<PAGE> 1
AIM BLUE
CHIP FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT APRIL 30, 1997
<PAGE> 2
----------------------------------------
AIM BLUE CHIP FUND
For shareholders who seek a
relatively conservative investment
portfolio that contains the
stocks of top-performing companies
within designated business sectors.
----------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Blue Chip 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 The Fund's average annual total returns on Class A shares were 10.93%,
12.67%, and 11.07% for the one-, five-, and 10-year periods ended 3/31/97,
the most recent calendar quarter, including sales charges. For Class B
shares, which commenced operations on 10/1/96, cumulative return was 0.59%
as of 3/31/97, including sales charges.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC).
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 performance of the
Fund's Class B shares will differ from Class A shares due to differing fees
and 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 The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper Growth Fund Index represents an average of the
performance of the 30 largest growth mutual funds tracked by Lipper
Analytical Services, Inc., an independent mutual funds performance monitor.
o The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the
performance of 30 large-company stocks.
o The Russell 1000 Index measures the performance of 1,000 large-company
stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
We have seen a great deal of change in the markets during
the past few months, change that has been unsettling even
for experienced market watchers.
[PHOTO OF In many instances the change has occurred suddenly as
Charles T. the markets have fluctuated widely during the past six
Bauer, months. The popular Dow Jones Industrial Average of 30
Chairman of large companies ranged from just over 7000 to just below
the Board of 6400 before strengthening once again and regaining its lost
THE FUND, ground. Both the Russell 2000 Index, judged to be the
APPEARS HERE] benchmark for small-cap stocks, and the Dow recently have
set records.
The point we want to emphasize is that such volatility
seems to be the norm rather than the exception in the
current market. Although most attention has been on the
large stocks in the S&P 500 index, the broad-based index
generally considered "the market," small- and mid-cap companies have been even
more volatile. Indexes for smaller companies were down as much as 20% before
their recent rebound. Similarly, bonds fluctuated widely as concerns mounted
over the possibility of rising interest rates.
What does all of this mean? In past reports, we suggested that the 20%-30%
returns of 1995 and 1996 were unlikely to continue uninterrupted, and we have
seen that to be true so far in 1997. However, we are still experiencing the
longest bull market in history, now in its seventh year. For hundreds of
thousands of investors, this bull market is the only investment climate they
have ever known. If you have been invested in stocks only since 1990, your
experience has truly been extraordinary: the S&P 500 had an annual return of
30% in 1991, 38% in 1995, and 23% in 1996. And not one down year.
Of course, returns such as those we've enjoyed in this bull market are well
above the averages for stocks. That has led mutual fund managers, financial
consultants, and market experts to voice concern that some investors may not be
prepared for more modest returns that are in line with historical averages.
And, although we've seen nothing but advances in the S&P 500 since 1990, it is
important to remember that the market has averaged a down year one out of every
three years since 1928.
KEEP REALISTIC EXPECTATIONS
What many investors may not realize is that periodic declines are inevitable.
In every market, there is always some segment, and some investment strategies,
that occasionally fall out of favor. Declines similar to what we have seen in
the small-cap and mid-cap sectors during the past six months often are more
severe than warranted; that is, they take good stocks down with the bad. Of
course, that lets us pick stocks just as prices for many attractive companies
are near their lowest for the year.
Not that we expect severe declines ahead. But it is important to maintain
realistic expectations about investment performance. Indeed, indications are
that stock performance may be returning to historic norms closer to 10% return
per year than 20%.
It's also a good idea to reassess your financial goals periodically with
your financial consultant. Managing your investments in changing markets can be
challenging. But your financial consultant knows a few time-tested investment
strategies that can help. Diversification can help you cushion the effects of
volatility.
On the following pages, your Fund's portfolio management team offers a
complete discussion of recent market conditions and how the Fund was affected.
They also discuss
---------------------------------
In every market, there is
always some segment,
and some investment strategies,
that occasionally fall
out of favor.
---------------------------------
Continued on next page
<PAGE> 4
The Chairman' s Letter
------------------------------------
It's also a good idea
to reassess
your financial goals periodically
with your financial consultant.
------------------------------------
the Fund's portfolio strategy: why they believe the portfolio is
well-positioned for growth, and why they are confident that the reasons for
investing in the Fund are as compelling as ever. These discussions will help
you better understand the relative performance of your Fund.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management Group Inc. and
INVESCO plc was concluded on February 28, 1997. AIM is now part of one of the
world's largest independent investment management groups with approximately
$170 billion in assets under management. The combined company, AMVESCAP plc,
has the financial strength necessary to meet your needs in an increasingly
competitive financial services environment, both in the United States and
worldwide. And, we will not change the portfolio management, investment style,
or name of any of the AIM funds you own. We have begun a new and promising era
for AIM, one we believe will yield exciting opportunities.
We appreciate the trust you have placed in us and we look forward to our
continued close association. If you have any questions or comments about this
report, we invite you to call Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line at 800-246-5463. We also invite you to visit AIM's Internet Web
site at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
2
<PAGE> 5
The Managers' Overview
BLUE CHIP FUND POSTS SOLID
RETURNS IN VOLATILE MARKET
- -------------------------------------------------------------------------------
A roundtable discussion with the Fund management team for AIM Blue Chip Fund
for the six-month period ended April 30, 1997.
Q. HOW DID AIM BLUE CHIP FUND PERFORM DURING THE PERIOD COVERED BY THIS
REPORT?
A. The Fund continued to provide impressive returns in a volatile market
environment. For the six-month period ended April 30, 1997, the Fund posted
a cumulative total return of 10.75% and 10.42% for Class A and Class B
shares, respectively, besting the 8.52% total return for the Lipper Growth
Fund Index. Net assets in the Fund more than tripled, increasing from $129
million at the beginning of the period to more than $434 million at its
end.
For the year ended April 30, 1997, Class A shares posted a total return of
22.68%. (Class B shares commenced operations on October 1, 1996). That
easily beat the 14.10% total return for the Lipper Growth Fund Index and
exceeded the 22.36% total return for the Russell 1000 Index.
======================================
NET ASSET INCREASE
--------------------------------------
10/31/96 $129 million
4/30/97 $434 million
======================================
======================================
STRONG RELATIVE PERFORMANCE
--------------------------------------
For the Six-Month Period Ended 4/30/97
Class A shares 10.75%
Class B shares 10.42%
Lipper Growth Fund Index 8.52%
======================================
Fund total return performance is compared to the performance of the 30
largest growth funds tracked by Lipper, excluding all sales charges and
including fees and expenses.
