ---------------------------------------------------------------
7,624,688
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.39%
FORE Systems, Inc.(a) 285,000 4,453,125
- ---------------------------------------------------------------
Fvc.com Inc.(a) 50,000 425,000
- ---------------------------------------------------------------
4,878,125
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-9.12%
Avant! Corp.(a) 130,419 2,225,274
- ---------------------------------------------------------------
Best Software, Inc.(a) 355,000 8,697,500
- ---------------------------------------------------------------
BrightStar Information Technology
Group, Inc.(a) 131,900 906,812
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 205,000 4,381,875
- ---------------------------------------------------------------
Complete Business Solutions,
Inc.(a) 205,000 4,868,750
- ---------------------------------------------------------------
Concord Communications, Inc.(a) 62,300 2,312,888
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Concord EFS, Inc.(a) 230,000 $ 6,555,000
- ---------------------------------------------------------------
DA Consulting Group, Inc.(a) 160,800 2,412,000
- ---------------------------------------------------------------
Datastream Systems, Inc.(a) 182,400 1,835,400
- ---------------------------------------------------------------
Dendrite International, Inc.(a) 128,800 2,656,500
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 45,000 1,850,625
- ---------------------------------------------------------------
Hyperion Solutions Corporation(a) 147,250 4,417,500
- ---------------------------------------------------------------
Intuit, Inc.(a) 75,000 3,787,500
- ---------------------------------------------------------------
JDA Software Group, Inc.(a) 170,000 1,615,000
- ---------------------------------------------------------------
Learning Company, Inc. (The)(a) 275,000 7,098,438
- ---------------------------------------------------------------
Manhattan Associates, Inc.(a) 68,200 1,091,200
- ---------------------------------------------------------------
MAPICS, Inc.(a) 70,000 1,321,250
- ---------------------------------------------------------------
Mastech Corp.(a) 210,000 4,935,000
- ---------------------------------------------------------------
Medical Manager Corp.(a) 400,000 9,950,000
- ---------------------------------------------------------------
Mercury Interactive Corp.(a) 115,000 4,772,500
- ---------------------------------------------------------------
MTI Technology Corp.(a) 200,000 650,000
- ---------------------------------------------------------------
Network Associates, Inc.(a) 120,500 5,121,250
- ---------------------------------------------------------------
Network Solutions, Inc.-Class
A(a) 105,000 5,604,375
- ---------------------------------------------------------------
Platinum Technology, Inc.(a) 212,250 3,488,859
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 143,500 5,058,375
- ---------------------------------------------------------------
Synopsys, Inc.(a) 81,084 3,669,051
- ---------------------------------------------------------------
Transaction Systems Architects,
Inc.-Class A(a) 100,000 3,609,375
- ---------------------------------------------------------------
USWeb Corp.(a) 330,000 4,743,750
- ---------------------------------------------------------------
Visio Corp.(a) 140,000 3,727,500
- ---------------------------------------------------------------
Walker Interactive Systems,
Inc.(a) 306,000 1,530,000
- ---------------------------------------------------------------
114,893,547
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.43%
Blyth Industries, Inc.(a) 195,000 5,386,875
- ---------------------------------------------------------------
CONSUMER FINANCE-0.43%
American Capital Strategies, Ltd. 85,100 1,127,575
- ---------------------------------------------------------------
Cash America International, Inc. 205,000 2,562,500
- ---------------------------------------------------------------
Investors Financial Services
Corp. 10,000 538,750
- ---------------------------------------------------------------
United Panam Financial Corp.(a) 242,500 1,242,813
- ---------------------------------------------------------------
5,471,638
- ---------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.46%
Silgan Holdings, Inc.(a) 230,000 5,750,000
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-1.15%
AmeriSource Health Corp.-Class
A(a) 95,000 4,981,563
- ---------------------------------------------------------------
JP Foodservice, Inc.(a) 100,750 4,785,625
- ---------------------------------------------------------------
Performance Food Group Co.(a) 175,000 4,243,750
- ---------------------------------------------------------------
Weider Nutrition International,
Inc. 100,000 493,750
- ---------------------------------------------------------------
14,504,688
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.14%
American Power Conversion
Corp.(a) 110,000 4,668,125
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-(CONTINUED)
PCD, Inc.(a) 150,000 $ 1,912,500
- ---------------------------------------------------------------
Pinnacle Systems, Inc.(a) 120,000 4,080,000
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 95,000 3,752,500
- ---------------------------------------------------------------
14,413,125
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.36%
EFTC Corp.(a) 100,000 262,500
- ---------------------------------------------------------------
Quanta Services, Inc.(a) 300,300 4,335,581
- ---------------------------------------------------------------
4,598,081
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.08%
Apex PC Solutions, Inc.(a) 180,000 4,702,500
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 160,000 4,330,000
- ---------------------------------------------------------------
Sipex Corp.(a) 165,000 4,578,750
- ---------------------------------------------------------------
13,611,250
- ---------------------------------------------------------------
ENTERTAINMENT-0.66%
Alliance Atlantis Communications
Corp.-Class B (Canada)(a) 60,000 1,117,500
- ---------------------------------------------------------------
Loews Cineplex Entertainment
Corp.(a) 319,500 3,354,750
- ---------------------------------------------------------------
Metro-Goldwyn-Mayer Inc.(a) 100,000 968,750
- ---------------------------------------------------------------
Metro-Goldwyn-Mayer Inc.,
Rights(a) 128,900 161,125
- ---------------------------------------------------------------
Metromedia International Group,
Inc.(a) 200,000 1,225,000
- ---------------------------------------------------------------
Sports Club Co., Inc. (The)(a) 302,300 1,435,925
- ---------------------------------------------------------------
8,263,050
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.71%
AMRESCO, Inc.(a) 60,000 416,250
- ---------------------------------------------------------------
FirstCity Financial Corp.(a) 160,000 2,120,000
- ---------------------------------------------------------------
Hamilton Bancorp, Inc.(a) 100,000 2,750,000
- ---------------------------------------------------------------
Insignia/ESG Holdings, Inc.(a) 30,000 382,500
- ---------------------------------------------------------------
Medallion Financial Corp. 227,000 4,029,250
- ---------------------------------------------------------------
MGIC Investment Corp. 20,000 780,000
- ---------------------------------------------------------------
Mutual Risk Management Ltd. 30,000 1,014,375
- ---------------------------------------------------------------
PMI Group, Inc. (The) 39,000 1,967,063
- ---------------------------------------------------------------
Rock Financial Corp. 200,000 1,012,500
- ---------------------------------------------------------------
SEI Corp. 85,000 7,044,375
- ---------------------------------------------------------------
21,516,313
- ---------------------------------------------------------------
FOODS-1.63%
