-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UagDNuXrgnU9pZGdbyEiuJuAG/hQgKp9qVAYRH920W3G2gvx848BTBZZeOSnf12l PsM6Lfe/kkcLwdXLCtegpA== 0000950129-99-000053.txt : 19990108 0000950129-99-000053.hdr.sgml : 19990108 ACCESSION NUMBER: 0000950129-99-000053 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM EQUITY FUNDS INC CENTRAL INDEX KEY: 0000105377 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132576643 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01424 FILM NUMBER: 99502115 BUSINESS ADDRESS: STREET 1: ELEVEN GREENWAY PLZ STREET 2: STE 1919 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7136261919 MAIL ADDRESS: STREET 1: AIM EQUITY FUNDS INC STREET 2: 11 GREENWAY PLZ STE 1919 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: WEINGARTEN EQUITY FUND INC DATE OF NAME CHANGE: 19880929 FORMER COMPANY: FORMER CONFORMED NAME: COMPUFUND INC DATE OF NAME CHANGE: 19880616 N-30D 1 AIM CAPITAL DEVELOPMENT FUND - ANNUAL REPORT 1 AIM CAPITAL DEVELOPMENT FUND [AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1998 Cover Image INVEST WITH DISCIPLINE--Registered Trademark-- 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 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 general@aimfunds.com. 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 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 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
======================================================================================================================== TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES - ------------------------------------------------------------------------------------------------------------------------ 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 ========================================================================================================================
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 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 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 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 9 SCHEDULE OF INVESTMENTS October 31, 1998
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
7 10
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
8 11
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
9 12
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
10 13
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
11 14
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
12 15
MARKET SHARES VALUE 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 - ---------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 ===============================================================
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 16 STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1998 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 ============================================================
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1998 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) ============================================================
See Notes to Financial Statements. 14 17 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 1998 and 1997
1998 1997 -------------- ------------ 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 ===========================================================================================
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 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 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 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: 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 ===========================================================================
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:
OPTION CONTRACTS ---------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- --------- Beginning of period - $ - - ------------------------------------------------------------------------------------ Written 1,600 321,591 - ------------------------------------------------------------------------------------ Closed (1,350) (272,341) - ------------------------------------------------------------------------------------ Exercised (100) (11,575) - ------------------------------------------------------------------------------------ Expired (150) (37,675) - ------------------------------------------------------------------------------------ End of period - $ - ====================================================================================
NOTE 8-CAPITAL STOCK Changes in the capital stock outstanding during the years ended October 31, 1998 and 1997 were as follows:
1998 1997 ------------------------------ --------------------------- SHARES AMOUNT SHARES AMOUNT ------------ --------------- ----------- ------------- 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.
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.
CLASS A CLASS B CLASS C --------------------------------- --------------------------------- --------------------- 1998 1997 1996 1998 1997 1996 1998 1997 ---- -------- -------- ---- -------- -------- ---- ---- 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% ============================== ======== ======== ======== ======== ======== ======== ======== ========
(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.
18 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 22
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND 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
20 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. ------------------------------------ 24 THE AIM FAMILY OF FUNDS--Registered Trademark-- 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
(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. -----END PRIVACY-ENHANCED MESSAGE-----