Q. WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
A. Volatility continued to dominate the stock markets. The Dow Jones
Industrial Average (DJIA) continued to set numerous records, but its
performance was marked by two significant downturns, one in December 1996
and the second from mid-March to mid-April 1997. During the second decline,
the DJIA lost 9.8% of its value-just short of the 10% correction many
market observers had predicted, given the prolonged length of the current
bull market. However, by the end of the reporting period, the DJIA had
recouped most of its losses.
The primary cause of market volatility was continuing uncertainty
regarding interest rates, the strength of the economy, and the outlook for
corporate earnings. In such an environment, investors were drawn to the
relative safety and liquidity of stocks in large, predictable companies.
It's a phenomenon often termed a "flight to quality."
Q. WAS THE FUND POSITIONED TO TAKE ADVANTAGE OF THIS "FLIGHT TO QUALITY"?
A. Yes, because it invests primarily in the stocks of large, industry-leading,
blue-chip companies-the market favorites throughout the reporting period.
As of April 30, 1997, the Fund was 89% invested in large-cap stocks and 11%
invested in mid-cap stocks. Holdings included the stocks of such market
leaders as Merck & Co., Inc., General Electric, United Technologies, and
Exxon Corporation. These stocks helped propel the DJIA to record-setting
heights during the reporting period.
Q. IS THE FUND MODELED AFTER AN INDEX?
A. No, AIM Blue Chip Fund is a market leaders fund, not an index fund. We
purchase stocks of companies that have emerged as market leaders in the 11
business sectors of the Russell 1000 Index. However, the Fund's weightings
in each sector do not necessarily correspond to that index. We capitalize
on the strengths and weaknesses of the different sectors by adjusting their
weightings in the portfolio.
In selecting stocks, the Fund combines the growth and value
philosophies. The Fund focuses on companies that demonstrate consistently
strong earnings growth. We also look for the stocks of fundamentally sound
companies that are selling at a discount or are undervalued relative to the
rest of the market.
At the end of the reporting period, the Fund's top holdings were in
the following sectors: technology, 18%; financial, 15%; and health care,
12%.
Q. GIVEN THE VOLATILITY OF TECHNOLOGY STOCKS, WHY DOES THE FUND HAVE SO MUCH
INVESTED IN THAT SECTOR?
A. The Fund invests only in the stocks of technology companies that meet our
earnings criteria. Many technology companies reported excellent earnings
for the first quarter of 1997, and our stock-selection process found a
number of technology firms we consider very promising. Moreover, we reduced
our technology holdings from about 24% of the portfolio during the
reporting period and shifted our emphasis within the technology sector,
which continues to show high-growth potential.
See important Fund & Index disclosures on inside front cover.
3
<PAGE> 6
The Managers' Overview
TOP 10 HOLDINGS
As of 4/30/97, based on total net assets
<TABLE>
<CAPTION>
==========================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
==========================================================================================================
<S> <C> <C> <C>
1. Philip Morris Companies, Inc. 1.66% 1. Medical (Drugs) 6.69%
2. Merck & Co., Inc. 1.46 2. Insurance (Multi-Line Property) 4.45
3. Microsoft Corp. 1.39 3. Semiconductors 3.78
4. General Electric Co. 1.28 4. Computer MINI/PCS 3.35
5. Kimberly-Clark Corp. 1.07 5. Oil & Gas (Services) 3.22
6. Thermo Electron Corp. 1.07 6. Banking 2.80
7. Travelers Group Inc. 1.05 7. Finance (Consumer Credit) 2.74
8. Coca-Cola Co. (The) 1.03 8. Electronic Components/Miscellaneous 2.50
9. Federal National Mortgage Association 1.02 9. Tobacco 2.45
10. Johnson & Johnson 1.01 10. Cosmetics & Toiletries 2.44
==========================================================================================================
</TABLE>
Please keep in mind that the Fund's portfolio is subject to change and
there is no assurance the Fund will continue to hold any particular
security.
During the six-month reporting period, we reduced our holdings in
networking company stocks, when earnings fell short of expectations, and
increased our stake in semiconductor company stocks, which rose
significantly over the period. One of the stocks added to the portfolio was
Texas Instruments, whose operating profit was up significantly this year.
Texas Instruments' revenue and profit growth came mainly from
differentiated products used for data communications, a flourishing
industry.
Other technology stocks in the portfolio which posted solid gains
included Microsoft and Dell Computer.
Q. WHAT DO YOU FIND ATTRACTIVE ABOUT FINANCIAL COMPANY STOCKS?
A. The relatively long period of stable interest rates and low inflation has
created a favorable environment for financial companies. We expect this
sector to remain vibrant as long as inflation is held in check.
The consolidation and restructuring taking place in the banking
industry is also giving financial institutions a boost. For example,
NationsBank, one of the stocks in the portfolio, merged with Boatman
Bancshares and reported a 38% rise in earnings for the first quarter of
1997.
The Fund also benefited from owning the stocks of such companies as
State Street Boston and Fifth Third Bank.
In the consumer-credit field, our leading holdings included the stocks
of the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, among the most important players in the home mortgage
market, and the Student Loan Marketing Association, the nation's leading
provider of financial funding services for college education loans.
Q. WHERE WAS YOUR FOCUS IN HEALTH-CARE STOCKS?
A. Our primary emphasis was on the stocks of pharmaceutical companies and
patient-care providers. Pharmaceutical manufacturers in the portfolio
included such recognizable names as Merck & Co. and Bristol- Myers Squibb.
These companies are bringing new products to the market and are reporting
substantial earnings growth.
In the patient-care area, health maintenance organizations continue to
lead the efficiency drive in the U.S. health-care industry and have
recently improved their pricing structure. The Fund's holdings in this area
included United HealthCare.
Considering the aging of the baby boomer population, we believe health
care will remain a promising area for investment for a long time.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. After two extraordinary years of unusually high returns on stocks, many
professionals were warning about the potential for a significant market
decline, with some making forecasts of a 20% correction. Nevertheless,
after the near correction of the early spring, the markets recovered
swiftly and completely. And the optimism seems well-grounded.
In the U.S., the economic fundamentals are encouraging: there is
minimal inflation, which caused the Fed to leave monetary policy unchanged
at its May meeting and dampens expectations of rising interest rates; the
economy is growing at a very healthy clip; and for a record 17 quarters in
a row, corporate earnings have outstripped analysts' forecasts.
Nonetheless, it is important that investors maintain realistic
expectations about investment performance. We have enjoyed record-breaking
returns from stocks in recent years, but indications are that stock
performance may be returning to historic norms that bear closer to 10% per
year than 20%.
--------------------
In the U.S.,
the economic
fundamentals are
encouraging . . .