American Italian Pasta Co.-Class
A(a) 256,000 5,888,000
- ---------------------------------------------------------------
International Home Foods, Inc.(a) 195,000 3,461,250
- ---------------------------------------------------------------
Keebler Foods Co.(a) 155,500 4,470,625
- ---------------------------------------------------------------
Suiza Foods Corp.(a) 104,900 3,422,363
- ---------------------------------------------------------------
Universal Foods Corp. 149,800 3,248,787
- ---------------------------------------------------------------
20,491,025
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.42%
Harrah's Entertainment, Inc.(a) 154,800 2,186,550
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-(CONTINUED)
International Game Technology 135,000 $ 3,045,938
- ---------------------------------------------------------------
5,232,488
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.56%
Allergan, Inc. 75,000 4,682,813
- ---------------------------------------------------------------
IVAX Corp.(a) 250,000 2,375,000
- ---------------------------------------------------------------
7,057,813
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.21%
Barr Laboratories, Inc.(a) 150,700 5,152,056
- ---------------------------------------------------------------
Forest Laboratories, Inc.(a) 110,000 4,599,375
- ---------------------------------------------------------------
Jones Medical Industries, Inc. 142,000 4,588,375
- ---------------------------------------------------------------
Mylan Laboratories, Inc. 130,000 4,476,875
- ---------------------------------------------------------------
North American Vaccine, Inc.(a) 60,000 907,500
- ---------------------------------------------------------------
Parexel International Corp.(a) 75,000 1,654,688
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 115,000 6,396,875
- ---------------------------------------------------------------
27,775,744
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.49%
Health Management Associates,
Inc.-Class A(a) 197,250 3,513,516
- ---------------------------------------------------------------
New American Healthcare Corp.(a) 250,000 2,656,250
- ---------------------------------------------------------------
6,169,766
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.50%
Mariner Post-Acute Network,
Inc.(a) 185,000 1,075,313
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 120,000 5,167,500
- ---------------------------------------------------------------
6,242,813
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.53%
Alternative Living Services,
Inc.(a) 85,000 2,220,625
- ---------------------------------------------------------------
American Oncology Resources,
Inc.(a) 45,000 599,063
- ---------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 40,000 3,907,500
- ---------------------------------------------------------------
6,727,188
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-3.39%
Biomet, Inc. 110,000 3,733,125
- ---------------------------------------------------------------
Coopers Companies, Inc.(a) 208,000 4,940,000
- ---------------------------------------------------------------
Cyberonics, Inc. 105,000 630,000
- ---------------------------------------------------------------
DVI, Inc.(a) 77,000 1,203,125
- ---------------------------------------------------------------
Henry Schein, Inc.(a) 120,000 4,642,500
- ---------------------------------------------------------------
Lifecore Biomedical, Inc.(a) 272,100 1,938,713
- ---------------------------------------------------------------
Maxxim Medical, Inc.(a) 140,000 3,535,000
- ---------------------------------------------------------------
Mini Med, Inc.(a) 55,000 3,052,500
- ---------------------------------------------------------------
PSS World Medical, Inc.(a) 230,000 5,088,750
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 45,000 4,573,125
- ---------------------------------------------------------------
Steris Corp.(a) 75,000 1,725,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 234,900 5,813,775
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-(CONTINUED)
Trex Medical Corp.(a) 150,000 $ 1,837,500
- ---------------------------------------------------------------
42,713,113
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-3.62%
Advance Paradigm, Inc.(a) 220,000 7,260,000
- ---------------------------------------------------------------
BioReliance Corp(a) 50,000 400,000
- ---------------------------------------------------------------
Boron, LePore & Associates,
Inc.(a) 94,900 2,562,300
- ---------------------------------------------------------------
Capital Senior Living Corp.(a) 270,000 3,172,500
- ---------------------------------------------------------------
Covance, Inc.(a) 105,000 2,926,875
- ---------------------------------------------------------------
First Consulting Group, Inc.(a) 255,800 4,204,713
- ---------------------------------------------------------------
MAXIMUS, Inc.(a) 39,000 1,131,000
- ---------------------------------------------------------------
Ocular Sciences, Inc.(a) 171,100 4,298,888
- ---------------------------------------------------------------
Omnicare, Inc. 125,700 4,344,506
- ---------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 289,900 5,489,981
- ---------------------------------------------------------------
PharMerica, Inc.(a) 365,000 1,231,875
- ---------------------------------------------------------------
Renex Corp.(a) 200,000 900,000
- ---------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 105,000 3,885,000
- ---------------------------------------------------------------
Ventana Medical Systems, Inc.(a) 208,000 3,848,000
- ---------------------------------------------------------------
45,655,638
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.29%
Service Experts, Inc.(a) 122,300 3,691,931
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.23%
Dial Corp. (The) 105,000 2,894,063
- ---------------------------------------------------------------
HOUSEWARES-0.49%
Central Garden and Pet Co.(a) 188,000 3,713,000
- ---------------------------------------------------------------
Helen of Troy Ltd.(a) 100,000 1,487,500
- ---------------------------------------------------------------
Windmere-Durable Holdings Inc.(a) 125,000 960,938
- ---------------------------------------------------------------
6,161,438
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.83%
ESG Re Ltd. (United Kingdom) 77,700 1,437,450
- ---------------------------------------------------------------
Healthcare Recoveries, Inc.(a) 279,800 2,832,975
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 120,000 4,980,000
- ---------------------------------------------------------------
PAULA Financial 151,500 1,202,531
- ---------------------------------------------------------------
10,452,956
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.18%
Horace Mann Educators Corp. 81,000 2,318,625
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-1.99%
Amerin Corp.(a) 220,000 4,702,500
- ---------------------------------------------------------------
CMAC Investment Corp. 73,000 3,056,875
- ---------------------------------------------------------------
CNA Surety Corp.(a) 249,700 3,511,406
- ---------------------------------------------------------------
Everest Reinsurance Holdings,
Inc. 86,000 2,961,626
- ---------------------------------------------------------------
Fidelity National Financial, Inc. 90,000 2,767,500
- ---------------------------------------------------------------
HCC Insurance Holdings, Inc. 150,000 2,690,625
- ---------------------------------------------------------------
Reliance Group Holdings, Inc. 220,000 3,066,250
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-(CONTINUED)
Transatlantic Holdings, Inc. 30,000 $ 2,340,000
- ---------------------------------------------------------------
25,096,782
- ---------------------------------------------------------------
INSURANCE BROKERS-0.16%
Annuity and Life Re, Ltd.
