<PAGE> 1
ANNUAL REPORT / OCTOBER 31 1999
AIM EQUITY FUNDS, INC.
INSTITUTIONAL CLASSES
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM WEINGARTEN FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
TABLE OF CONTENTS
AIM Charter Fund 2
AIM Constellation Fund 16
AIM Weingarten Fund 32
AN INVESTMENT IN THESE FUNDS IS NOT A DEPOSIT OF A BANK AND IS NEITHER INSURED
NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF
YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report reconfirmed our
[PHOTO OF faith in two long-established principles of investing:
Charles T. portfolio diversification and long-term thinking. We could
Bauer, title this report "What a Difference a Year Makes."
Chairman of An investor surveying conditions when the fiscal year
the Board of opened on October 31, 1998, saw a market dominated by
THE FUND large-capitalization stocks and high-quality bonds,
APPEARS HERE] especially U.S. Treasuries. Ten months into 1998, two
well-known indexes of large-capitalization U.S. company
stocks, the S&P 500 and the Dow Jones Industrial Average,
were up by double digits, but the smaller-company stocks in
the Russell 2000 had lost 12.80%. Overseas, many markets
were languishing, especially in Asia, where many financial
difficulties originated in 1997.
In bond markets also, name-brand quality was the place
to be. The Lehman Corporate/Government Bond Index, which
follows intermediate and long-term government and investment-grade debt, was up
8.56%, while the Lehman High Yield Index, which tracks riskier "junk bonds," had
dropped 2.30%.
It would be easy for an investor to conclude that blue chips, whether
equity or fixed-income, were the only place to be. That investor, of course,
would be wrong.
MARKETS TURN
While large-capitalization stocks continue to do very well, during 1999 markets
broadened considerably, with many investment sectors performing a complete
turnaround. Year to date by October 31, 1999, the small-cap stocks in the
Russell 2000 were back in positive territory, and the many Asian markets had
staged a comeback. The same holds true for bonds. The higher-quality Lehman
index is down 1.49% year to date through October 31, 1999, while high-yield
bonds have moved into positive returns.
The point, at the risk of sounding repetitive to those of you who have
invested with us for a long time, is that this is why diversification is a
fundamental investing principle. Market sectors and asset classes go in and out
of favor, but over the long run -- and the long run is several years -- the
markets' overall trend has been upward. Selecting an asset class or a market
sector on the basis of a short-term snapshot of conditions is usually unwise, as
is concentrating your portfolio in one asset class. Staying fully invested in a
diversified portfolio remains a compelling strategy and one of your best
prospects for long-term gain.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by signs of
economic health in Europe and Asia, not to mention the prolonged U.S. economic
expansion. However, we are aware of how easily an investor could have been
misled by conditions just 12 months ago. For our shareholders, we therefore
reiterate our commitment to investing through a financial advisor. In addition
to helping you select investments appropriate to your time horizon and risk
tolerance, a financial advisor can keep you informed about how changing market
conditions affect you and your portfolio and can help assure that when you do
alter your investments, there's a logical reason for doing so. AIM believes
every investor should be guided by a financial professional.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the year ended October 31, 1999, how the markets
behaved and what they foresee for the near future. We trust you will find their
discussion informative. If you have any questions or comments, we invite you to
contact our Client Services department at 800-659-1005.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
-------------------------------------
STAYING FULLY
INVESTED IN A DIVERSIFIED
PORTFOLIO REMAINS
A COMPELLING STRATEGY
AND ONE OF YOUR
BEST PROSPECTS FOR
LONG-TERM GAIN.
-------------------------------------
<PAGE> 4
AIM CHARTER FUND
AIM Charter Fund is for shareholders who seek growth of capital with a secondary
objective of current income. The fund invests primarily in stocks of large-cap,
well-run companies with a history of stable and improving earnings and generally
increasing dividend payouts.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Charter Fund's Institutional Class performance figures are historical
and reflect reinvestment of all distributions and changes in net asset
value.
o One-year performance includes reinvested distributions of $0.6065 per share.
o Average annual total returns for Institutional Class shares for periods
ended 9/30/99 (the most recent quarter end), are as follows: one year,
37.78%; five years, 22.58%; inception (7/30/91), 16.39%.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper, Inc. is an independent mutual fund performance monitor.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is
widely regarded by investors as representative of the stock market in
general.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
o Performance results for the indexes are for the period 7/31/91-10/31/99
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK
THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of
the fund.
Market volatility can significantly impact short-term performance. Results of an
investment made today may differ substantially from the historical performance
shown.
RESULTS OF A $10,000 INVESTMENT
AIM CHARTER FUND VS. BENCHMARK INDEXES
7/30/91-10/31/99
in thousands
================================================================================
AIM Charter Fund, Lipper Growth and
Institutional Class Income Fund Index S&P 500
- --------------------------------------------------------------------------------
7/91 $10,000 $10,000 $10,000
10/91 10,512 10,316 10,200
10/92 10,988 11,234 11,215
10/93 12,898 13,424 12,887
10/94 12,637 13,849 13,384
10/95 16,105 16,657 16,918
10/96 18,891 20,220 20,992
10/97 24,379 25,889 27,730
10/98 27,230 28,336 33,834
10/99 36,637 32,878 42,517
Past performance cannot guarantee comparable future results.
Source: Lipper, Inc.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99
AIM CHARTER FUND INSTITUTIONAL CLASS
================================================================================
Inception (7/30/91) 17.03%
5 years 23.74
1 year 34.61
================================================================================
AIM CHARTER FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
AIM CHARTER FUND SHOWS
STELLAR PERFORMANCE
THE STOCK MARKET HAS BEEN VERY VOLATILE OVER THE REPORTING PERIOD. HOW DID AIM
CHARTER FUND PERFORM?
AIM Charter Fund produced outstanding results despite market volatility. As of
October 31, 1999, the fund's Institutional Class shares produced a total annual
return of 34.61%, handily outpacing the S&P 500, which returned 25.66% over the
time period. The fund's net assets rose from $43.8 million to approximately
$66.8 million over the fiscal year.
WHAT WERE MARKET CONDITIONS LIKE OVER THE REPORTING PERIOD?
Investor concern over interest rates and the Year 2000 computer problem roiled
the markets. In June and August, the Federal Reserve Board (the Fed) raised
rates in two quarter-point moves. At its October meeting, the Fed chose to leave
rates unchanged but adopted a "tightening bias," indicating that it may be
inclined to raise rates in the near future. In addition, investor concerns over
the effects of Y2K at year-end created some market turbulence.
Meanwhile the market reversed its long-term trend toward large stocks, as
investors turned to small and mid-sized stocks. These smaller stocks had been
undervalued for some time, and they became attractive as many large stocks
suffered earnings disappointments.
HOW DID YOU MANAGE THE FUND DURING THESE CONDITIONS?
With earnings growth slowing for many large companies, fewer stocks met our
investment criteria. Over the fiscal year, we cut the number of holdings in the
fund's portfolio from 145 to 75. The sale of these securities created a 9.84%
capital gain for the fund. At the same time, paring down the portfolio allowed
us to concentrate on stocks that exhibited the strongest earnings performance.
WHAT WERE THE TOP SECTORS FOR THE FUND?
The fund continued to focus on leading technology, financial and health-care
stocks. Over the fiscal year, the fund's technology concentration increased from
21% to 30%, while its investments in financial and health-care stocks held
steady or decreased slightly.
WHY IS TECHNOLOGY SO IMPORTANT TO THE FUND?
Technology was one of the strongest performing market sectors over the fiscal
year. For example, in the third quarter the S&P 500 declined by 6.24%, but its
technology segment posted a positive return of 4.43%. Our heavy weighting in
technology is one of the main reasons the fund beat the S&P 500 over the fiscal
year.
The fund held stocks of companies involved in Internet infrastructure, such
as software, wireless communications and cable TV firms. A new stock among our
top 10 holdings is Novell, which makes software that connects PCs to corporate
networks. The company has seen tremendous growth this year based on the success
of its Internet-related products.
THE FUND'S LARGEST HOLDING IS MICROSOFT. HOW WILL THE RULING IN THE DEPARTMENT
OF JUSTICE CASE AFFECT YOUR INVESTMENT?
After the close of the reporting period, a federal judge ruled that Microsoft is
a monopoly. As of this writing, neither a settlement nor an appeal has been
announced, and it's unlikely that a final decision will be made until 2001.
While we cannot comment on our specific plans to buy or sell stocks, we can say
that as of this time, Microsoft remains a large holding in the fund. We believe
that the growth prospects company's remain
-------------------------------------
PARING DOWN THE PORTFOLIO ALLOWED
US TO CONCENTRATE ON STOCKS
THAT EXHIBITED THE STRONGEST
EARNINGS PERFORMANCE.