--------------------
See important Fund & Index disclosures on inside front cover.
4
<PAGE> 7
For Consideration
WHY SMART MONEY
REMAINS FULLY INVESTED
Some investors like to wait for just the right moment to get into the stock
market and for just the right time to pull their investment out.
If that sounds like you, there's something you should know. During the
periods when you're content to sit on the sidelines, some of the market's best
single-day performances could slip right past you.
Are you so confident in your timing strategy that you're willing to forfeit
those gains? Missing even a handful of them could cost you dearly.
MISSING THE 20 BEST DAYS COULD CUT YOUR RETURN IN HALF
If you had invested a hypothetical $10,000 in the S&P 500 Index on December 31,
1991, by December 31, 1996 your $10,000 would have grown to $20,276, an average
annual total return of 15.18%.
But suppose during that five-year period there were times when you decided
to get out of the market, and as a result you ended up missing the market's 10
best single-day performances. In that case, your 15.18% return would have been
reduced to 11.03%. If you had missed the market's 20 best days, that 15.18%
return would have been sliced almost in half, down to 7.72%.
SMART INVESTORS DON'T PLAY THE
TIMING GAME
The more you try to time the market, the greater your chances become of missing
the market's biggest single- day gains. That's why smart investors don't play
the timing game. They don't let the market's short-term gyrations sideline them
or dictate their investment objectives. They're patient investors-focused on
the long term and on their long-term goals.
Of course, past performance cannot guarantee comparable future results. But
one thing is clear. It's time, not timing, that counts when it comes to
potentially maximizing your investment return.
TALK TO YOUR FINANCIAL CONSULTANT
To find out more about the advantages of investing through the market ups and
downs, consult the combined expertise of your financial consultant and the
investment management of AIM. Regardless of the market, AIM's investment
strategy stays the same; we believe earnings drive stock prices and stock
prices drive portfolio performance.
AIM managed approximately $73 billion as of May 23, 1997, for financial
institutions, corporate clients and individual investors like you. Your
financial consultant can help you start investing with AIM today.
====================================================================
THE PENALTY FOR MISSING THE MARKET
- --------------------------------------------------------------------
Trying To Time The Market Can Be An Inexact--and Costly--exercise.
S&p 500 Index: December 31, 1991-December 31, 1996.
AVERAGE ANNUAL GROWTH
PERIOD OF INVESTMENT TOTAL RETURN $10,000
Fully Invested 15.18% $20,276
Miss The 10 Best Days 11.03 16,876
Miss The 20 Best Days 7.72 14,507
Miss The 40 Best Days 2.13 11,113
Miss The 60 Best Days -2.37 8,868
====================================================================
Source: Ibbotson Associates, Towers Data Systems HYPO--Registered Trademark--.
Past performance cannot guarantee comparable future results. The unmanaged
Standard & Poor's Composite Index of 500 Stocks is a group of unmanaged
securities widely regarded to be representative of the stock market in general;
results mentioned assume the reinvestment of dividends. An investment cannot be
made in an index.
---------------------------------------
Instead of panicking
when the market moves,
try focusing on long-term goals.
Remember, it's time--
not timing--
that counts.
---------------------------------------
5
<PAGE> 8
For Consideration
ARE YOU A MUTUAL FUND
TRADER OR INVESTOR?
We all know the story of the tortoise and the hare. The tortoise won the race
because he had a plan, he stuck with it, and he didn't let the hare's fast
start change his tune.
When you consider your investment strategy, are you the tortoise or the
hare?
ARE YOU A MUTUAL FUND INVESTOR OR TRADER?
History shows that successful investors achieve good returns by setting goals,
being diversified, buying more when markets correct, and being patient.
That's the same strategy the tortoise used to beat the hare.
Smart investors think like the tortoise.
They know mutual funds are long-term investments, so they overlook daily market
fluctuations. And they understand that discipline and patience are the keys to
successful investing.
Mutual fund traders, on the other hand, act like the hare: they pay more
attention to short-term changes rather than long-term goals. While they may
break out to a big lead, they just might run out of gas before they reach the
finish line.
The next time you think about your investments, consider whether you're
acting like the tortoise or the hare. Remember: time, not timing, makes the
difference.
TALK TO YOUR FINANCIAL CONSULTANT
The tortoise beat the hare because he knew his goals and how he might reach
them. To help reach your financial goals, ask your financial consultant about
AIM. Regardless of the market, AIM's disciplined investment strategy remains
the same: we believe earnings drive stock prices and stock prices drive
portfolio performance.
AIM companies managed approximately $73 billion as of May 23, 1997 for
financial institutions, corporate clients, and individual investors like you.
Your financial consultant can help you start investing with AIM today.
THE PATIENT INVESTOR --
o Develops long-term financial goals and sticks to them
o Disregards short-term market fluctuations
o Considers a loss a buying opportunity
o Trusts expertise and experience of proven management
o Depends on logic to dictate important decisions
o Respects the advantages financial consultants can provide
o Understands the benefits of regular, disciplined investing
o Realizes that sage advice, not sales fees, is paramount
THE RESTLESS TRADER --
o Waffles between daily and weekly time horizons
o Frets over daily price changes in the morning paper
o Panics by selling shares at the first sign of a loss
o Solicits hot tips from friends and neighbors
o Succumbs to the emotion of the moment
o Refuses to listen to the wisdom of a financial consultant
o Fails to explore the benefits of consistent investing through dollar-cost
averaging
o Emphasizes transaction costs
Dollar-cost averaging does not assure a profit and does not protect against
loss in declining markets. Since dollar-cost averaging involves continuous
investing regardless of fluctuating securities prices, you should consider your
ability to continue purchases over an extended period of time.