(Bermuda)(a) 87,400 2,042,975
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.20%
EVEREN Capital Corp. 125,000 2,546,875
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.94%
Affiliated Managers Group,
Inc.(a) 225,000 5,006,250
- ---------------------------------------------------------------
Conning Corp. 70,000 1,032,500
- ---------------------------------------------------------------
Knight/Trimark Group, Inc.(a) 400,000 3,250,000
- ---------------------------------------------------------------
Waddell & Reed Financial, Inc. 125,000 2,617,188
- ---------------------------------------------------------------
11,905,938
- ---------------------------------------------------------------
INVESTMENTS-0.05%
Security Capital Group Inc.-Class
B(a) 36,700 584,906
- ---------------------------------------------------------------
LAND DEVELOPMENT-0.25%
Silverleaf Resorts, Inc.(a) 268,000 3,165,750
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.88%
Family Golf Centers, Inc.(a) 149,800 3,155,163
- ---------------------------------------------------------------
GTECH Holdings Corp.(a) 55,000 1,320,000
- ---------------------------------------------------------------
International Speedway Corp. 122,600 3,785,275
- ---------------------------------------------------------------
North Face, Inc. (The)(a) 165,000 1,969,687
- ---------------------------------------------------------------
Travis Boats & Motors, Inc.(a) 49,500 813,656
- ---------------------------------------------------------------
11,043,781
- ---------------------------------------------------------------
LODGING-HOTELS-0.82%
American Skiing Co.(a) 70,000 625,625
- ---------------------------------------------------------------
Four Seasons Hotels, Inc.
(Canada) 100,000 2,300,000
- ---------------------------------------------------------------
Prime Hospitality Corp.(a) 120,000 1,095,000
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 140,000 3,902,500
- ---------------------------------------------------------------
Vail Resorts Inc.(a) 91,700 2,452,975
- ---------------------------------------------------------------
10,376,100
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.03%
Industrial Distribution Group,
Inc.(a) 45,100 326,975
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-2.55%
Alpine Group, Inc.(The)(a) 169,700 2,863,688
- ---------------------------------------------------------------
American Bank Note Holographics,
Inc.(a) 545,500 5,148,156
- ---------------------------------------------------------------
Amor Holdings, Inc.(a) 100,000 1,043,750
- ---------------------------------------------------------------
First Years, Inc. (The) 390,000 6,142,500
- ---------------------------------------------------------------
Howmet International Inc.(a) 290,000 4,350,000
- ---------------------------------------------------------------
Mettler-Toledo International
Inc.(a) 202,000 4,418,750
- ---------------------------------------------------------------
Superior TeleCom Inc. 70,100 3,014,300
- ---------------------------------------------------------------
U.S.A. Floral Products, Inc.(a) 120,000 1,095,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED)-(CONTINUED)
US Filter Corp.(a) 190,000 $ 4,025,625
- ---------------------------------------------------------------
32,101,769
- ---------------------------------------------------------------
METAL FABRICATORS-0.38%
Metal USA Inc.(a) 480,000 4,770,000
- ---------------------------------------------------------------
NATURAL GAS-0.26%
KN Energy, Inc. 65,000 3,229,688
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.76%
Daisytek International Corp.(a) 230,000 3,464,375
- ---------------------------------------------------------------
Knoll, Inc.(a) 100,000 2,700,000
- ---------------------------------------------------------------
School Specialty, Inc.(a) 214,102 3,372,107
- ---------------------------------------------------------------
9,536,482
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.07%
Tuboscope Vetco International
Corp.(a) 70,000 866,250
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.19%
Anadarko Petroleum Corp. 104,600 3,543,325
- ---------------------------------------------------------------
Apache Corp. 135,000 3,822,188
- ---------------------------------------------------------------
Benton Oil & Gas Co.(a) 90,000 461,250
- ---------------------------------------------------------------
Devon Energy Corp. 125,000 4,234,375
- ---------------------------------------------------------------
Newfield Exploration Co.(a) 50,000 1,215,625
- ---------------------------------------------------------------
Noble Affiliates, Inc. 130,000 4,257,500
- ---------------------------------------------------------------
Ocean Energy, Inc.(a) 150,000 1,875,000
- ---------------------------------------------------------------
Snyder Oil Corp. 205,000 3,267,187
- ---------------------------------------------------------------
Stolt Comex Seaway, S.A. (United
Kingdom)(a) 100,000 1,031,250
- ---------------------------------------------------------------
Union Pacific Resources Group
Inc. 299,800 3,897,400
- ---------------------------------------------------------------
27,605,100
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.21%
Pope & Talbot, Inc. 96,500 910,719
- ---------------------------------------------------------------
Wausau-Mosinee Paper Corp. 100,000 1,743,750
- ---------------------------------------------------------------
2,654,469
- ---------------------------------------------------------------
PERSONAL CARE-1.69%
Chattem, Inc.(a) 149,900 4,159,725
- ---------------------------------------------------------------
NBTY, Inc.(a) 434,700 3,477,600
- ---------------------------------------------------------------
Playtex Products, Inc.(a) 251,700 3,319,294
- ---------------------------------------------------------------
Rexall Sundown, Inc.(a) 200,000 3,587,500
- ---------------------------------------------------------------
Steiner Leisure Ltd.(a) 130,000 3,168,750
- ---------------------------------------------------------------
Twinlab Corp.(a) 160,000 3,550,000
- ---------------------------------------------------------------
21,262,869
- ---------------------------------------------------------------
PUBLISHING-1.01%
IDG Books Worldwide, Inc.(a) 329,800 5,111,900
- ---------------------------------------------------------------
Petersen Companies, Inc.