-------------------------------------
GROWTH OF NET ASSETS
In millions
================================================================================
10/31/98 $43.8
10/31/99 $66.8
================================================================================
AIM CHARTER FUND INSTITUTIONAL CLASS VS. BENCHMARK INDEX
One-year returns, as of 10/31/99
================================================================================
Fund 34.61%
S&P 500 25.66%
================================================================================
AIM CHARTER FUND
3
<PAGE> 6
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
<TABLE>
<CAPTION>
======================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Microsoft Corp. 4.78% 1. Computers (Software & Services) 11.21%
2. Tyco International Ltd. 4.69 2. Financial (Diversified) 7.81
3. American Express Co. 3.14 3. Health Care (Diversified) 7.55
4. International Business Machines Corp. 3.01 4. Computers (Hardware) 6.57
5. Novell, Inc. 3.00 5. Broadcasting (Television, Radio & Cable) 5.43
6. Chase Manhattan Corp. (The) 2.97 6. Retail (General Merchandise) 5.38
7. American International Group, Inc. 2.80 7. Manufacturing (Diversified) 5.19
8. General Electric Co. 2.76 8. Communications Equipment 4.90
9. Dayton Hudson Corp. 2.63 9. Health Care (Drugs-Major Pharmaceuticals) 4.05
10. Cisco Systems, Inc. 2.51 10. Investment Banking/Brokerage 3.74
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
======================================================================================================================
</TABLE>
strong, especially with the upcoming introduction of two new software products:
Office 2000 and Windows 2000. Over the short term, the stock may be volatile,
but this is a core growth company that should continue to be a part of our
portfolio.
WHAT WERE CONDITIONS LIKE FOR FINANCIAL STOCKS?
Interest rate concerns have plagued financial stocks, causing them to experience
substantial volatility. But the long-term prospects for banks and insurance
companies seem favorable based on the continued strength of their earnings.
Another issue gives us reason to believe that financial stocks may soon
recover. Congress has reformed the Glass-Steagall Act-essentially created to
separate commercial and investment banking. Many analysts believe such reform
would set off a blizzard of merger and acquisition activity among banks,
insurance companies, investment managers and brokers.
WHAT HAPPENED IN THE HEALTH-CARE INDUSTRY OVER THE PAST YEAR?
Health-care stocks have been disappointing for several reasons: 1. Investors are
moving out of growth stocks, such as health care, and into cyclical stocks that
are more sensitive to the economy. 2. Many health-care stocks were considered to
be too expensive and have fallen out of favor with some investors. 3. Concerns
about political reform in Washington hang over the health-care industry. Recent
changes in Medicare reimbursement programs affect the bottom lines of hospitals,
nursing homes and other service providers. Over the long term, we believe the
industry will make a comeback, if only for the simple reason that baby boomers
will be spending more money on health care as they age. The fund's diversified
health-care holdings increased over the year from 4.86% to 7.55% as we found
buying opportunities in this area.
BESIDES TECHNOLOGY, WHAT OTHER AREAS PERFORMED WELL FOR THE FUND?
The fund increased its holdings in consumer cyclicals, including retail stocks.
For much of the period, consumer-cyclical companies benefited from a booming
economy, nearly full employment and robust sales. Dayton-Hudson, which owns
Marshall Fields, Target and Mervyn's stores, became a top 10 holding for the
fund near the end of the reporting period. The company reported strong earnings
in its most recent quarter based on sales growth in its 1,212 stores.
WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
We believe market volatility is here to stay, at least for the near term. In
this kind of market, it pays to maintain a disciplined investment strategy. The
fund will continue to look for buying opportunities during market troughs and
selling opportunities at peaks. The long-term outlook for the market remains
positive. The United States is experiencing one of the longest expansion periods
in its history. The U.S. economy remains strong, inflation is low and the
country is enjoying a budget surplus. We believe the environment remains
favorable for equities despite short-term volatility.
AIM CHARTER FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-92.27%
BANKS (MONEY CENTER)-2.97%
Chase Manhattan Corp. (The) 2,500,000 $ 218,437,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.67%
AT&T Corp.-Liberty Media
Group-Class A(a) 1,000,000 39,687,500
- ---------------------------------------------------------------
Comcast Corp.-Class A 3,000,000 126,375,000
- ---------------------------------------------------------------
MediaOne Group, Inc.(a) 2,500,000 177,656,250
- ---------------------------------------------------------------
343,718,750
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.90%
Corning, Inc. 500,000 39,312,500
- ---------------------------------------------------------------
Lucent Technologies Inc. 1,755,000 112,758,750
- ---------------------------------------------------------------
Motorola, Inc. 850,000 82,821,875
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 800,000 92,450,000
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 150,000 33,412,500
- ---------------------------------------------------------------
360,755,625
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-6.27%
Dell Computer Corp.(a) 1,500,000 60,187,500
- ---------------------------------------------------------------
International Business Machines
Corp.(b) 2,250,000 221,343,750
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,700,000 179,881,250
- ---------------------------------------------------------------
461,412,500
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.51%
Cisco Systems, Inc.(a) 2,500,000 185,000,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.33%
EMC Corp.(a) 1,250,000 91,250,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 1,024,500 79,975,031
- ---------------------------------------------------------------
171,225,031
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-10.27%
America Online, Inc.(a) 600,000 77,812,500
- ---------------------------------------------------------------
Microsoft Corp.(a) 3,800,000 351,737,500
- ---------------------------------------------------------------
Novell, Inc.(a) 11,000,000 220,687,500
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 650,000 70,118,750
- ---------------------------------------------------------------
Yahoo! Inc.(a) 200,000 35,812,500
- ---------------------------------------------------------------
756,168,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-0.74%
Providian Financial Corp. 500,000 $ 54,500,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.76%
General Electric Co. 1,500,000 203,343,750
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.55%
Linear Technology Corp. 600,000 41,962,500
- ---------------------------------------------------------------
Texas Instruments, Inc. 800,000 71,800,000
- ---------------------------------------------------------------
113,762,500
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.82%
Applied Materials, Inc.(a) 500,000 44,906,250
- ---------------------------------------------------------------
Teradyne, Inc.(a) 400,000 15,400,000
- ---------------------------------------------------------------
60,306,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-7.81%
American Express Co. 1,500,000 231,000,000
- ---------------------------------------------------------------
Citigroup, Inc. 2,300,000 124,487,500
- ---------------------------------------------------------------
Fannie Mae 1,000,000 70,750,000
- ---------------------------------------------------------------
Freddie Mac 2,750,000 148,671,875
- ---------------------------------------------------------------
574,909,375
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-7.55%
American Home Products Corp. 1,400,000 73,150,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 2,000,000 153,625,000
- ---------------------------------------------------------------
Johnson & Johnson 1,500,001 157,125,084
- ---------------------------------------------------------------
Warner-Lambert Co. 2,150,000 171,596,875
- ---------------------------------------------------------------
555,496,959
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.05%
Pfizer, Inc. 3,750,000 148,125,000
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 950,000 51,240,625
- ---------------------------------------------------------------
Schering-Plough Corp. 2,000,000 99,000,000
- ---------------------------------------------------------------
298,365,625
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.64%
Guidant Corp. 1,750,000 86,406,250
- ---------------------------------------------------------------
Medtronic, Inc. 1,000,000 34,625,000
- ---------------------------------------------------------------
121,031,250
- ---------------------------------------------------------------
</TABLE>
AIM CHARTER FUND 5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-2.80%
American International Group,
Inc. 2,000,000 $ 205,875,000
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-3.74%
Goldman Sachs Group, Inc. (The) 150,000 10,650,000
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 39,250,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 1,250,000 137,890,625
- ---------------------------------------------------------------
Schwab (Charles) Corp. (The) 2,250,000 87,609,375
- ---------------------------------------------------------------
275,400,000
- ---------------------------------------------------------------
LODGING-HOTELS-0.76%
Carnival Corp. 1,250,000 55,625,000
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-5.19%
Tyco International Ltd.(b) 8,650,000 345,459,375
- ---------------------------------------------------------------
United Technologies Corp. 600,000 36,300,000
- ---------------------------------------------------------------
381,759,375
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-1.50%
Baker Hughes, Inc. 1,250,000 34,921,875
- ---------------------------------------------------------------
Halliburton Co. 800,000 30,150,000
- ---------------------------------------------------------------
Schlumberger Ltd. 750,000 45,421,875
- ---------------------------------------------------------------
110,493,750
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.33%
Conoco, Inc.-Class B 900,000 24,412,500
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.18%
Mobil Corp. 900,000 86,850,000
- ---------------------------------------------------------------
RAILROADS-0.48%
Kansas City Southern Industries,
Inc. 750,000 35,578,125
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.89%
Home Depot, Inc. (The) 749,993 56,624,472
- ---------------------------------------------------------------
Lowe's Companies, Inc. 1,500,000 82,500,000
- ---------------------------------------------------------------
139,124,472
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.13%
Best Buy Co., Inc.(a) 1,400,000 77,787,500
- ---------------------------------------------------------------
Tandy Corp. 1,250,000 78,671,875
- ---------------------------------------------------------------
156,459,375
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.54%
Kroger Co. (The)(a) 1,916,900 39,895,481
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL
MERCHANDISE)-5.38%
Costco Wholesale Corp.(a) 400,000 $ 32,125,000
- ---------------------------------------------------------------
Dayton Hudson Corp. 3,000,000 193,875,000
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 3,000,000 170,062,500
- ---------------------------------------------------------------
396,062,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.48%
Amazon.com, Inc.(a) 500,000 35,312,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.33%
Concord EFS, Inc.(a) 1,500,000 40,593,750
- ---------------------------------------------------------------
First Data Corp. 1,250,000 57,109,375
- ---------------------------------------------------------------
97,703,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.33%
MCI WorldCom, Inc.(a) 2,000,000 171,625,000
- ---------------------------------------------------------------
TELEPHONE-1.37%
GTE Corp. 500,000 37,500,000
- ---------------------------------------------------------------
SBC Communications, Inc. 1,250,000 63,671,875
- ---------------------------------------------------------------
101,171,875
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$4,615,196,054) 6,791,781,943
- ---------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS-2.32%
BROADCASTING (TELEVISION, RADIO
& CABLE)-0.76%
Mediaone Group, Inc.-$2.25
Series D Conv. Pfd. 400,000 56,200,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-1.56%
Houston Industries, Inc.-$3.29
Conv. Pfd. 1,000,000 114,750,000
- ---------------------------------------------------------------
Total Convertible Preferred
Stocks (Cost $123,420,376) 170,950,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-2.09%
COMPUTERS (HARDWARE)-0.30%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03 (Acquired
04/17/98-11/30/98; Cost
$27,943,750)(c) $ 28,300,000 22,074,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.94%
VERITAS Software Corp., Conv.