6
<PAGE> 9
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-79.94%
ADVERTISING/BROADCASTING-0.02%
Interpublic Group of Companies,
Inc. 1,600 $ 90,600
- --------------------------------------------------------------
AEROSPACE/DEFENSE-1.19%
Boeing Co. (The) 21,000 2,071,125
- --------------------------------------------------------------
United Technologies Corp. 40,800 3,085,500
- --------------------------------------------------------------
5,156,625
- --------------------------------------------------------------
AIRLINES-0.98%
AMR Corp.(a) 22,000 2,048,750
- --------------------------------------------------------------
Delta Air Lines, Inc. 24,000 2,211,000
- --------------------------------------------------------------
4,259,750
- --------------------------------------------------------------
BANKING-2.80%
Bank of Boston Corp. 20,000 1,455,000
- --------------------------------------------------------------
Fifth Third Bancorp 37,800 2,820,825
- --------------------------------------------------------------
NationsBank Corp. 64,000 3,864,000
- --------------------------------------------------------------
Norwest Corp. 34,800 1,735,650
- --------------------------------------------------------------
State Street Corp. 29,200 2,299,500
- --------------------------------------------------------------
12,174,975
- --------------------------------------------------------------
BANKING (MONEY CENTER)-0.89%
Chase Manhattan Corp. 20,000 1,852,500
- --------------------------------------------------------------
Citicorp 18,000 2,027,250
- --------------------------------------------------------------
3,879,750
- --------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-1.83%
Coca-Cola Co. (The) 70,000 4,453,750
- --------------------------------------------------------------
PepsiCo, Inc. 100,000 3,487,500
- --------------------------------------------------------------
7,941,250
- --------------------------------------------------------------
BIOTECHNOLOGY-0.52%
Guidant Corp. 33,300 2,272,725
- --------------------------------------------------------------
BUSINESS SERVICES-1.69%
AccuStaff, Inc.(a) 69,300 1,264,725
- --------------------------------------------------------------
Cognizant Corp. 21,700 707,963
- --------------------------------------------------------------
Equifax, Inc. 135,000 3,881,250
- --------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 65,900 1,499,225
- --------------------------------------------------------------
7,353,163
- --------------------------------------------------------------
CHEMICALS-1.08%
Goodrich (B.F.) Co. 56,100 2,236,987
- --------------------------------------------------------------
Monsanto Co. 57,200 2,445,300
- --------------------------------------------------------------
4,682,287
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.37%
IMC Global, Inc. 44,000 1,622,500
- --------------------------------------------------------------
COMPUTER MAINFRAMES-0.56%
International Business Machines
Corp. 15,000 2,411,250
- --------------------------------------------------------------
COMPUTER MINI/PCS-3.35%
Compaq Computer Corp.(a) 50,000 4,268,750
- --------------------------------------------------------------
<CAPTION>
MARKET
COMPUTER MINI/PCS-(CONTINUED) SHARES VALUE
<S> <C> <C>
Dell Computer Corp.(a) 50,000 $ 4,184,375
- --------------------------------------------------------------
Hewlett-Packard Co. 61,000 3,202,500
- --------------------------------------------------------------
Sun Microsystems, Inc. (a) 100,000 2,881,250
- --------------------------------------------------------------
14,536,875
- --------------------------------------------------------------
COMPUTER NETWORKING-0.16%
Ascend Communications, Inc.(a) 14,800 677,100
- --------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-2.22%
Computer Associates International,
Inc. 24,000 1,248,000
- --------------------------------------------------------------
Fiserv, Inc.(a) 62,400 2,355,600
- --------------------------------------------------------------
Microsoft Corp.(a) 49,800 6,050,700
- --------------------------------------------------------------
9,654,300
- --------------------------------------------------------------
CONGLOMERATES-1.71%
Corning Inc. 28,000 1,351,000
- --------------------------------------------------------------
Loews Corp. 45,000 4,134,375
- --------------------------------------------------------------
Tyco International Ltd. 32,000 1,952,000
- --------------------------------------------------------------
7,437,375
- --------------------------------------------------------------
COSMETICS & TOILETRIES-2.44%
Gillette Co. 37,000 3,145,000
- --------------------------------------------------------------
Procter & Gamble Co. (The) 25,000 3,143,750
- --------------------------------------------------------------
Warner-Lambert Co. 44,000 4,312,000
- --------------------------------------------------------------
10,600,750
- --------------------------------------------------------------
ELECTRIC POWER-1.65%
Allegheny Power System, Inc. 49,500 1,299,375
- --------------------------------------------------------------
American Electric Power Co. 73,200 2,964,600
- --------------------------------------------------------------
Consolidated Edison Co. of New
York, Inc. 42,300 1,173,825
- --------------------------------------------------------------
Entergy Corp. 17,200 402,050
- --------------------------------------------------------------
Houston Industries, Inc. 65,500 1,310,000
- --------------------------------------------------------------
7,149,850
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.50%
Emerson Electric Co. 61,000 3,095,750
- --------------------------------------------------------------
General Electric Co. 50,000 5,543,750
- --------------------------------------------------------------
Honeywell, Inc. 31,200 2,203,500
- --------------------------------------------------------------
10,843,000
- --------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-1.20%
Franklin Resources, Inc. 51,450 3,041,981
- --------------------------------------------------------------
Merrill Lynch & Co., Inc. 23,000 2,190,750
- --------------------------------------------------------------
5,232,731
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.74%
Federal Home Loan Mortgage Corp. 107,000 3,410,625
- --------------------------------------------------------------
Federal National Mortgage
Association 108,000 4,441,500
- --------------------------------------------------------------
Student Loan Marketing Association 34,200 4,044,150
- --------------------------------------------------------------
11,896,275
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
FINANCE (SAVINGS & LOAN)-1.33%
MARKET
SHARES VALUE
<S> <C> <C>
Great Western Financial Corp. 70,000 $ 2,940,000
- --------------------------------------------------------------
H.F. Ahmanson & Co. 73,900 2,817,437
- --------------------------------------------------------------
5,757,437
- --------------------------------------------------------------
FOOD/PROCESSING-1.40%
ConAgra, Inc. 48,000 2,766,000
- --------------------------------------------------------------
Sara Lee Corp. 78,900 3,313,800
- --------------------------------------------------------------
6,079,800
- --------------------------------------------------------------
FUNERAL SERVICES-0.81%
Service Corp. International 103,300 3,538,025
- --------------------------------------------------------------
HOTELS/MOTELS-0.55%
HFS, Inc.(a) 40,000 2,370,000
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.28%
Conseco Inc. 100,000 4,137,500
- --------------------------------------------------------------
Equitable Companies, Inc. 48,200 1,409,850
- --------------------------------------------------------------
5,547,350
- --------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-4.45%
Allstate Corp. 66,000 4,323,000
- --------------------------------------------------------------
American International Group, Inc. 33,900 4,356,150
- --------------------------------------------------------------
Chubb Corp. 37,000 2,136,750
- --------------------------------------------------------------
CIGNA Corp. 14,900 2,240,588
- --------------------------------------------------------------