(The)-Class A(a) 110,000 2,921,875
- ---------------------------------------------------------------
Scholastic Corp.(a) 120,000 4,732,500
- ---------------------------------------------------------------
12,766,275
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RAILROADS-0.34%
Kansas City Southern Industries,
Inc. 110,300 $ 4,260,338
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-2.67%
AMRESCO Capital Trust Inc. 265,500 2,157,188
- ---------------------------------------------------------------
Apartment Investment & Management
Co. 100,000 3,493,750
- ---------------------------------------------------------------
Apartment Investment & Management
Co., Series E Conv. Pfd. 11,790 468,653
- ---------------------------------------------------------------
CarrAmerica Realty Corp. 100,000 2,250,000
- ---------------------------------------------------------------
CCA Prison Realty Trust 50,000 1,175,000
- ---------------------------------------------------------------
Colonial Properties Trust 100,000 2,750,000
- ---------------------------------------------------------------
Corporate Office Properties
Trust, Inc. 380,000 2,897,500
- ---------------------------------------------------------------
Correctional Properties Trust 207,400 4,031,337
- ---------------------------------------------------------------
Equity Office Properties Trust 108,000 2,592,000
- ---------------------------------------------------------------
Great Lakes REIT, Inc. 40,000 657,500
- ---------------------------------------------------------------
Kilroy Realty Corp. 150,000 3,328,125
- ---------------------------------------------------------------
Manufactured Home Communities,
Inc. 130,000 3,241,875
- ---------------------------------------------------------------
MeriStar Hospitality Corp. 85,000 1,572,500
- ---------------------------------------------------------------
Weeks Corp. 105,000 3,051,562
- ---------------------------------------------------------------
33,666,990
- ---------------------------------------------------------------
RESTAURANTS-1.58%
Avado Brands, Inc. 300,000 2,362,500
- ---------------------------------------------------------------
Brinker International, Inc.(a) 192,000 4,644,000
- ---------------------------------------------------------------
CEC Entertainment Inc.(a) 150,000 4,237,500
- ---------------------------------------------------------------
Dave & Buster's, Inc.(a) 144,900 2,716,875
- ---------------------------------------------------------------
Logan's Roadhouse, Inc.(a) 40,000 700,000
- ---------------------------------------------------------------
Rainforest Cafe, Inc.(a) 150,000 993,750
- ---------------------------------------------------------------
Starbucks Corp.(a) 97,000 4,207,375
- ---------------------------------------------------------------
19,862,000
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.18%
Eagle Hardware & Garden, Inc.(a) 100,000 2,325,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.79%
CDW Computer Centers, Inc.(a) 60,000 4,496,250
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 61,800 2,811,900
- ---------------------------------------------------------------
Tech Data Corp.(a) 67,000 2,638,125
- ---------------------------------------------------------------
9,946,275
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.58%
Consolidated Stores Corp.(a) 56,400 927,075
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 283,600 5,140,250
- ---------------------------------------------------------------
K & G Men's Center, Inc.(a) 149,100 1,248,712
- ---------------------------------------------------------------
7,316,037
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.92%
Dominick's Supermarkets, Inc.(a) 48,100 2,347,881
- ---------------------------------------------------------------
Whole Foods Market, Inc.(a) 100,000 4,006,250
- ---------------------------------------------------------------
Wild Oats Markets Inc.(a) 210,000 5,171,250
- ---------------------------------------------------------------
11,525,381
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL
MERCHANDISE)-0.18%
Signet Group PLC (United
Kingdom)(a) 2,320,000 $ 1,239,610
- ---------------------------------------------------------------
Signet Group PLC-ADR (United
Kingdom)(a) 60,000 967,500
- ---------------------------------------------------------------
2,207,110
- ---------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.36%
Micro Warehouse, Inc.(a) 205,000 4,471,563
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-5.62%
Bed Bath & Beyond, Inc.(a) 100,000 2,756,250
- ---------------------------------------------------------------
Brookstone, Inc.(a) 85,000 972,188
- ---------------------------------------------------------------
Casey's General Stores, Inc. 130,000 1,820,000
- ---------------------------------------------------------------
Cole National Corp.-Class A(a) 70,000 1,452,500
- ---------------------------------------------------------------
CSK Auto Corp.(a) 147,400 3,841,612
- ---------------------------------------------------------------
Electronics Boutique Holdings
Corp.(a) 200,000 2,500,000
- ---------------------------------------------------------------
Finish Line, Inc. (The)-Class
A(a) 70,000 743,750
- ---------------------------------------------------------------
Group 1 Automotive, Inc.(a) 90,000 1,541,250
- ---------------------------------------------------------------
Hibbett Sporting Goods, Inc.(a) 170,000 4,600,625
- ---------------------------------------------------------------
Home Choice Holdings Inc.(a) 189,100 2,470,119
- ---------------------------------------------------------------
Hot Topic, Inc.(a) 86,000 1,612,500
- ---------------------------------------------------------------
Just for Feet, Inc.(a) 198,900 3,368,869
- ---------------------------------------------------------------
Linens 'N Things, Inc.(a) 310,300 9,599,906
- ---------------------------------------------------------------
Lithia Motors, Inc.-Class A(a) 135,000 2,025,000
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 172,000 3,440,000
- ---------------------------------------------------------------
Musicland Stores Corp.(a) 300,000 3,956,250
- ---------------------------------------------------------------
PETsMART Inc.(a) 180,000 1,293,750
- ---------------------------------------------------------------
Pier 1 Imports, Inc. 232,500 2,150,625
- ---------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 100,000 2,081,250
- ---------------------------------------------------------------
Rainbow Rentals, Inc.(a) 172,000 1,709,250
- ---------------------------------------------------------------
Renters Choice, Inc.(a) 129,900 3,223,144
- ---------------------------------------------------------------
Rent-Way, Inc.(a) 97,900 2,312,887
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 185,000 5,041,250
- ---------------------------------------------------------------
Zale Corp.(a) 265,000 6,277,188
- ---------------------------------------------------------------
70,790,163
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.52%
Abercrombie & Fitch Co.-Class
A(a) 70,000 2,778,125
- ---------------------------------------------------------------
Goody's Family Clothing, Inc.(a) 82,500 881,718
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 90,000 2,182,500
- ---------------------------------------------------------------
Stage Stores, Inc.(a) 50,000 662,500
- ---------------------------------------------------------------
6,504,843
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.26%
Allied Capital Corp. 175,000 3,281,250
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-3.46%
Abacus Direct Corp.(a) 115,000 5,606,250
- ---------------------------------------------------------------