Notes, 5.25%, 11/01/04 13,500,000 69,001,875
- ---------------------------------------------------------------
</TABLE>
6 AIM CHARTER FUND
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-0.51%
Amazon.com, Inc., Conv. Sub.
Deb., 4.75%, 02/01/09 $ 35,000,000 $ 37,275,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.34%
Global Telesystems Group, Inc.,
Conv. Sr. Unsec. Sub. Notes,
8.75%, 06/30/00 (Acquired
02/05/98; Cost $13,002,080)(c) 10,000,000 25,025,000
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes
(Cost $95,916,763) 153,375,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.93%
STIC Liquid Assets Portfolio(d) 181,461,397 $ 181,461,397
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 181,461,397 181,461,397
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $362,922,794) 362,922,794
- ---------------------------------------------------------------
TOTAL INVESTMENTS-101.61% 7,479,030,612
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.61%) (118,345,314)
- ---------------------------------------------------------------
NET ASSETS-100.00% $7,360,685,298
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)A portion of this security is subject to call options written. See Note 7.
(c)Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/99 was $47,099,000 which
represented 0.64% of the Fund's net assets.
(d)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM CHARTER FUND 7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$5,197,455,987) $7,479,030,612
- ------------------------------------------------------------
Receivables for:
Investments sold 11,818,345
- ------------------------------------------------------------
Capital stock sold 10,408,480
- ------------------------------------------------------------
Dividends and interest 7,301,796
- ------------------------------------------------------------
Investment for deferred compensation plan 83,490
- ------------------------------------------------------------
Other assets 140,597
- ------------------------------------------------------------
Total assets 7,508,783,320
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 105,957,126
- ------------------------------------------------------------
Capital stock reacquired 8,011,254
- ------------------------------------------------------------
Deferred compensation 83,490
- ------------------------------------------------------------
Options written (Premiums received
$25,481,560) 25,656,250
- ------------------------------------------------------------
Accrued advisory fees 3,634,922
- ------------------------------------------------------------
Accrued administrative services fees 27,618
- ------------------------------------------------------------
Accrued directors' fees 3,913
- ------------------------------------------------------------
Accrued distribution fees 3,681,163
- ------------------------------------------------------------
Accrued transfer agent fees 637,952
- ------------------------------------------------------------
Accrued operating expenses 404,334
- ------------------------------------------------------------
Total liabilities 148,098,022
- ------------------------------------------------------------
Net assets applicable to shares outstanding $7,360,685,298
============================================================
NET ASSETS:
Class A $4,948,665,737
============================================================
Class B $2,206,751,605
============================================================
Class C $ 138,467,127
============================================================
Institutional Class $ 66,800,829
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 288,328,877
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 130,030,549
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 8,139,220
============================================================
Institutional Class:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 3,855,460
============================================================
Class A:
Net asset value and redemption price per
share $ 17.16
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $17.16 / 94.50%) $ 18.16
============================================================
Class B:
Net asset value and offering price per
share $ 16.97
============================================================
Class C:
Net asset value and offering price per
share $ 17.01
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 17.33
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $157,812 foreign
withholding tax) $ 49,869,261
- ------------------------------------------------------------
Interest 25,693,052
- ------------------------------------------------------------
Total investment income 75,562,313
- ------------------------------------------------------------
EXPENSES:
Advisory fees 41,014,707
- ------------------------------------------------------------
Administrative services fees 235,274
- ------------------------------------------------------------
Custodian fees 364,030
- ------------------------------------------------------------
Directors' fees 50,623
- ------------------------------------------------------------
Distribution fees-Class A 13,556,239
- ------------------------------------------------------------
Distribution fees-Class B 18,631,086
- ------------------------------------------------------------
Distribution fees-Class C 809,325
- ------------------------------------------------------------
Transfer agent fees-Class A 4,930,725
- ------------------------------------------------------------
Transfer agent fees-Class B 3,087,342
- ------------------------------------------------------------
Transfer agent fees-Class C 149,576
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 6,136
- ------------------------------------------------------------
Other 1,214,166
- ------------------------------------------------------------
Total expenses 84,049,229
- ------------------------------------------------------------
Less: Fees waived by advisor (1,130,089)
- ------------------------------------------------------------
Expenses paid indirectly (149,110)
- ------------------------------------------------------------
Net expenses 82,770,030
- ------------------------------------------------------------
Net investment income (loss) (7,207,717)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 668,004,945
- ------------------------------------------------------------
Foreign currencies (1,105,968)
- ------------------------------------------------------------
Option contracts written (9,533,983)
- ------------------------------------------------------------
657,364,994
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,116,385,588
- ------------------------------------------------------------
Foreign currencies (47,768)
- ------------------------------------------------------------
Option contracts written 214,221
- ------------------------------------------------------------
1,116,552,041
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies and option contracts 1,773,917,035
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $1,766,709,318
============================================================
</TABLE>
See Notes to Financial Statements.
8 AIM CHARTER FUND
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (7,207,717) $ 37,825,223
- -----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 657,364,994 206,268,933
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 1,116,552,041 254,914,824
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,766,709,318 499,008,980
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (9,134,542) (28,039,987)
- -----------------------------------------------------------------------------------------------
Class B -- (3,013,337)
- -----------------------------------------------------------------------------------------------
Class C -- (47,378)
- -----------------------------------------------------------------------------------------------
Institutional Class (216,682) (445,449)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (149,620,112) (346,531,949)
- -----------------------------------------------------------------------------------------------
Class B (57,712,333) (108,856,197)
- -----------------------------------------------------------------------------------------------
Class C (1,614,093) (819,962)
- -----------------------------------------------------------------------------------------------
Institutional Class (1,761,967) (3,989,466)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 151,495,357 235,195,827
- -----------------------------------------------------------------------------------------------
Class B 370,892,559 350,425,592
- -----------------------------------------------------------------------------------------------
Class C 84,930,162 32,069,085
- -----------------------------------------------------------------------------------------------
Institutional Class 9,431,197 3,464,509
- -----------------------------------------------------------------------------------------------
Net increase in net assets 2,163,398,864 628,420,268
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,197,286,434 4,568,866,166
- -----------------------------------------------------------------------------------------------
End of period $ 7,360,685,298 $5,197,286,434
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 4,466,453,244 $3,821,903,969
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (217,108) 9,291,857
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 613,057,085 201,250,572
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 2,281,392,077 1,164,840,036
- -----------------------------------------------------------------------------------------------
$ 7,360,685,298 $5,197,286,434
===============================================================================================
</TABLE>
See Notes to Financial Statements.
AIM CHARTER FUND 9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter 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 ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital with a secondary
objective of current income.
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 closing bid price on that day. 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 closing bid
price. 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 prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
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 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 is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$7,049,976, undistributed net realized gains decreased by $34,849,976 and
paid-in capital increased by $27,800,000 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
reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Futures Contracts -- The Fund may purchase or sell 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
10 AIM CHARTER FUND
<PAGE> 13
of the contracts may not correlate with changes in the value of the
securities being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also 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 or if the value of the foreign currency changes
unfavorably.
G. 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 may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
I. Bond Premiums -- It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
J. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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 agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. The waiver is
contractual and may not be terminated without approval of the Board of
Directors. During the year ended October 31, 1999, AIM waived fees of
$1,130,089. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $235,274 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for
AIM CHARTER FUND 11
<PAGE> 14
providing transfer agency and shareholder services to the Fund. During the year
ended October 31, 1999, AFS was paid $4,807,681 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 and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund , pursuant to the Plans,
pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's
average daily net assets of Class A shares and 1.00% of the average daily net
assets of Class B and C 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 Class 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,
1999, the Class A, Class B and Class C shares paid AIM Distributors $13,556,239,
$18,631,086 and $809,325, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,030,454 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $96,080 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $15,483
for services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$76,809 and $72,301, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $149,110 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$7,032,932,257 and $6,722,183,283, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,293,837,834
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (24,022,713)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $2,269,815,121
==========================================================
Cost of investments for tax purposes is $5,209,215,491.