MGIC Investment Corp. 21,000 1,706,250
- --------------------------------------------------------------
Travelers Group, Inc. 82,000 4,540,750
- --------------------------------------------------------------
19,303,488
- --------------------------------------------------------------
LEISURE & RECREATION-2.16%
Carnival Corp.-Class A 112,000 4,130,000
- --------------------------------------------------------------
Eastman Kodak Co. 12,000 1,002,000
- --------------------------------------------------------------
Walt Disney Co. (The) 52,000 4,264,000
- --------------------------------------------------------------
9,396,000
- --------------------------------------------------------------
MACHINERY (HEAVY)-1.24%
Caterpillar Inc. 25,000 2,225,000
- --------------------------------------------------------------
Ingersoll-Rand Co. 64,200 3,153,825
- --------------------------------------------------------------
5,378,825
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.07%
Thermo Electron Corp.(a) 135,000 4,657,500
- --------------------------------------------------------------
MEDICAL (DRUGS)-6.69%
Abbott Laboratories 30,000 1,830,000
- --------------------------------------------------------------
American Home Products Corp. 50,000 3,312,500
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 64,900 4,250,950
- --------------------------------------------------------------
Cardinal Health, Inc. 34,000 1,810,500
- --------------------------------------------------------------
Johnson & Johnson 71,900 4,403,875
- --------------------------------------------------------------
Lilly (Eli) & Co. 34,600 3,040,475
- --------------------------------------------------------------
Merck & Co., Inc. 70,200 6,353,100
- --------------------------------------------------------------
Pfizer, Inc. 42,000 4,032,000
- --------------------------------------------------------------
29,033,400
- --------------------------------------------------------------
MEDICAL
(INSTRUMENTS/PRODUCTS)-1.88%
Baxter International Inc. 65,400 3,131,025
- --------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (INSTRUMENTS/PRODUCTS)-(CONTINUED)
Boston Scientific Corp.(a) 39,900 $ 1,925,175
- --------------------------------------------------------------
Medtronic, Inc. 20,000 1,385,000
- --------------------------------------------------------------
Sybron International Corp.(a) 51,600 1,715,700
- --------------------------------------------------------------
8,156,900
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-2.28%
Columbia/HCA Healthcare Corp. 113,000 3,955,000
- --------------------------------------------------------------
HEALTHSOUTH Corp.(a) 152,800 3,017,800
- --------------------------------------------------------------
United Healthcare Corp. 60,000 2,917,500
- --------------------------------------------------------------
9,890,300
- --------------------------------------------------------------
METALS-0.47%
Aluminum Company of America 29,000 2,026,375
- --------------------------------------------------------------
NATURAL GAS PIPELINE-0.76%
El Paso Natural Gas Co. 57,100 3,318,938
- --------------------------------------------------------------
OFFICE AUTOMATION-0.99%
Danka Business Systems PLC-ADR
(United Kingdom) 42,700 1,305,018
- --------------------------------------------------------------
Xerox Corp. 48,600 2,988,900
- --------------------------------------------------------------
4,293,918
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.38%
Apache Corp. 48,400 1,645,600
- --------------------------------------------------------------
OIL & GAS (SERVICES)-3.22%
Exxon Corp. 70,000 3,963,750
- --------------------------------------------------------------
Halliburton Co. 37,000 2,613,125
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New
York shares (Netherlands) 21,000 3,785,250
- --------------------------------------------------------------
Texaco, Inc. 31,000 3,270,500
- --------------------------------------------------------------
Unocal Corp. 8,600 327,875
- --------------------------------------------------------------
13,960,500
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.24%
Baker Hughes, Inc. 69,200 2,387,400
- --------------------------------------------------------------
Schlumberger Ltd. 27,000 2,990,250
- --------------------------------------------------------------
5,377,650
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-2.02%
Bowater, Inc. 47,000 2,032,750
- --------------------------------------------------------------
Kimberly-Clark Corp. 91,000 4,663,750
- --------------------------------------------------------------
Mead Corp. 37,000 2,076,625
- --------------------------------------------------------------
8,773,125
- --------------------------------------------------------------
PUBLISHING-0.36%
New York Times Co.-Class A 36,600 1,582,950
- --------------------------------------------------------------
RAILROADS-0.37%
Canadian National Railway Co.
(Canada) 41,900 1,613,150
- --------------------------------------------------------------
RESTAURANTS-0.03%
Applebee's International, Inc. 6,900 161,287
- --------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.93%
Kroger Co.(a) 114,200 3,140,500
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
RETAIL (FOOD & DRUG)-(CONTINUED) SHARES VALUE
<S> <C> <C>
Rite Aid Corp. 75,100 $ 3,454,600
- --------------------------------------------------------------
Safeway, Inc.(a) 40,500 1,807,312
- --------------------------------------------------------------
8,402,412
- --------------------------------------------------------------
RETAIL (STORES)-2.34%
CVS Corp. 36,000 1,786,500
- --------------------------------------------------------------
Lowe's Companies, Inc. 83,500 3,173,000
- --------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 23,500 766,688
- --------------------------------------------------------------
Staples, Inc.(a) 80,000 1,440,000
- --------------------------------------------------------------
Sysco Corp. 43,500 1,544,250
- --------------------------------------------------------------
Toys "R" Us, Inc.(a) 51,700 1,473,450
- --------------------------------------------------------------
10,183,888
- --------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.36%
Perkin-Elmer Corp. 21,600 1,568,700
- --------------------------------------------------------------
SEMICONDUCTORS-3.78%
Altera Corp.(a) 59,000 2,924,188
- --------------------------------------------------------------
Applied Materials, Inc.(a) 62,000 3,402,250
- --------------------------------------------------------------
Intel Corp. 28,000 4,287,500
- --------------------------------------------------------------
Motorola, Inc. 54,700 3,131,575
- --------------------------------------------------------------
Texas Instruments, Inc. 30,000 2,677,500
- --------------------------------------------------------------
16,423,013
- --------------------------------------------------------------
SHOES & RELATED APPAREL-0.26%
Nike, Inc. - Class B 19,700 1,108,125
- --------------------------------------------------------------
TELECOMMUNICATIONS-1.74%
Lucent Technologies, Inc. 55,900 3,305,088
- --------------------------------------------------------------
WorldCom, Inc.(a) 176,800 4,243,200
- --------------------------------------------------------------
7,548,288
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TELEPHONE-2.20%
BellSouth Corp. 49,400 $ 2,198,300
- --------------------------------------------------------------
Cincinnati Bell, Inc. 75,000 4,200,000
- --------------------------------------------------------------
SBC Communications, Inc. 57,000 3,163,500
- --------------------------------------------------------------
9,561,800
- --------------------------------------------------------------
TOBACCO-2.45%
Philip Morris Companies, Inc. 183,000 7,205,625
- --------------------------------------------------------------
RJR Nabisco Holdings Corp. 115,000 3,421,250
- --------------------------------------------------------------
10,626,875
- --------------------------------------------------------------
Total Common Stocks 347,158,750
- --------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS-0.34%
INSURANCE (MULTI-LINE
PROPERTY)-0.34%
MGIC Investment Corp.-$3.12 Conv.