Acxiom Corp.(a) 196,000 4,924,500
- ---------------------------------------------------------------
Forrester Research, Inc.(a) 109,300 3,524,925
- ---------------------------------------------------------------
Getty Images, Inc. (United
Kingdom)(a) 30,000 369,375
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-(CONTINUED)
Hagler Bailly, Inc.(a) 160,000 $ 3,760,000
- ---------------------------------------------------------------
HA-LO Industries, Inc.(a) 150,000 4,237,500
- ---------------------------------------------------------------
Information Resources, Inc.(a) 155,000 1,230,312
- ---------------------------------------------------------------
Lamar Advertising Co.(a) 225,000 7,024,218
- ---------------------------------------------------------------
Market Facts, Inc.(a) 173,800 4,062,575
- ---------------------------------------------------------------
Nielsen Media Research 200,000 2,837,500
- ---------------------------------------------------------------
Snyder Communications, Inc.(a) 90,000 3,211,875
- ---------------------------------------------------------------
Young & Rubicam, Inc.(a) 108,500 2,834,563
- ---------------------------------------------------------------
43,623,593
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-7.21%
ABR Information Services, Inc.(a) 239,900 4,528,112
- ---------------------------------------------------------------
Advantage Learning Systems,
Inc.(a) 55,400 2,548,400
- ---------------------------------------------------------------
Avis Rent A Car, Inc.(a) 140,400 2,860,650
- ---------------------------------------------------------------
Bright Horizons Family Solutions,
Inc.(a) 189,992 3,514,852
- ---------------------------------------------------------------
Career Education Corp.(a) 51,700 1,266,650
- ---------------------------------------------------------------
Cerner Corp.(a) 45,000 1,006,875
- ---------------------------------------------------------------
Equity Corp. International(a) 200,000 4,962,500
- ---------------------------------------------------------------
G & K Services, Inc.-Class A 53,500 2,447,625
- ---------------------------------------------------------------
Galileo International, Inc. 126,700 4,806,681
- ---------------------------------------------------------------
Hertz Corp.-Class A 87,000 3,115,687
- ---------------------------------------------------------------
Inspire Insurance Solutions,
Inc.(a) 172,500 4,312,500
- ---------------------------------------------------------------
Iron Mountain, Inc.(a) 150,000 4,584,375
- ---------------------------------------------------------------
LaSalle Partners, Inc.(a) 71,900 2,103,075
- ---------------------------------------------------------------
MemberWorks, Inc.(a) 100,000 2,312,500
- ---------------------------------------------------------------
Metzler Group, Inc.(a) 180,000 7,560,000
- ---------------------------------------------------------------
PalEx, Inc.(a) 125,000 875,000
- ---------------------------------------------------------------
Pegasus Systems, Inc.(a) 250,000 4,343,750
- ---------------------------------------------------------------
Pittston Brink's Group 70,000 2,082,500
- ---------------------------------------------------------------
Primark Corp.(a) 143,000 3,861,000
- ---------------------------------------------------------------
Protection One, Inc. 281,000 3,161,250
- ---------------------------------------------------------------
Regis Corp. 156,800 4,811,800
- ---------------------------------------------------------------
Rental Service Corp.(a) 140,000 3,115,000
- ---------------------------------------------------------------
Sotheby's Holdings, Inc.-Class A 55,000 1,189,375
- ---------------------------------------------------------------
Strayer Education, Inc. 25,000 850,000
- ---------------------------------------------------------------
Sylvan Learning Systems, Inc.(a) 205,000 6,329,375
- ---------------------------------------------------------------
Trammell Crow Co.(a) 46,600 1,007,725
- ---------------------------------------------------------------
Travel Services International,
Inc.(a) 260,000 5,265,000
- ---------------------------------------------------------------
United Rentals, Inc.(a) 38,500 1,034,688
- ---------------------------------------------------------------
United Road Services, Inc.(a) 60,000 960,000
- ---------------------------------------------------------------
90,816,945
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-3.07%
Cotelligent Group, Inc.(a) 187,500 3,539,063
- ---------------------------------------------------------------
Gartner Group, Inc.-Class A(a) 157,000 3,120,375
- ---------------------------------------------------------------
Insight Enterprises, Inc.(a) 150,000 4,350,000
- ---------------------------------------------------------------
Keane, Inc.(a) 95,000 3,158,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMPUTER SYSTEMS)-(CONTINUED)
Policy Management Systems
Corp.(a) 155,000 $ 7,042,812
- ---------------------------------------------------------------
Shared Medical Systems Corp. 40,000 1,995,000
- ---------------------------------------------------------------
SunGard Data Systems Inc.(a) 341,900 11,539,125
- ---------------------------------------------------------------
Sykes Enterprises, Inc.(a) 196,900 3,864,162
- ---------------------------------------------------------------
38,609,287
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.64%
4Front Software International,
Inc.(a) 335,000 2,721,875
- ---------------------------------------------------------------
Billing Concepts Corp.(a) 106,700 1,507,138
- ---------------------------------------------------------------
BISYS Group, Inc.(a) 200,000 8,750,000
- ---------------------------------------------------------------
Computer Horizons Corp.(a) 85,000 1,955,000
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 150,000 8,175,000
- ---------------------------------------------------------------
DST Systems, Inc.(a) 45,000 2,250,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 115,000 5,347,500
- ---------------------------------------------------------------
Lason Holdings, Inc.(a) 76,400 4,182,900
- ---------------------------------------------------------------
MedQuist, Inc.(a) 97,900 2,637,180
- ---------------------------------------------------------------
NOVA Corp.(a) 144,400 4,169,550
- ---------------------------------------------------------------
Transaction Network Services,
Inc.(a) 151,900 4,158,262
- ---------------------------------------------------------------
45,854,405
- ---------------------------------------------------------------
SERVICES (ELECTRONICS MANUFACTURING)-0.18%
Celestica Inc. (Canada)(a) 125,000 2,289,062
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.72%
Metamor Worldwide, Inc.(a) 135,000 3,467,813
- ---------------------------------------------------------------
Syntel, Inc.(a) 165,000 2,310,000
- ---------------------------------------------------------------
Vincam Group, Inc. (The)(a) 209,850 3,318,252
- ---------------------------------------------------------------
9,096,065
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-1.03%
Casella Waste Systems, Inc.(a) 190,000 5,605,000
- ---------------------------------------------------------------
Wackenhut Corrections Corp.(a) 179,700 4,413,880
- ---------------------------------------------------------------
Waste Connections, Inc(a) 156,900 2,981,100
- ---------------------------------------------------------------
12,999,980
- ---------------------------------------------------------------
SERVICES (GLOBAL INTERNET &
TELECOMMUNICATION)-0.27%
Global Crossing Ltd. (Bermuda)(a) 120,000 3,450,000
- ---------------------------------------------------------------