</TABLE>
12 AIM CHARTER FUND
<PAGE> 15
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year 31,202 $ 8,091,351
- --------------------------------------------------------------------------------------
Written 62,592 40,059,097
- --------------------------------------------------------------------------------------
Closed (54,607) (18,452,621)
- --------------------------------------------------------------------------------------
Exercised (14,921) (4,076,636)
- --------------------------------------------------------------------------------------
Expired (1,766) (139,631)
- --------------------------------------------------------------------------------------
End of year 22,500 $ 25,481,560
======================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------------------------------------- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
International Business Machines Corp. Jan-00 $80 12,500 $20,804,105 $25,156,250 $(4,352,145)
- --------------------------------------------------------------------------------------------------------------------
Tyco International Ltd. Nov-99 50 10,000 4,677,455 500,000 4,177,455
- --------------------------------------------------------------------------------------------------------------------
22,500 $25,481,560 $25,656,250 $ (174,690)
====================================================================================================================
</TABLE>
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- -----------
<S> <C> <C>
Beginning of year -- $ --
- -------------------------------------------------------------------------------------
Purchased 24,165 6,379,447
- -------------------------------------------------------------------------------------
Closed (20,165) (4,215,217)
- -------------------------------------------------------------------------------------
Exercised -- --
- -------------------------------------------------------------------------------------
Expired (4,000) (2,164,230)
- -------------------------------------------------------------------------------------
End of year -- $ --
=====================================================================================
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 51,272,783 $ 809,088,837 65,753,775 $ 868,543,898
- --------------------------------------------------------------------------------------------------------------------
Class B 36,310,602 576,056,633 32,991,364 431,938,545
- --------------------------------------------------------------------------------------------------------------------
Class C 6,968,661 111,866,437 2,736,777 36,139,093
- --------------------------------------------------------------------------------------------------------------------
Institutional Class 828,138 13,421,969 568,334 7,594,968
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 10,532,077 149,384,623 29,328,588 355,378,824
- --------------------------------------------------------------------------------------------------------------------
Class B 3,894,826 54,866,091 8,807,895 105,930,618
- --------------------------------------------------------------------------------------------------------------------
Class C 107,859 1,525,822 67,166 810,828
- --------------------------------------------------------------------------------------------------------------------
Institutional Class 134,608 1,929,704 351,483 4,295,496
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (51,731,503) (806,978,103) (75,327,509) (988,726,895)
- --------------------------------------------------------------------------------------------------------------------
Class B (16,551,587) (260,030,165) (14,417,738) (187,443,571)
- --------------------------------------------------------------------------------------------------------------------
Class C (1,788,368) (28,462,097) (376,288) (4,880,836)
- --------------------------------------------------------------------------------------------------------------------
Institutional Class (372,429) (5,920,476) (636,014) (8,425,955)
- --------------------------------------------------------------------------------------------------------------------
39,605,667 $ 616,749,275 49,847,833 $ 621,155,013
====================================================================================================================
</TABLE>
AIM CHARTER FUND 13
<PAGE> 16
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.42 $ 13.48 $ 11.24 $ 10.66 $ 8.93
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.09 0.18 0.16 0.24 0.23
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 4.43 1.24 2.91 1.44 2.07
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations 4.52 1.42 3.07 1.68 2.30
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.07) (0.14) (0.16) (0.20) (0.24)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Distributions from net realized gains (0.54) (1.34) (0.67) (0.90) (0.33)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions (0.61) (1.48) (0.83) (1.10) (0.57)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 17.33 $ 13.42 $ 13.48 $ 11.24 $ 10.66
============================================================ ======= ======= ======= ======= =======
Total return 34.61% 11.69% 29.05% 17.29% 27.45%
============================================================ ======= ======= ======= ======= =======
Net assets, end of period (000s omitted) $66,801 $43,815 $40,191 $29,591 $25,538
============================================================ ======= ======= ======= ======= =======
Ratio of expenses (exclusive of interest) to average net
assets(a) 0.65%(b) 0.66% 0.67% 0.69% 0.74%
============================================================ ======= ======= ======= ======= =======
Ratio of net investment income to average net assets(c) 0.51%(b) 1.37% 1.21% 2.24% 1.98%
============================================================ ======= ======= ======= ======= =======
Portfolio turnover rate 107% 154% 170% 164% 161%
============================================================ ======= ======= ======= ======= =======
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.67%, 0.67%, 0.68% and 0.70% for 1999-1996.
(b) Ratios are based on average net assets of $57,565,832.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income prior to fee waivers and/or expense reimbursements were 0.49%, 1.36%,
1.20% and 2.23% for 1999-1996.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Charter Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Charter
Fund as of October 31, 1999, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
December 3, 1999
Houston, Texas
14 AIM CHARTER FUND
<PAGE> 17
BOARD OF DIRECTORS
Charles T. Bauer
Chairman
A I M Management Group Inc.
Bruce L. Crockett
Director
ACE Limited;
Formerly Director, President, and
Chief Executive Officer
COMSAT Corporation
Owen Daly II
Director
Cortland Trust Inc.
Edward K. Dunn Jr.
Chairman, Mercantile Mortgage Corp.;
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares
Jack Fields
Chief Executive Officer
Texana Global, Inc.;
Formerly Member
of the U.S. House of Representatives
Carl Frischling
Partner
Kramer, Levin, Naftalis & Frankel LLP
Robert H. Graham
President and Chief Executive Officer
A I M Management Group Inc.
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.;
Commissioner, New York City Dept. for the
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of
New York State
Lewis F. Pennock
Attorney
Louis S. Sklar
Executive Vice President
Hines Interests
Limited Partnership
OFFICERS
Charles T. Bauer
Chairman
Robert H. Graham
President
Carol F. Relihan
Senior Vice President and Secretary
Gary T. Crum
Senior Vice President
Edgar M. Larsen
Senior Vice President
Dana R. Sutton
Vice President and Treasurer
Melville B. Cox
Vice President
Mary J. Benson
Assistant Vice President
and Assistant Treasurer
Sheri Morris
Assistant Vice President
and Assistant Treasurer
Renee A. Friedli
Assistant Secretary
P. Michelle Grace
Assistant Secretary
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
OFFICE OF THE FUND
11 Greenway Plaza
Suite 100
Houston, TX 77046
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
SUB-ADVISOR
A I M Capital Management, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
TRANSFER AGENT
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
COUNSEL TO THE FUND
Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE DIRECTORS
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza
Suite 100
Houston, TX 77002
AUDITORS
KPMG LLP
700 Louisiana
Houston, TX 77002
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Charter Fund Institutional Class paid ordinary dividends in the amount of
$0.0845 per share during the Fund's tax year ended October 31, 1999. Of this
amount 21.00% is eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $231,102,000 during the
Fund's tax year ended October 31, 1999.
REQUIRED STATE INCOME TAX INFORMATION
Of the total income dividends paid, 5.99% was derived from U.S. Treasury
obligations.
AIM CHARTER FUND 15
<PAGE> 18
AIM CONSTELLATION FUND
AIM Constellation Fund is for shareholders who seek capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Constellation Fund's institutional class performance figures are
historical and reflect the reinvestment of all distributions and changes in
net asset value.
o Had fees and expenses not been waived during the fiscal year, returns would
have been lower.
o Average annual total returns for periods ended 9/30/99 (the most recent
calendar quarter-end) are as follows: one year, 32.56%; five years, 18.02%;
inception (4/8/92), 17.47%.
o One-year performance includes reinvested distributions of $0.7312 per share.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lipper, Inc. is an independent mutual fund performance monitor.
o The Nasdaq (National Association of Securities Dealers Automated Quotation
system) Composite Index is a market-value-weighted index comprising all
Nasdaq domestic and non-U.S. based common stocks listed on the Nasdaq
system. It includes more than 5,000 companies and is often considered
representative of the small and medium-size company stock universe. While it
includes many small and mid-sized company stocks, large-capitalization
technology companies tend to dominate the index.
o The unmanaged Standard & Poor's 400 MidCap Index (the S&P 400) comprises the
common stocks of approximately 400 mid-capitalization companies.
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.
o You cannot invest in any index listed. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
o Since the last reporting period, AIM Constellation Fund, Institutional
Class, has elected to use the S&P 500 as its benchmark instead of the S&P
400. The new index is the benchmark used for other classes of the fund. The
fund will no longer measure its performance against the S&P 400, the index
published in previous reports to shareholders. Because this is the first
reporting period since we have adopted the new index, SEC guidelines require
that we compare the fund's performance to both the old and the new index.
o Performance results for the indexes are for the period 3/31/92-10/31/99.
RESULTS OF A $10,000 INVESTMENT
AIM CONSTELLATION FUND VS. BENCHMARK INDEXES
4/8/92-10/31/99
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99
================================================================================
AIM Constellation Fund, Institutional Class
Inception (4/8/92) 18.37%
5 years 18.94
1 year 35.46
================================================================================
In thousands
================================================================================
AIM Constellation Fund,
Institutional Class S&P MidCap 400 Nasdaq S&P 500
- --------------------------------------------------------------------------------
4/92 $10,797 $10,307 $ 9,584 $10,547
10/93 13,938 12,526 12,907 12,120
10/94 15,045 12,824 12,877 12,587
10/95 20,173 15,545 17,160 15,911
10/96 22,556 18,242 20,231 19,743
10/97 26,936 24,200 26,394 26,080
10/98 26,438 25,824 29,339 31,821
10/99 35,813 31,266 49,132 39,987
Past performance cannot guarantee comparable future results.