Pfd. 21,100 1,474,362
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS-12.96%(b)
5.10%, 06/26/97 $56,730,000(c) 56,280,223
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-5.81%(d)
HSBC Securities, Inc., 5.49%,
05/01/97(e) 25,227,733 25,227,733
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.05% 430,141,068
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.95% 4,140,970
- ---------------------------------------------------------------
NET ASSETS-100.00% $ 434,282,038
- ---------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principle balance was pledged as collateral to cover margin
requirements for open futures contract. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 04/30/97 with maturing value of
$200,030,500. Collateralized by $85,760,000 U.S. Government agency
obligations, 0% to 7.15% due 07/18/97 to 02/14/06 and $116,271,000 U.S.
Treasury obligations, 5.875% to 7.875% due 06/30/01 to 08/15/05 with an
aggregate market value at April 30, 1997 of $204,003,650.
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$387,353,855) $430,141,068
- --------------------------------------------------------
Receivables for:
Investments sold 3,170,112
- --------------------------------------------------------
Capital stock sold 5,666,351
- --------------------------------------------------------
Dividends and interest 273,668
- --------------------------------------------------------
Variation margin 213,000
- --------------------------------------------------------
Investment for deferred compensation plan 2,375
- --------------------------------------------------------
Other assets 59,453
- --------------------------------------------------------
Total assets 439,526,027
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,136,009
- --------------------------------------------------------
Capital stock reacquired 626,002
- --------------------------------------------------------
Deferred compensation 2,375
- --------------------------------------------------------
Accrued advisory fees 237,752
- --------------------------------------------------------
Accrued administrative service fees 5,859
- --------------------------------------------------------
Accrued directors' fees 1,995
- --------------------------------------------------------
Accrued distribution fees 171,767
- --------------------------------------------------------
Accrued transfer agent fees 47,902
- --------------------------------------------------------
Accrued operating expenses 14,328
- --------------------------------------------------------
Total liabilities 5,243,989
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $434,282,038
========================================================
NET ASSETS:
Class A $318,365,527
========================================================
Class B $115,916,511
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 12,041,534
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 4,395,452
========================================================
CLASS A:
Net asset value and redemption price per
share $ 26.44
========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $26.44
divided by 94.50%) $ 27.98
========================================================
CLASS B:
Net asset value and offering price per
share $ 26.37
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $3,596 foreign
withholding tax) $ 1,496,700
- --------------------------------------------------------
Interest 1,200,744
- --------------------------------------------------------
Total investment income 2,697,444
- --------------------------------------------------------
EXPENSES:
Advisory fees 953,904
- --------------------------------------------------------
Custodian fees 26,464
- --------------------------------------------------------
Distribution fees -- Class A 355,285
- --------------------------------------------------------
Distribution fees -- Class B 247,408
- --------------------------------------------------------
Transfer agent fees -- Class A 132,626
- --------------------------------------------------------
Transfer agent fees -- Class B 69,650
- --------------------------------------------------------
Administrative service fees 34,499
- --------------------------------------------------------
Directors' fees 3,261
- --------------------------------------------------------
Other 106,445
- --------------------------------------------------------
Total expenses 1,929,542
- --------------------------------------------------------
Less: Fees waived by advisor (88,557)
- --------------------------------------------------------
Expenses paid indirectly (1,942)
- --------------------------------------------------------
Net expenses 1,839,043
- --------------------------------------------------------
Net investment income 858,401
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain on sales of investment
securities 4,074,170
- --------------------------------------------------------
Net unrealized appreciation of:
Investment securities 15,525,348
- --------------------------------------------------------
Futures contracts 305,318
- --------------------------------------------------------
15,830,666
- --------------------------------------------------------
Net gain on investment securities and
futures contracts 19,904,836
- --------------------------------------------------------
Net increase in net assets resulting from
operations $20,763,237
========================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the one month ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ONE MONTH ENDED
APRIL 30, OCTOBER 31,
1997 1996
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 858,401 $ 7,068
- -------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 4,074,170 1,953,887
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and futures contracts 15,830,666 254,588
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 20,763,237 2,215,543
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (302,061) --
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains (13,654,606) --
- -------------------------------------------------------------------------------------------------
Capital stock transactions -- net:
Class A 192,860,065 11,821,515
- -------------------------------------------------------------------------------------------------
Class B 106,067,049 8,096,586
- -------------------------------------------------------------------------------------------------
Net increase in net assets 305,733,684 22,133,644
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 128,548,354 106,414,710
- -------------------------------------------------------------------------------------------------
End of period $434,282,038 $128,548,354
=================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $386,410,003 $ 87,482,889
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 765,345 209,005
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities 4,043,977 13,624,413
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 43,062,713 27,232,047
- -------------------------------------------------------------------------------------------------
$434,282,038 $128,548,354
=================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip 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 diversified portfolios:
AIM Blue Chip Fund, AIM Aggressive Growth Fund, AIM Capital Development Fund,
AIM Charter Fund, AIM Constellation Fund, and AIM Weingarten Fund. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class B shares commenced sales on October 1, 1996. Class A
shares are sold with a front-end sales charge. Class B 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
Fund's investment objective is long-term growth of capital. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations--A security listed or traded on an exchange is valued at
its last 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 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
11
<PAGE> 14
issue, coupon rate and maturity date. Securities for which market quotations
are not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors of
the Company. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. 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.
C. Foreign Currency Contracts--A forward 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 forward contract for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts.
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are recorded on a trade date basis. Realized gains or losses on
sales are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
G. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated between 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. AIM has agreed to
waive advisory fees for two years to the extent necessary to keep the annual
expense ratio for Class A shares at 1.31% for such period. During the six months
ended April 30, 1997, AIM voluntarily waived advisory fees in the amounts of
$88,557.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $34,499 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the six months ended April 30,
1997, AFS was paid $98,590 for such services.
The Fund received reductions in transfer agency fees of $1,942 from dividends
received on balances in cash management bank accounts. The effect of the above
arrangement resulted in a reduction of the Fund's total expenses of $1,942
during the six months ended April 30, 1997.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B 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 (the "Class A Plan") and with respect to the Fund's Class
B shares (the "Class B Plan") (collectively, the "Plans"). The Fund, pursuant to
the Class A Plan, pays AIM Distributors compensation at an annual rate of 0.35%
of the average daily net assets attributable to the Class A shares. The Class A
Plan is designed to compensate AIM Distributors for certain promotional and
other sales related costs and provides periodic payments to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own Class A shares of the Fund. The Fund,
pursuant to the Class B Plan, pays AIM
12
<PAGE> 15
Distributors compensation at an annual rate of 1.00% of the average daily net
assets attributable to the Class B shares. Of this amount, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class B shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class B shares of
the Fund. Any amounts not paid as a service fee under such Plans would
constitute an asset-based sales charge. The Plans also impose a cap on the total
sales charges, including asset-based sales charges, that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more assignees, its rights to all or a portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges payable to AIM Distributors
related to the Class B shares. During the six months ended April 30, 1997, the
Class A shares and the Class B shares paid AIM Distributors $355,285 and
$247,408, respectively, as compensation pursuant to the Plans.