SERVICES (INTERNATIONAL DATA NETWORK)-0.24%
Equant N.V.-New York Registered
Shares (Netherlands) 70,000 3,062,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.15%
Associated Group, Inc.
(The)-Class A(a) 150,000 5,062,500
- ---------------------------------------------------------------
International Telecommunication
Data Systems, Inc.(a) 210,000 5,013,750
- ---------------------------------------------------------------
Metromedia Fiber Network, Inc.(a) 115,000 4,355,625
- ---------------------------------------------------------------
14,431,875
- ---------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TEXTILES (APPAREL)-0.65%
Columbia Sportswear Co.(a) 155,000 $ 2,712,500
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 90,000 1,861,875
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 77,400 3,594,262
- ---------------------------------------------------------------
8,168,637
- ---------------------------------------------------------------
TRUCKERS-0.02%
Jevic Transportation, Inc.(a) 40,000 285,000
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.71%
Superior Services, Inc.(a) 160,000 3,360,000
- ---------------------------------------------------------------
U.S. Liquids Inc.(a) 225,000 3,403,125
- ---------------------------------------------------------------
Waste Industries, Inc.(a) 92,500 2,162,187
- ---------------------------------------------------------------
8,925,312
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$1,093,871,320) 1,172,202,068
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-6.44%(B)
Chase Securities, Inc., 5.55%,
11/02/98(c) $81,076,324 $ 81,076,324
- ---------------------------------------------------------------
Total Repurchase Agreement
(Cost $81,076,324) 81,076,324
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.50% 1,253,278,392
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.50% 6,271,155
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,259,549,547
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) 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 sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 10/30/98 with a maturing value
$200,092,500. Collateralized by $254,478,951 U.S. Government obligations,
5.00% to 16.00% due 05/20/02 to 10/15/28 with an aggregate market value at
10/31/98 of $204,000,718.
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
$1,174,947,644) $1,253,278,392
- ------------------------------------------------------------
Receivables for:
Investments sold 10,646,034
- ------------------------------------------------------------
Capital stock sold 6,011,040
- ------------------------------------------------------------
Dividends and interest 274,546
- ------------------------------------------------------------
Investment for deferred compensation plan 12,692
- ------------------------------------------------------------
Other assets 95,850
- ------------------------------------------------------------
Total assets 1,270,318,554
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 7,028,076
- ------------------------------------------------------------
Capital stock reacquired 2,011,607
- ------------------------------------------------------------
Deferred compensation 12,692
- ------------------------------------------------------------
Accrued advisory fees 638,189
- ------------------------------------------------------------
Accrued administrative services fees 7,097
- ------------------------------------------------------------
Accrued directors' fees 1,308
- ------------------------------------------------------------
Accrued distribution fees 694,253
- ------------------------------------------------------------
Accrued transfer agent fees 286,577
- ------------------------------------------------------------
Accrued operating expenses 89,208
- ------------------------------------------------------------
Total liabilities 10,769,007
- ------------------------------------------------------------
Net assets applicable to shares outstanding $1,259,549,547
- ------------------------------------------------------------
NET ASSETS:
Class A $ 717,263,173
============================================================
Class B $ 493,992,893
============================================================
Class C $ 48,293,481
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 55,658,172
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 38,905,993
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 3,804,639
============================================================
Class A:
Net asset value and redemption price per
share $ 12.89
============================================================
Offering price per share:
(Net assets value of $12.89 divided by
94.50%) $ 13.64
============================================================
Class B:
Net asset value and offering price per
share $ 12.70
============================================================
Class C:
Net asset value and offering price per
share $ 12.69
============================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $7,234 foreign withholding
tax) $ 5,602,027
- ------------------------------------------------------------
Interest 4,885,477
- ------------------------------------------------------------
Total investment income 10,487,504
- ------------------------------------------------------------
EXPENSES:
Advisory fees 7,886,238
- ------------------------------------------------------------
Administrative services fees 85,252
- ------------------------------------------------------------
Custodian fees 123,565
- ------------------------------------------------------------
Directors' fees 14,203
- ------------------------------------------------------------
Distribution fees-Class A 2,504,089
- ------------------------------------------------------------
Distribution fees-Class B 4,422,958
- ------------------------------------------------------------
Distribution fees-Class C 340,482
- ------------------------------------------------------------
Transfer agent fees-Class A 1,551,766
- ------------------------------------------------------------
Transfer agent fees-Class B 1,356,637
- ------------------------------------------------------------
Transfer agent fees-Class C 110,412
- ------------------------------------------------------------
Other 470,468
- ------------------------------------------------------------
Total expenses 18,866,070
- ------------------------------------------------------------
Less: Expenses paid indirectly (45,992)
- ------------------------------------------------------------
Net expenses 18,820,078
- ------------------------------------------------------------
Net investment income (loss) (8,332,574)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (67,546,256)
- ------------------------------------------------------------
Foreign currencies (63,343)
- ------------------------------------------------------------
Futures contracts (261,825)
- ------------------------------------------------------------
Option contracts written 234,891
- ------------------------------------------------------------
(67,636,533)
- ------------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (113,912,197)
- ------------------------------------------------------------
Futures contracts (315,275)
- ------------------------------------------------------------
(114,227,472)
- ------------------------------------------------------------
Net gain (loss) from investment
securities, foreign currencies, futures
and option contracts (181,864,005)
- ------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(190,196,579)
============================================================