Source: Lipper, Inc.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM CONSTELLATION FUND
16
<PAGE> 19
ANNUAL REPORT / MANAGER'S OVERVIEW
SMALL- AND MID-CAP STOCKS
SHOW SOME SIZZLE
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?
AIM Constellation Fund's technology exposure boosted its returns for the
fiscal year and helped it outperform its benchmarks. The fund's Institutional
Class produced an impressive 35.46% total return.
Fund returns outperformed both the 21.07% the S&P MidCap 400 and the Russell
Midcap Index during the same period. Net assets closed the period at $244.4
million, up from $189.0 million at the close of the last fiscal year.
WHAT WERE MARKETS LIKE DURING THE FISCAL YEAR?
The period started well, as mid-cap stocks benefited from interest-rate cuts by
the Federal Reserve Board (the Fed) in the fall of 1998, which spurred a market
rally. Historically, mid-capitalization stocks have done well when interest
rates fall.
A technology sell-off affected the fund because of our significant tech
holdings. But the markets rebounded when first-quarter 1999 earnings came in
quite strong.
In May, the Fed hinted that it might raise interest rates, and in June it
did so, raising the federal funds rate to 5% and announcing its shift to a
neutral bias. That announcement sparked a "relief rally" in the markets. At this
point, the S&P 400 MidCap Index saw its high for the year of 427.82.
Late August and most of September saw a pretty severe sell-off as investors
fretted about the trade deficit, the dollar and the possibility of higher
interest rates when the Federal Reserve Board switched gears and adopted a
"tightening bias." Markets began to recover during October, so the fiscal year
ended on a positive note.
DID THE FUND REMAIN HEAVILY INVESTED IN TECHNOLOGY?
At the end of the fiscal year, technology stood at just over 45% of the fund's
assets. Technology has been the big winner for most of this year. Industries
such as semiconductors, communications equipment and computer software and
services have really outperformed, and the fund has quite a bit of exposure in
all three, as the Top 10 Industries list shows.
Chip makers have recovered after several years in the doldrums, expecting a
15% production increase this year over last. The increase is fueled by the
proliferation of chips for communications and Internet infrastructure. One such
company is Analog Devices, a leading maker of both analog and digital integrated
circuits, which translate real-world phenomena such as pressure, temperature and
sound into digital signals. We increased our holding in Analog Devices during
the fiscal year.
DID YOU FAVOR ANY OTHER INDUSTRIES?
Consumer cyclicals, at roughly 14% of the portfolio, is one area in which we
have made a conscious effort to add to positions on weakness. Retailers usually
underperform in the summer and the fall, as portfolio managers become worried
about back-to-school sales and same-store sales results. Also, when interest
rates rise, the outlook for consumer spending darkens. However, when a company
continues to produce solid sales numbers and to exceed analysts' expectations,
we have taken advantage of the opportunity to buy the stock on weakness. Talbots
is a good example; a constant in the ever-changing fashion world, it sells
traditional and classic ladies' apparel. Another excellent cyclical stock added
during the fiscal year is Tandy, which sells
-------------------------------------
Technology has been the big
winner for most of this year.
Industries such as semiconductors,
communications equipment and
computer software and services have
really outperformed . . .
-------------------------------------
GROWTH OF NET ASSETS
In millions
================================================================================
10/31/98 $244.4
10/31/99 $189.0
================================================================================
AIM CONSTELLATION FUND INSTITUTIONAL CLASS VS. BENCHMARK INDEXES
One-year returns, as of 10/31/99
================================================================================
Fund 35.46%
S&P 400 21.07%
Russell Midcap Index 17.12%
================================================================================
See important fund and index disclosures inside front cover.
AIM CONSTELLATION FUND
17
<PAGE> 20
ANNUAL REPORT / MANAGER'S OVERVIEW
audio/video equipment, cellular and everyday telephones, computers and other
like items at its RadioShack chain.
WERE THERE INDUSTRIES IN WHICH YOU REDUCED YOUR HOLDINGS?
We have fewer assets in financial-services companies than we did at the outset
of the fiscal year. Rising interest rates have led to relatively poor
performance in this group. We reduced our exposure by selling quite a few
financial-services companies that reported disappointing earnings.
Health-care stocks continue to languish for several reasons. A major factor
is concern about political reform in Washington. In particular, the health-care
services area has suffered, largely because of changes in Medicare's
reimbursement programs; these affect hospitals, nursing homes and other service
providers.
We also removed waste-management stocks from the portfolio over the last six
months. Waste Management missed its third-quarter earnings estimates, and
another holding in the industry encountered regulatory troubles during an
acquisition.
WERE THERE OTHER WAYS IN WHICH YOU ALTERED THE PORTFOLIO?
At the beginning of the fiscal year, the fund held the securities of 265
companies; as of October 31, 1999, the fund held 172 issues. Also, the fund's
median market capitalization has grown from $3.2 billion to $5.6 billion. These
changes have occurred largely because the fund's managers continue to focus on
finding and holding high-quality growth stocks for the portfolio.
WHAT IS YOUR NEAR-TERM OUTLOOK?
Small- and mid-cap stocks are still historically undervalued. We expect them to
outperform large-cap stocks over the next 12 months. With valuations as low as
they are, we don't see the risk to smaller stocks that we did at this time last
year. Mid-caps, often overshadowed by the comforting, familiar large-caps and
the sizzling dot-com small-caps, offer unique advantages: their management is
usually a bit more seasoned than that of small-caps and startups, and they have
a better chance than large-caps to beat GDP growth and to attack niche markets.
Effective December 1, 1999, the fund's Board of Directors changed AIM
Constellation Fund's prospectus by deleting the language specifying the
capitalization range within which the fund is allowed to invest, and thus
broadening its scope beyond small and mid-sized companies. Constellation
will now be a multi-cap fund, with the flexibility to invest across the full
market spectrum. This means that for the first time in many years, the fund
will be able to invest in the best and fastest-growing companies in the
market regardless of size. AIM Constellation Fund's objective to seek growth
of capital is not changingNmerely the strategy used to achieve that
objective.