AIM Distributors received commissions of $561,119 from sales of shares of the
Class A capital stock transactions during the six months ended April 30, 1997.
Such commissions are not an expense of the Fund. They are deducted from, and are
not included in, the proceeds from sales of capital stock. During the six months
ended April 30, 1997, AIM Distributors received commissions of $37,936 in
contingent deferred sales charges imposed on redemption of Fund Shares. Certain
officers and directors of the Company are officers and directors of AIM, AFS and
AIM Distributors.
During the six months ended April 30, 1997, the Fund paid legal fees of
$2,574, respectively, 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-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) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1997, 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 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended April 30, 1997 was $297,101,775
and $72,246,352, respectively.
The amount of unrealized appreciation (depreciation) of investment securities on
a tax basis is as follows:
<TABLE>
<CAPTION>
APRIL 30,
1997
-----------
<S> <C>
Aggregate unrealized appreciation of investment
securities $47,802,414
- -----------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (5,027,924)
- -----------------------------------------------------------------------
Net unrealized appreciation of investment securities $42,774,490
=======================================================================
</TABLE>
Costs of investments for tax purposes is $387,366,578.
NOTE 5-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding during the six months ended April 30, 1997
and the one month ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
------------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 9,229,884 $240,812,000 620,358 $16,142,093
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Class B* 4,281,712 111,295,514 313,256 8,163,778
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Issued as reinvestment of dividends:
Class A 475,660 11,415,842 -- --
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Class B* 59,879 1,437,104 -- --
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Reacquired:
Class A (2,282,834) (59,367,777) (165,098) (4,320,578)
- ----------------------------------------------------------- ---------- ------------ -------- -----------
Class B* (256,818) (6,665,569) (2,577) (67,192)
- ----------------------------------------------------------- ---------- ------------ -------- -----------
11,507,483 $298,927,114 765,939 $19,918,101
============================================================ ========== ============ ======== ===========
</TABLE>
* Class B shares commenced sales on October 1, 1996.
13
<PAGE> 16
NOTE 7-OPEN FUTURES CONTRACTS
On April 30, 1997, $2,368,000 principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
-------- --------- ----------- ------------
<S> <C> <C> <C> <C>
S&P 500 Index 142 June 97/Buy $ 275,500
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the Class A shares during the six months ended April 30, 1997,
the one month ended October 31, 1996 and each of the years in the eight-year
period ended September 30, 1996 and for a share of capital stock outstanding of
the Class B shares during the six months ended April 30, 1997 and the period
October 1, 1996 (date sales commenced) through October 31, 1996.
<TABLE>
<CAPTION>
SEPTEMBER 30,
APRIL 30, OCTOBER 31, --------------------------------------------
1997 1996 1996(a) 1995 1994 1993
CLASS A: ---------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.08 $ 25.56 $ 23.83 $ 19.22 $ 18.89 $ 18.24
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.07 -- 0.33 0.14 0.15 0.19
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Net realized and unrealized gains (losses)
on investments 2.51 0.52 4.61 5.05 1.24 0.63
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 2.58 0.52 4.94 5.19 1.39 0.82
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.05) -- (0.21) (0.12) (0.21) (0.17)
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains (2.17) -- (3.00) (0.46) (0.85) --
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (2.22) -- (3.21) (0.58) (1.06) (0.17)
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 26.44 $ 26.08 $ 25.56 $ 23.83 $ 19.22 $ 18.89
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Total return(b) 10.75% 2.04% 22.39% 27.84% 7.69% 4.54%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Ratios/supplement data:
Net assets, end of period (000s omitted) $318,366 $120,448 $106,415 $ 71,324 $ 60,115 $ 65,112
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Ratio of expenses to average net assets(c) 1.30%(d)(e) 1.30% 1.26% 1.3% 1.4% 1.3%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Ratio of net investment income to average net
assets(f) 0.84%(d) 0.12% 0.53% 0.7% 0.8% 1.0%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Portfolio turnover rate 35% 10% 58% 17% 13% 25%
- --------------------------------------------- -------- -------- -------- -------- -------- --------
Average brokerage commission rate paid(g) $ 0.0622 $ 0.0665 N/A N/A N/A N/A
- --------------------------------------------- -------- -------- -------- -------- -------- --------
<CAPTION>
SEPTEMBER 30,
--------------------------------------------
1992 1991 1990 1989
CLASS A: -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.77 $ 13.60 $ 13.82 $ 11.48
- --------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.20 0.23 0.25 0.24
- --------------------------------------------- -------- -------- -------- --------
Net realized and unrealized gains (losses)
on investments 1.48 3.19 (0.20) 2.25
- --------------------------------------------- -------- -------- -------- --------
Total from investment operations 1.68 3.42 0.05 2.49
- --------------------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.21) (0.25) (0.27) (0.15)
- --------------------------------------------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- --
- --------------------------------------------- -------- -------- -------- --------
Total distributions (0.21) (0.25) (0.27) (0.15)
- --------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 18.24 $ 16.77 $ 13.60 $ 13.82
- --------------------------------------------- -------- -------- -------- --------
Total return(b) 10.10% 25.52% 0.34% 21.98%
- --------------------------------------------- -------- -------- -------- --------
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 61,601 $ 46,958 $ 31,706 $ 21,170
- --------------------------------------------- -------- -------- -------- --------
Ratio of expenses to average net assets(c) 1.4% 1.5% 1.6% 1.7%
- --------------------------------------------- -------- -------- -------- --------
Ratio of net investment income to average net
assets(f) 1.2% 1.6% 2.0% 1.9%
- --------------------------------------------- -------- -------- -------- --------
Portfolio turnover rate 5% 9% 12% 15%
- --------------------------------------------- -------- -------- -------- --------
Average brokerage commission rate paid(g) N/A N/A N/A N/A
- --------------------------------------------- -------- -------- -------- --------
</TABLE>
(a) The Fund changed investment advisors on June 3, 1996.
(b) Does not deduct sales charges and periods for less than one year are not
annualized.