</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) $ (8,332,574) $ (5,256,151)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities, foreign currencies, futures and option
contracts (67,636,533) (6,205,853)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies, futures and option
contracts (114,227,472) 159,137,915
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (190,196,579) 147,675,911
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 242,830,301 218,214,845
- -------------------------------------------------------------------------------------------
Class B 274,584,791 235,598,112
- -------------------------------------------------------------------------------------------
Class C 44,827,215 12,327,342
- -------------------------------------------------------------------------------------------
Net increase in net assets 372,045,728 613,816,210
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 887,503,819 273,687,609
- -------------------------------------------------------------------------------------------
End of period $1,259,549,547 $887,503,819
===========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,260,398,710 $706,543,586
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (21,335) (10,996)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities, foreign currencies, futures and
option contracts (79,158,576) (11,586,991)
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 78,330,748 192,558,220
- -------------------------------------------------------------------------------------------
$1,259,549,547 $887,503,819
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Capital Development Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six separate
portfolios: AIM Capital Development Fund, AIM Aggressive Growth Fund, AIM Blue
Chip Fund, AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund. The
Fund currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term capital appreciation.
The 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. 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
15
<PAGE> 18
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 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 specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income, dividend expense on
short sales and distributions to shareholders are recorded on the ex-dividend
date. On October 31, 1998, undistributed net investment income was increased
by $8,322,235, undistributed net realized gains increased by 64,948 and
paid-in capital decreased by 8,387,183 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. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in value of the contracts may not correlate with changes in
the value of the securities being hedged.
D. Accounting for Securities Sold Short--When the Fund sells common stock short,
an amount equal to the proceeds of the sales is recorded as an asset. This
asset is offset by a liability (representing the borrowed security) recorded
on the books of the Fund at the market value of the common stock determined
each day in accordance with the procedures for security valuations discussed
in "A" above. The Fund's risk is that the value of the security will increase
rather than decline and thus an unrealized loss will be recorded. When the
Fund closes out a short position by delivering the stock sold short, the Fund
will realize a gain or loss and the liability related to such short position
will be eliminated. The Fund will attempt to hedge against market risk by
entering into short sales of securities that it currently owns or has the
right to acquire through the conversion or exchange of other securities that
it owns. Such short sales may protect the Fund against the risk of losses in
the value of its portfolio securities because any unrealized losses with
respect to such securities may be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in
such portfolio may be wholly or partially offset by a corresponding loss in
the short position.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward of
$75,941,588 (which may be carried forward to offset future taxable gains, if
any) which expires, if not previously utilized, in the year 2006.
F. Covered Call Options--The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written by
the Fund normally will have expiration dates between three and nine months
from the date written. The exercise price of a call option may be below,
equal to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset and
an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the mean between the last bid
and asked prices on that day. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call option
has the right to acquire the security which is the subject of the call option
at any time during the option period. During the option period, in return for
the premium paid by the purchaser of the option, the Fund has given up the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline. During the option
period, the Fund may be required at any time to deliver the underlying
security against payment of the exercise price. This obligation is terminated
upon the expiration of the option period or at such earlier time at which the
Fund effects a closing purchase transaction by purchasing (at a price which
16
<PAGE> 19
may be higher than that received when the call option was written) a call
option identical to the one originally written.
G. Foreign Currency Translation--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.
H. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract 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.
I. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million.
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 $85,252 for such services.
The Fund, pursuant to a transfer agency and services agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1998, AFS was paid
$1,770,783 for such services.
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 0.35% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. The Fund pursuant
to the Class B Plan, pays AIM Distributors compensation at an annual rate of
1.00% of the average daily net assets of the Class B shares. Of these amounts,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class A, Class B or C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. The
Plans also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by the respective classes. During the year ended
October 31, 1998, the Class A, Class B and Class C shares paid AIM Distributors
$2,504,089, $4,422,958 and $340,482, respectively, as compensation under the
Plans.
AIM Distributors received commissions of $1,536,318 from Class A capital stock
transactions 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 capital stock. During the year ended October 31,
1998, AIM Distributors received $108,532 in contingent deferred sales charges
imposed on redemptions of capital stock. Certain officers and directors of the
Company are officers and directors of AIM, AIM Distributors and AFS.
During the year ended October 31, 1998, the Fund paid legal fees of $5,579 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
$12,462 and $33,530, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $45,992 during the year ended October 31, 1998.
NOTE 4-DIRECTOR'S FEES
Director's fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $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.
17
<PAGE> 20
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
$1,412,034,539 and $857,601,297, 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 $ 200,538,389
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (124,243,306)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 76,295,083
===========================================================================
</TABLE>
Cost of investments for tax purposes is $1,176,983,309.