(c) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.37% (annualized), 1.37% (annualized) and 1.28% for the periods ended
April 30, 1997, October 31, 1996 and September 30, 1996, respectively.
(d) Ratios are annualized and based on average net assets of $204,702,290.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(f) After waiver of fees and/or expense reimbursements. Ratios of net investment
income to average net assets prior to waiver of fees and/or expense
reimbursements were 0.77% (annualized), 0.05% (annualized) and 0.51% for the
periods ended April 30, 1997, October 31, 1996 and September 30, 1996,
respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
14
<PAGE> 17
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
CLASS B: ---------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 26.07 $ 25.56
- ------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income 0.01 (0.01)
- ------------------------------------------------------------ -------- --------
Net realized and unrealized gains on investments 2.49 0.52
- ------------------------------------------------------------ -------- --------
Total from investment operations 2.50 0.51
- ------------------------------------------------------------ -------- --------
Less distributions:
Dividends from net investment income (0.03) --
- ------------------------------------------------------------ -------- --------
Distributions from net realized gains (2.17) --
- ------------------------------------------------------------ -------- --------
Total distributions (2.20) --
- ------------------------------------------------------------ -------- --------
Net asset value, end of period $ 26.37 $ 26.07
============================================================ ======== ========
Total return(a) 10.42% 2.00%
============================================================ ======== ========
Ratios/supplement data:
Net assets, end of period (000s omitted) $115,917 $ 8,101
============================================================ ======== ========
Ratio of expenses to average net assets(b) 2.10%(c)(d) 2.01%(e)
============================================================ ======== ========
Ratio of net investment income (loss) to average net
assets(f) 0.04%(c) (0.58)%(e)
============================================================ ======== ========
Portfolio turnover rate 29% 10%
============================================================ ======== ========
Average brokerage commission rate paid(g) $ 0.0622 $ 0.0665
============================================================ ======== ========
</TABLE>
(a) Does not deduct sales charges and periods for less than one year are not
annualized.
(b) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 2.17% (annualized) and 2.08% (annualized) for the periods 1997-1996,
respectively.
(c) Ratios are annualized and based on average net assets of $49,891,750.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
the same.
(e) Annualized.
(f) After waiver of fees and/or expense reimbursements. Ratios of net
investment income (loss) to average net assets prior to waiver of fees
and/or expense reimbursements were (0.03)% (annualized) and (0.65)%
(annualized) for the periods 1997-1996, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ending
October 31, 1996.
15
<PAGE> 18
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the AIM Equity Funds, Inc. (the "Company")
was held on February 7, 1997 at the offices of A I M Management Group Inc., 11
Greenway Plaza, Houston, Texas. The meeting was held for the following purposes:
(1) To elect Directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson and Louis S. Sklar.
(2) To approve a new Master Investment Advisory Agreement between the AIM
Constellation Fund (the "Fund") and A I M Advisors, Inc.
(3) To ratify the selection of KPMG Peat Marwick LLP as independent accountants
for the Fund for the Company's fiscal year ending October 31, 1997.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- ------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 618,811,245 0 19,923,485
Bruce L. Crockett........................................... 619,427,685 0 19,307,045
Owen Daly II................................................ 618,919,919 0 19,814,811
Carl Frischling............................................. 619,275,356 0 19,459,374
Robert H. Graham............................................ 619,431,576 0 19,303,154
John F. Kroeger............................................. 618,878,096 0 19,856,634
Lewis F. Pennock............................................ 619,272,998 0 19,461,732
Ian W. Robinson............................................. 618,944,840 0 19,789,890
Louis S. Sklar.............................................. 619,462,714 0 19,272,016
(2) Approval of Master Investment Advisory Agreement............ 4,528,722 62,834 129,363
(3) KPMG Peat Marwick LLP....................................... 609,690,634 5,519,782 23,524,314
</TABLE>
16
<PAGE> 19
Directors & Officers
<TABLE>
<S> <C> <C>
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
Formerly Director, President, and
Chief Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 100
Owen Daly II Gary T. Crum Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT
Scott G. Lucas
Jack Fields Senior Vice President A I M Fund Services, Inc.
Formerly Member of the P.O. Box 4739
U.S. House of Representatives Carol F. Relihan Houston, TX 77210-4739
Senior Vice President and Secretary
Carl Frischling CUSTODIAN
Partner Jonathan C. Schoolar
Kramer, Levin, Naftalis & Frankel Senior Vice President State Street Bank and Trust Company
225 Franklin Street
Robert H. Graham Melville B. Cox Boston, MA 02110
President and Chief Executive Officer Vice President
A I M Management Group Inc. COUNSEL TO THE FUND
Dana R. Sutton
John F. Kroeger Vice President and Assistant Treasurer Ballard Spahr
Formerly Consultant Andrews & Ingersoll
Wendell & Stockel Associates, Inc. P. Michelle Grace 1735 Market Street
Assistant Secretary Philadelphia, PA 19103
Lewis F. Pennock
Attorney David L. Kite COUNSEL TO THE DIRECTORS
Assistant Secretary
Ian W. Robinson Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive Vice Nancy L. Martin 919 Third Avenue
President and Assistant Secretary New York, NY 10022
Chief Financial Officer
Bell Atlantic Management Ofelia M. Mayo DISTRIBUTOR
Services, Inc. Assistant Secretary
A I M Distributors, Inc.
Louis S. Sklar Kathleen J. P#ueger 11 Greenway Plaza
Executive Vice President Assistant Secretary Suite 100
Hines Interests Houston, TX 77046
Limited Partnership Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
<PAGE> 20
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS -- REGISTERED TRADEMARK --
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
AIM Global Growth Fund
[PHOTO OF 11 AIM Growth Fund
GREENWAY PLAZA AIM International Equity Fund
APPEARS HERE] AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the mutual *AIM Aggressive Growth Fund was closed to new
fund industry since 1976 and managed approximately $73 billion in investors on June 5, 1997. For more complete
assets for more than 3.5 million shareholders, including individual information about any AIM Fund(s), including sales
investors, corporate clients, and financial institutions as of May charges and expenses, ask your financial consultant
23, 1997. The AIM Family of Funds--Registered Trademark is distributed or securities dealer for a free prospectus(es).
nationwide, and AIM today ranks among the nation's top 15 Please read the prospectus(es) carefully before you
mutual fund companies in assets under management, according to invest or send money.
Lipper Analytical Services, Inc.
[AIM LOGO APPEARS HERE]
---------------
A I M Distributors, Inc. BULK RATE
11 Greenway Plaza, Suite 100 U.S. POSTAGE
Houston, TX 77046 PAID
HOUSTON, TX
Permit No. 1919
---------------
</TABLE>