NOTE 7-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 1,600 321,591
- ------------------------------------------------------------------------------------
Closed (1,350) (272,341)
- ------------------------------------------------------------------------------------
Exercised (100) (11,575)
- ------------------------------------------------------------------------------------
Expired (150) (37,675)
- ------------------------------------------------------------------------------------
End of period - $ -
====================================================================================
</TABLE>
NOTE 8-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 101,121,530 $ 1,487,557,560 33,846,855 $ 430,979,375
- ---------------------------------------------------------------------------------------------------------------------------
Class B 25,176,788 370,811,453 20,627,807 261,084,351
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 4,336,475 62,530,399 850,531 12,426,338
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (85,122,675) (1,244,727,259) (16,847,317) (212,764,530)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (6,860,398) (96,226,662) (2,062,227) (25,486,239)
- ---------------------------------------------------------------------------------------------------------------------------
Class C* (1,375,616) (17,703,184) (6,751) (98,996)
- ---------------------------------------------------------------------------------------------------------------------------
37,276,104 $ 562,242,307 36,408,898 $ 466,140,299
===========================================================================================================================
* Class C shares commenced sales on August 4, 1997.
</TABLE>
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 two-year period ended October 31,
1998 and the period June 17, 1996 (date operations commenced) through October
31, 1996, for a share of Class B capital stock outstanding during each of the
years in the two-year period ended October 31, 1998 and the period October 1,
1996 (date sales commenced) through October 31, 1996 and for a share of Class C
capital stock outstanding during the year ended October 31, 1998 and the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------------------- --------------------------------- ---------------------
1998 1997 1996 1998 1997 1996 1998 1997
---- -------- -------- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 14.57 $ 11.09 $ 10.00 $ 14.46 $ 11.08 $ 11.26 $ 14.45 $ 13.48
- ------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss)() (0.06)(a) (0.10)(a) (0.01)(a) (0.16)(a) (0.20)(a) (0.01)(a) (0.16)(a) (0.06)(a)
- ------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on
securities (both
realized and unrealized) (1.62) 3.58 1.10 (1.60) 3.58 (0.17) (1.60) 1.03
- ------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations (1.68) 3.48 1.09 (1.76) 3.38 (0.18) (1.76) 0.97
- ------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.89 $ 14.57 $ 11.09 $ 12.70 $ 14.46 $ 11.08 $ 12.69 $ 14.45
============================== ======== ======== ======== ======== ======== ======== ======== ========
Total return(b) (11.53)% 31.38% 10.90% (12.17)% 30.51% (1.60)% (12.18)% 7.20%
============================== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $717,263 $577,685 $251,253 $493,993 $297,623 $ 22,435 $ 48,293 $ 12,195
============================== ======== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average
net assets(c) 1.28%(d) 1.33% 1.35%(e) 2.02%(d) 2.09% 1.89%(e) 2.02%(d) 2.14%(e)
============================== ======== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net
assets(f) (0.40)%(d) (0.83)% (0.29)%(e) (1.14)%(d) (1.59)% (0.83)%(e) (1.14)%(d) (1.64)%(e)
============================== ======== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 78% 41% 13% 78% 41% 13% 78% 41%
============================== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.38% and 1.60% (annualized) for
1997-1996, for Class A, 2.14% and 2.28% (annualized) for
1997-1996 for Class B and 2.19% (annualized) for 1997 for
Class C.
(d) Ratios are based on average net assets of $715,454,107,
$442,295,823 and $34,048,155 for Class A, Class B and Class
C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of
net investment income (loss) to average net assets prior to
fee waivers and/or expense reimbursements were (0.88)% and
(0.54)% (annualized) for 1997-1996 for Class A, (1.64)% and
(1.22)% (annualized) for 1997-1996 for Class B and (1.69)%
(annualized) for 1997 for Class C.
</TABLE>
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Capital Development Fund (a series
portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1998, the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended, and financial
highlights for each of the years in the two-year period
then ended and the period June 17, 1996 (date operations
commenced) through October 31, 1996. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audit.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 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 the AIM
Capital Development Fund as of October 31, 1998, the
results of its operations for the year then ended, the
changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years in the two-year period then ended
and the period June 17, 1996 (date operations commenced)
through October 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 4, 1998
19
<PAGE> 22
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II 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>
20
<PAGE> 23
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds(R). The exchange privilege may be modified or discontinued
for any of the AIM funds. Certain restrictions apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your Individual
Retirement Account (IRA), Roth IRA, or any other type of retirement plan,
and earn tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o WWW.AIMFUNDS.COM. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
------------------------------------
CURRENT SHAREHOLDERS
CAN CALL OUR
AIM INVESTOR LINE AT
800-246-5463
FOR 24-HOUR-A-DAY
ACCOUNT INFORMATION.
------------------------------------
<PAGE> 24
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Asian Growth Fund since 1976 and managed approximately $91
AIM Capital Development Fund AIM Developing Markets Fund(2) billion in assets for more than 5.5 million
AIM Constellation Fund AIM Emerging Markets Fund(2) shareholders, including individual investors,
AIM Mid Cap Equity Fund(2), (A) AIM Europe Growth Fund(2) corporate clients, and financial institutions,
AIM Select Growth Fund(3) AIM European Development Fund as of September 30, 1998.
AIM Small Cap Growth Fund(2), (B) AIM International Equity Fund The AIM Family of Funds --Registered
AIM Small Cap Opportunities Fund AIM International Growth Fund(2) Trademark-- is distributed nationwide, and
AIM Value Fund AIM Japan Growth Fund(2) today is the 11th-largest mutual fund complex
AIM Weingarten Fund AIM Latin American Growth Fund(2) in the U.S. in assets under management,
AIM New Pacific Growth Fund(2) according to Strategic Insight, an independent
GROWTH & INCOME FUNDS mutual fund monitor.
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Basic Value Fund(2), (C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
MONEY MARKET FUNDS AIM Global Trends Fund(2), (E)
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