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
<TABLE>
<CAPTION>
==============================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. America Online, Inc. 2.23% 1. Computers (Software & Services)(1) 15.30%
2. VERITAS Software Corp. 1.76 2. Communications Equipment 9.95
3. EMC Corp. 1.67 3. Electronics (Semiconductors) 9.30
4. Corning, Inc. 1.64 4. Electrical Equipment 5.18
5. JDS Uniphase Corp. 1.64 5. Broadcasting (TV, Radio & Cable) 4.64
6. Lucent Technologies, Inc. 1.62 6. Oil and Gas (Drilling & Equipment) 3.60
7. PMC-Sierra, Inc. 1.54 7. Services (Advertising & Marketing) 3.31
8. Solectron Corp. 1.48 8. Computers (Peripherals) 3.06
9. Omnicom Group, Inc. 1.44 9. Services (Data Processing) 3.02
10. Providian Financial Corp. 1.28 10. Retail (Computers & Electronics) 2.95
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
==============================================================================================================
</TABLE>
AIM CONSTELLATION FUND
18
<PAGE> 21
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-95.54%
AIRLINES-0.25%
Southwest Airlines Co. 2,250,000 $ 37,828,125
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.67%
Danaher Corp. 1,250,000 60,390,625
- ---------------------------------------------------------------
SPX Corp.(a) 500,000 42,375,000
- ---------------------------------------------------------------
102,765,625
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.58%
Northern Trust Corp. 925,000 89,320,312
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.01%
Bank United Corp.-Class A 1,000,000 39,000,000
- ---------------------------------------------------------------
Compass Bancshares, Inc. 1,000,000 26,687,500
- ---------------------------------------------------------------
Old Kent Financial Corp. 817,425 33,310,069
- ---------------------------------------------------------------
TCF Financial Corp. 700,000 20,650,000
- ---------------------------------------------------------------
Zions Bancorp 600,000 35,362,500
- ---------------------------------------------------------------
155,010,069
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.53%
Biogen, Inc.(a) 2,500,000 185,312,500
- ---------------------------------------------------------------
Chiron Corp.(a) 1,000,000 28,562,500
- ---------------------------------------------------------------
Genzyme Corp.(a) 527,300 20,169,225
- ---------------------------------------------------------------
234,044,225
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.64%
Adelphia Communications Corp.(a) 1,000,000 54,625,000
- ---------------------------------------------------------------
AMFM Inc.(a) 2,250,000 157,500,000
- ---------------------------------------------------------------
AT&T Corp.-Liberty Media
Group-Class A(a) 3,000,000 119,062,500
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 1,500,000 68,156,250
- ---------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 1,050,000 85,050,000
- ---------------------------------------------------------------
Univision Communications,
Inc.-Class A(a) 1,465,400 124,650,587
- ---------------------------------------------------------------
USA Networks, Inc.(a) 1,317,800 59,383,362
- ---------------------------------------------------------------
Westwood One, Inc.(a) 887,400 40,931,325
- ---------------------------------------------------------------
709,359,024
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.95%
ADC Telecommunications, Inc.(a) 1,750,000 83,453,125
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 1,500,000 170,250,000
- ---------------------------------------------------------------
Corning, Inc. 3,186,600 250,546,425
- ---------------------------------------------------------------
General Instrument Corp.(a) 1,900,000 102,243,750
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 1,500,000 250,312,500
- ---------------------------------------------------------------
Lucent Technologies Inc.(b) 3,849,120 247,305,960
- ---------------------------------------------------------------
Motorola, Inc. 750,000 73,078,125
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,500,000 173,343,750
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 250,000 55,687,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Scientific-Atlanta, Inc. 2,000,000 $ 114,500,000
- ---------------------------------------------------------------
1,520,721,135
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.39%
Apple Computer, Inc.(a) 1,000,000 80,125,000
- ---------------------------------------------------------------
Gateway, Inc.(a) 2,000,000 132,125,000
- ---------------------------------------------------------------
212,250,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.87%
Exodus Communications, Inc.(a) 341,700 29,386,200
- ---------------------------------------------------------------
VeriSign, Inc.(a) 835,000 103,122,500
- ---------------------------------------------------------------
132,508,700
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.06%
Adaptec, Inc.(a) 3,000,000 135,000,000
- ---------------------------------------------------------------
EMC Corp.(a)(b)(c) 3,500,000 255,500,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.- Class A(a) 1,000,000 78,062,500
- ---------------------------------------------------------------
468,562,500
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-15.30%
America Online, Inc.(a) 2,625,000 340,429,687
- ---------------------------------------------------------------
At Home Corp.(a) 1,150,000 42,981,250
- ---------------------------------------------------------------
BMC Software, Inc.(a) 2,500,000 160,468,750
- ---------------------------------------------------------------
Business Objects S.A.-ADR
(France)(a) 675,000 48,600,000
- ---------------------------------------------------------------
Check Point Software
Technologies Ltd. (Israel)(a) 750,000 86,765,625
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 2,800,000 179,550,000
- ---------------------------------------------------------------
Compuware Corp.(a) 1,250,000 34,765,625
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 1,250,000 101,015,625
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 2,000,000 80,625,000
- ---------------------------------------------------------------
Inktomi Corp.(a) 750,000 76,078,125
- ---------------------------------------------------------------
Intuit, Inc.(a) 3,750,000 109,218,750
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 1,050,000 25,134,375
- ---------------------------------------------------------------
Lycos, Inc.(a) 3,000,000 160,500,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,150,000 106,446,875
- ---------------------------------------------------------------
Novell, Inc.(a) 1,000,000 20,062,500
- ---------------------------------------------------------------
RealNetworks, Inc.(a) 1,000,000 109,687,500
- ---------------------------------------------------------------
Siebel Systems, Inc.(a) 600,000 65,887,500
- ---------------------------------------------------------------
Synopsys, Inc.(a) 1,000,000 62,312,500
- ---------------------------------------------------------------
Verio, Inc.(a) 2,125,000 79,289,063
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 2,500,000 269,687,500
- ---------------------------------------------------------------
Yahoo! Inc.(a) 1,000,000 179,062,500
- ---------------------------------------------------------------
2,338,568,750
- ---------------------------------------------------------------
</TABLE>
AIM CONSTELLATION FUND 19
<PAGE> 22
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-2.41%
Capital One Financial Corp. 2,323,700 $ 123,156,100
- ---------------------------------------------------------------
Providian Financial Corp. 1,800,000 196,200,000
- ---------------------------------------------------------------
SLM Holding Corp. 1,000,000 48,937,500
- ---------------------------------------------------------------
368,293,600
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-5.18%
American Power Conversion
Corp.(a) 5,250,000 117,796,875
- ---------------------------------------------------------------
Conexant Systems, Inc.(a) 2,000,000 186,750,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 1,000,000 90,062,500
- ---------------------------------------------------------------
Solectron Corp.(a) 3,000,000 225,750,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 2,625,000 104,343,750
- ---------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 2,750,000 67,203,125
- ---------------------------------------------------------------
791,906,250
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.11%
AVX Corp. 428,100 17,124,000
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.29%
General Motors Corp.-Class H(a) 600,000 43,687,500
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.88%
PE Corp-PE Biosystems Group 1,550,000 100,556,250
- ---------------------------------------------------------------
Waters Corp.(a) 650,000 34,531,250
- ---------------------------------------------------------------
135,087,500
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-9.30%
Altera Corp.(a) 2,875,000 139,796,875
- ---------------------------------------------------------------
Analog Devices, Inc.(a) 3,000,000 159,375,000
- ---------------------------------------------------------------
ASM Lithography Holding N.V.
(Netherlands)(a) 650,000 47,206,250
- ---------------------------------------------------------------
Atmel Corp.(a) 916,800 35,411,400
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 4,000,000 102,250,000
- ---------------------------------------------------------------
Linear Technology Corp. 2,000,000 139,875,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 2,000,000 106,375,000
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 1,500,000 118,406,250
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 1,338,375 89,169,234
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 2,499,700 235,596,725
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 2,000,000 91,750,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 2,000,000 157,250,000
- ---------------------------------------------------------------
1,422,461,734
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.67%
Applied Materials, Inc.(a) 500,000 44,906,250
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 1,200,000 95,025,000
- ---------------------------------------------------------------
Novellus Systems, Inc.(a) 500,000 38,750,000
- ---------------------------------------------------------------
Teradyne, Inc.(a) 2,000,000 77,000,000
- ---------------------------------------------------------------
255,681,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.36%
American Express Co. 575,000 88,550,000
- ---------------------------------------------------------------
Citigroup, Inc. 1,100,000 59,537,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
MGIC Investment Corp. 1,000,000 $ 59,750,000
- ---------------------------------------------------------------
207,837,500
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.46%
Park Place Entertainment(a) 5,304,000 69,615,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.80%
Forest Laboratories, Inc.(a) 1,500,000 68,812,500
- ---------------------------------------------------------------
Jones Pharma, Inc.(d) 3,691,275 114,429,525
- ---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 1,200,000 36,600,000
- ---------------------------------------------------------------
MedImmune, Inc.(a) 500,000 56,000,000
- ---------------------------------------------------------------
275,842,025
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.32%
Express Scripts, Inc.-Class A(a) 1,000,000 49,125,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.38%
Bausch & Lomb, Inc. 1,000,000 54,000,000
- ---------------------------------------------------------------
Biomet, Inc. 2,500,000 75,312,500
- ---------------------------------------------------------------
Medtronic, Inc. 1,500,000 51,937,500
- ---------------------------------------------------------------
Sybron International Corp.(a) 1,250,000 29,765,625
- ---------------------------------------------------------------
211,015,625
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.33%
AFLAC, Inc. 1,000,000 51,125,000
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.02%
Schwab (Charles) Corp. (The) 4,000,000 155,750,000
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.53%
Federated Investors, Inc.-Class
B 2,064,000 35,604,000
- ---------------------------------------------------------------
Knight/Trimark Group, Inc.-Class
A(a) 1,750,000 45,609,375
- ---------------------------------------------------------------
81,213,375
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.91%
Harley-Davidson, Inc. 2,350,000 139,384,375
- ---------------------------------------------------------------
NATURAL GAS-0.40%
El Paso Energy Corp. 1,500,000 61,500,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-3.60%
Baker Hughes, Inc. 2,000,000 55,875,000
- ---------------------------------------------------------------
BJ Services Co.(a) 2,000,000 68,625,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(a)(d) 2,750,000 106,390,625
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 1,000,000 31,750,000
- ---------------------------------------------------------------
Global Industries Ltd.(a) 3,000,000 24,000,000
- ---------------------------------------------------------------
R&B Falcon Corporation(a) 3,716,600 46,225,213
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 2,250,000 35,015,625
- ---------------------------------------------------------------
Smith International, Inc.(a) 1,750,000 60,484,375
- ---------------------------------------------------------------
</TABLE>
20 AIM CONSTELLATION FUND
<PAGE> 23
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Transocean Offshore, Inc. 1,500,000 $ 40,781,250
- ---------------------------------------------------------------
Varco International, Inc.(a) 2,499,400 26,399,913
- ---------------------------------------------------------------
Weatherford International,
Inc.(a) 1,600,000 54,200,000
- ---------------------------------------------------------------
549,747,001
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.99%
Apache Corp. 1,790,000 69,810,000
- ---------------------------------------------------------------
EOG Resources, Inc. 3,200,000 66,600,000
- ---------------------------------------------------------------
Santa Fe Snyder Corp.(a) 1,750,000 15,093,750
- ---------------------------------------------------------------
151,503,750
- ---------------------------------------------------------------
PERSONAL CARE-0.23%
Estee Lauder Cos. Inc.-Class A 750,000 34,968,750
- ---------------------------------------------------------------
PUBLISHING-0.43%
McGraw-Hill Cos., Inc. (The) 1,100,000 65,587,500
- ---------------------------------------------------------------
RAILROADS-0.70%
Kansas City Southern Industries,
Inc. 2,250,000 106,734,375
- ---------------------------------------------------------------
RESTAURANTS-0.78%
Brinker International, Inc.(a) 2,000,000 46,625,000
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(a) 1,750,000 40,250,000
- ---------------------------------------------------------------
Papa John's International,
Inc.(a) 851,500 31,824,813
- ---------------------------------------------------------------
118,699,813
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.58%
Lowe's Companies, Inc. 1,600,000 88,000,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.95%
Best Buy Co., Inc.(a) 1,750,000 97,234,375
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 1,954,600 120,696,550
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 2,500,000 106,718,750
- ---------------------------------------------------------------
Tandy Corp. 2,000,000 125,875,000
- ---------------------------------------------------------------
450,524,675
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.98%
Kohl's Corp.(a) 2,000,000 149,625,000
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.17%
Dollar Tree Stores, Inc.(a) 1,810,600 78,874,263
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 2,850,000 58,781,250
- ---------------------------------------------------------------
Ross Stores, Inc. 2,000,000 41,250,000
- ---------------------------------------------------------------
178,905,513
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.27%
Kroger Co. (The)(a) 2,000,000 41,625,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-2.80%
Barnes & Noble, Inc.(a) 1,153,000 23,996,813
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 2,750,100 91,612,706
- ---------------------------------------------------------------
eToys, Inc.(a) 1,169,000 69,847,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-(CONTINUED)
Linens 'n Things, Inc.(a) 1,285,300 $ 51,090,675
- ---------------------------------------------------------------
Staples, Inc.(a) 6,000,000 133,125,000
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,077,500 57,915,625
- ---------------------------------------------------------------
427,588,569
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.76%
American Eagle Outfitters,
Inc.(a) 808,300 34,605,344
- ---------------------------------------------------------------
Intimate Brands, Inc. 1,000,000 41,000,000
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(d) 2,310,075 50,677,270
- ---------------------------------------------------------------
Talbots, Inc. (The) 1,302,100 61,280,081
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 3,000,000 81,375,000
- ---------------------------------------------------------------
268,937,695
- ---------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-3.31%
CMGI, Inc.(a) 500,000 54,718,750
- ---------------------------------------------------------------
Interpublic Group of Companies,
Inc. 1,000,000 40,625,000
- ---------------------------------------------------------------
Lamar Advertising Co.(a)(d) 3,025,000 163,350,000
- ---------------------------------------------------------------
Omnicom Group, Inc. 2,500,000 220,000,000
- ---------------------------------------------------------------
TMP Worldwide, Inc.(a) 450,000 28,096,875
- ---------------------------------------------------------------
506,790,625
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.91%
ChoicePoint, Inc.(a) 617,300 38,156,856
- ---------------------------------------------------------------
Cintas Corp. 1,500,000 90,375,000
- ---------------------------------------------------------------
Viad Corp. 400,500 9,837,281
- ---------------------------------------------------------------
138,369,137
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.02%
Affiliated Computer Services,
Inc.-Class A(a) 1,000,000 38,000,000
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 6,750,000 182,671,875
- ---------------------------------------------------------------
DST Systems, Inc.(a) 750,000 47,765,625
- ---------------------------------------------------------------
Fiserv, Inc.(a) 3,750,000 120,000,000
- ---------------------------------------------------------------
Paychex, Inc. 1,875,000 73,828,125
- ---------------------------------------------------------------
462,265,625
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.32%
Valassis Communications, Inc.(a) 1,125,000 48,375,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.63%
Crown Castle International
Corp.(a) 2,750,000 52,937,500
- ---------------------------------------------------------------
Metromedia Fiber Network,
Inc.-Class A(a) 1,290,000 42,650,625
- ---------------------------------------------------------------
95,588,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.23%
Global TeleSystems Group,
Inc.(a) 1,500,000 35,906,250
- ---------------------------------------------------------------
TELEPHONE-1.38%
CenturyTel, Inc. 2,249,925 90,981,342
- ---------------------------------------------------------------
</TABLE>
AIM CONSTELLATION FUND 21
<PAGE> 24
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
Cincinnati Bell, Inc.(a) 1,000,000 $ 20,812,500
- ---------------------------------------------------------------
NTL, Inc.(a) 687,500 51,820,313
- ---------------------------------------------------------------
RCN Corp.(a) 1,000,000 47,875,000
- ---------------------------------------------------------------
211,489,155
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.90%
Jones Apparel Group, Inc.(a) 2,563,800 81,080,175
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 2,000,000 56,500,000
- ---------------------------------------------------------------
137,580,175
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$8,597,266,374) 14,606,399,932
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
OPTIONS
PURCHASED-0.00%
COMPUTERS
(PERIPHERALS)-0.00%
EMC Corp. (Cost
$1,338,808) 5,691 $60 Dec-99 $604,669
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.63%
STIC Liquid Assets Portfolio(e) 353,486,756 353,486,756
- ----------------------------------------------------------------
STIC Prime Portfolio(e) 353,486,756 353,486,756
- ----------------------------------------------------------------
Total Money Market Funds
(Cost $706,973,512) 706,973,512
- ----------------------------------------------------------------
TOTAL INVESTMENTS-100.17% 15,313,978,113
- ----------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.17%) (25,496,319)
- ----------------------------------------------------------------
NET ASSETS-100.00% $15,288,481,794
- ----------------------------------------------------------------
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)A portion of this security is subject to call options.
(c)A portion of this security is subject to put options.
(d)Affiliated issuers are those in which the Fund's holdings of an issuer
represents 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of any issuer
to have control (as defined in the Investment Company Act of 1940) of that
issuer. The aggregate market value of these securities as of 10/31/99 was
$434,847,420 which represented 2.84% of the Fund's net assets.
(e)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
22 AIM CONSTELLATION FUND
<PAGE> 25
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$9,305,578,694) $15,313,978,113
- ------------------------------------------------------------
Receivables for:
Investments sold 71,399,488
- ------------------------------------------------------------
Capital stock sold 10,526,738
- ------------------------------------------------------------
Dividends and interest 2,290,468
- ------------------------------------------------------------
Investment for deferred compensation plan 183,244
- ------------------------------------------------------------
Other assets 52,373
- ------------------------------------------------------------
Total assets 15,398,430,424
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 56,379,176
- ------------------------------------------------------------
Capital stock reacquired 30,978,770
- ------------------------------------------------------------
Deferred compensation 183,244
- ------------------------------------------------------------
Options written (premiums received
$3,848,894) 5,097,494
- ------------------------------------------------------------
Accrued advisory fees 7,461,612
- ------------------------------------------------------------
Accrued administrative services fees 70,930
- ------------------------------------------------------------
Accrued directors' fees 9,103
- ------------------------------------------------------------
Accrued distribution fees 5,519,204
- ------------------------------------------------------------
Accrued transfer agent fees 3,222,924
- ------------------------------------------------------------
Accrued operating expenses 1,026,173
- ------------------------------------------------------------
Total liabilities 109,948,630
- ------------------------------------------------------------
Net assets applicable to shares outstanding $15,288,481,794
============================================================
NET ASSETS:
Class A $14,292,905,417
============================================================
Class B $ 589,717,520
============================================================
Class C $ 161,489,815
============================================================
Institutional Class $ 244,369,042
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 412,537,590
============================================================
Class B:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 17,344,531
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 4,751,201
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,787,086
============================================================
Class A:
Net asset value and redemption price per
share $ 34.65
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $34.65 / 94.50%) $ 36.67
============================================================
Class B:
Net asset value and offering price per
share $ 34.00
============================================================
Class C:
Net asset value and offering price per
share $ 33.99
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 36.01
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $242,135 foreign
withholding tax) $ 43,615,002
- ------------------------------------------------------------
Interest 42,276,941
- ------------------------------------------------------------
Total investment income 85,891,943
- ------------------------------------------------------------
EXPENSES:
Advisory fees 90,458,750
- ------------------------------------------------------------
Administrative services fees 431,120
- ------------------------------------------------------------
Custodian fees 801,999
- ------------------------------------------------------------
Directors' fees 93,740
- ------------------------------------------------------------
Distribution fees-Class A 40,983,445
- ------------------------------------------------------------
Distribution fees-Class B 4,365,731
- ------------------------------------------------------------
Distribution fees-Class C 1,175,217
- ------------------------------------------------------------
Transfer agent fees-Class A 23,308,682
- ------------------------------------------------------------
Transfer agent fees-Class B 1,540,074
- ------------------------------------------------------------
Transfer agent fees-Class C 368,612
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 22,937
- ------------------------------------------------------------
Other 2,563,084
- ------------------------------------------------------------
Total expenses 166,113,391
- ------------------------------------------------------------
Less: Fees waived by advisor (3,107,849)
- ------------------------------------------------------------
Expenses paid indirectly (238,341)
- ------------------------------------------------------------
Net expenses 162,767,201
- ------------------------------------------------------------
Net investment income (loss) (76,875,258)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 1,641,321,263
- ------------------------------------------------------------
Option contracts written 2,695,940
- ------------------------------------------------------------
1,644,017,203
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 2,670,530,284
- ------------------------------------------------------------
Foreign currencies (1,219)
- ------------------------------------------------------------
Option contracts written (1,395,306)
- ------------------------------------------------------------
2,669,133,759
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies, and option
contracts 4,313,150,962
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $4,236,275,704
============================================================
</TABLE>
See Notes to Financial Statements.
AIM CONSTELLATION FUND 23
<PAGE> 26
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (76,875,258) $ (68,697,946)
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, and option contracts 1,644,017,203 459,324,772
- -------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, and option
contracts 2,669,133,759 (647,916,119)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 4,236,275,704 (257,289,293)
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (337,206,115) (1,023,550,465)
- -------------------------------------------------------------------------------------------------
Class B (8,290,207) (2,750,431)
- -------------------------------------------------------------------------------------------------
Class C (2,229,567) (2,040,204)
- -------------------------------------------------------------------------------------------------
Institutional Class (5,075,580) (13,510,099)
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (1,783,881,252) (667,156,467)
- -------------------------------------------------------------------------------------------------
Class B 205,093,817 292,437,630
- -------------------------------------------------------------------------------------------------
Class C 55,508,352 60,444,760
- -------------------------------------------------------------------------------------------------
Institutional Class (4,793,973) 17,436,212
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,355,401,179 (1,595,978,357)
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 12,933,080,615 14,529,058,972
- -------------------------------------------------------------------------------------------------
End of period $15,288,481,794 $12,933,080,615
=================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 7,663,956,851 $ 9,156,848,152
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (551,737) (994,714)
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and option contracts 1,617,926,281 439,210,537
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and option contracts 6,007,150,399 3,338,016,640
- -------------------------------------------------------------------------------------------------
$15,288,481,794 $12,933,080,615
=================================================================================================
</TABLE>
See Notes to Financial Statements.
24 AIM CONSTELLATION FUND
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of 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 closing bid price on that day. 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 closing bid
price. 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 prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
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 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 is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income increased by
$77,318,235, undistributed net realized gains decreased by $112,499,990 and
paid in capital increased $35,181,755 as a result of net operating tax loss
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 reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
AIM CONSTELLATION FUND 25
<PAGE> 28
E. 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 also 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 or if the value of the foreign currency changes
unfavorably.
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 may be higher than that received when the call option was
written) a call option identical to the one originally written.
G. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
H. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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 agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. The waiver is
contractual and may not be terminated without approval of the Board of
Directors. During the year ended October 31, 1999, AIM waived fees of
$3,107,849. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $431,120 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $11,438,795 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 and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays
AIM Distributors compensation at the annual rate of 0.30% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. Of these amounts, the Fund may pay a service fee of
26 AIM CONSTELLATION FUND
<PAGE> 29
0.25% of the average daily net assets of the Class A, Class B or Class 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, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $40,983,445, $4,365,731 and
$1,175,217, respectively, as compensation under the Plans.
AIM Distributors received commissions of $3,182,696 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $605,519 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $31,683
for services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$170,495 and $67,846, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $238,341 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$8,369,125,551 and $10,276,104,460, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $6,146,948,281
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (161,712,109)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $5,985,236,172
=========================================================
Cost of investments for tax purposes is $9,328,741,941.
</TABLE>
AIM CONSTELLATION FUND 27
<PAGE> 30
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 1,875 $ 357,644
- -------------------------------------------------------------------------------------
Written 41,226 7,516,095
- -------------------------------------------------------------------------------------
Closed (17,190) (3,487,198)
- -------------------------------------------------------------------------------------
Expired (3,820) (537,647)
- -------------------------------------------------------------------------------------
End of period 22,091 $ 3,848,894
=====================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------------------------------------- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
EMC Corp. Jan. 00 $75 2,846 $1,162,552 $1,849,900 $ (687,348)
- -------------------------------------------------------------------------------------------------------------------
Lucent Technologies Inc. Nov. 99 65 19,245 2,686,342 3,247,594 (561,252)
- -------------------------------------------------------------------------------------------------------------------
22,091 $3,848,894 $5,097,494 $(1,248,600)
===================================================================================================================
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 98,564,141 $ 2,981,238,092 271,511,337 $ 7,555,171,888
- ------------------------------------------------------------------------------------------------------------------------
Class B 10,942,571 332,728,027 12,877,388 356,713,527
- ------------------------------------------------------------------------------------------------------------------------
Class C 5,133,893 156,450,704 2,960,570 81,123,332
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,596,295 51,100,608 2,149,830 60,442,629
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 11,320,463 318,895,308 38,633,795 977,878,833
- ------------------------------------------------------------------------------------------------------------------------
Class B 286,888 7,992,642 104,498 2,643,686
- ------------------------------------------------------------------------------------------------------------------------
Class C 75,962 2,115,494 76,723 1,938,518
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 170,003 4,957,282 494,582 12,886,955
- ------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (167,354,090) (5,084,014,652) (330,045,727) (9,200,207,188)
- ------------------------------------------------------------------------------------------------------------------------
Class B (4,443,036) (135,626,852) (2,423,778) (66,919,583)
- ------------------------------------------------------------------------------------------------------------------------
Class C (3,390,263) (103,057,846) (842,846) (22,617,090)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,915,980) (60,851,863) (1,977,243) (55,893,372)
- ------------------------------------------------------------------------------------------------------------------------
(49,013,153) $(1,528,073,056) (6,480,871) $ (296,837,865)
========================================================================================================================
</TABLE>
28 AIM CONSTELLATION FUND
<PAGE> 31
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 27.25 $ 30.00 $ 26.01 $ 24.05 $ 18.49
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.01) -- 0.02 0.04 0.02
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 9.50 (0.65) 4.86 2.67 6.06
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 9.49 (0.65) 4.88 2.71 6.08
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Distributions from net realized gains (0.73) (2.10) (0.89) (0.75) (0.52)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 36.01 $ 27.25 $ 30.00 $ 26.01 $ 24.05
============================================================ ======== ======== ======== ======== ========
Total return 35.46% (1.85)% 19.42% 11.81% 34.09%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $244,369 $189,039 $188,109 $293,035 $138,918
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(a) 0.64%(b) 0.63% 0.65% 0.66% 0.66%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income (loss) to average net
assets(c) (0.04)%(b) (0.01)% 0.06% 0.21% 0.18%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 62% 76% 67% 58% 45%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.66%, 0.65%, 0.67%, 0.67% and 0.68% for 1999-1995.
(b) Ratios are based on average net assets of $216,157,183.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) prior to fee waivers and/or expense reimbursements were
(0.06)%, (0.03)%, 0.04%, 0.20% and 0.16% for 1999-1995.
- --------------------------------------------------------------------------------
29
AIM CONSTELLATION FUND
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Constellation Fund (a portfolio of
AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended, and the financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Constellation Fund as of October 31, 1999, and the
results of its operations for the year then ended, the
changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended,
in conformity with generally accepted accounting
principles.
KPMG LLP
December 3, 1999
Houston, Texas
30 AIM CONSTELLATION FUND
<PAGE> 33
BOARD OF DIRECTORS
Charles T. Bauer
Chairman
A I M Management Group Inc.
Bruce L. Crockett
Director
ACE Limited;
Formerly Director, President, and
Chief Executive Officer
COMSAT Corporation
Owen Daly II
Director
Cortland Trust Inc.
Edward K. Dunn Jr.
Chairman, Mercantile Mortgage Corp.;
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares
Jack Fields
Chief Executive Officer
Texana Global, Inc.;
Formerly Member
of the U.S. House of Representatives
Carl Frischling
Partner
Kramer, Levin, Naftalis & Frankel LLP
Robert H. Graham
President and Chief Executive Officer
A I M Management Group Inc.
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.;
Commissioner, New York City Dept. for the
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of
New York State
Lewis F. Pennock
Attorney
Louis S. Sklar
Executive Vice President
Hines Interests
Limited Partnership
OFFICERS
Charles T. Bauer
Chairman
Robert H. Graham
President
Carol F. Relihan
Senior Vice President and Secretary
Gary T. Crum
Senior Vice President
Edgar M. Larsen
Senior Vice President
Dana R. Sutton
Vice President and Treasurer
Melville B. Cox
Vice President
Mary J. Benson
Assistant Vice President
and Assistant Treasurer
Sheri Morris
Assistant Vice President
and Assistant Treasurer
Renee A. Friedli
Assistant Secretary
P. Michelle Grace
Assistant Secretary
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
OFFICE OF THE FUND
11 Greenway Plaza
Suite 100
Houston, TX 77046
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
SUB-ADVISOR
A I M Capital Management, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
TRANSFER AGENT
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
COUNSEL TO THE FUND
Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE DIRECTORS
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza
Suite 100
Houston, TX 77002
AUDITORS
KPMG LLP
700 Louisiana
Houston, TX 77002
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Constellation Fund Institutional Class distributed long-term capital gains
of $465,301,469 during the Fund's tax year ended October 31, 1999.
AIM CONSTELLATION FUND 31
<PAGE> 34
AIM WEINGARTEN FUND
AIM Weingarten Fund is for shareholders who seek long-term growth of capital
through investments primarily in common stocks of leading U.S. companies
considered by management to have strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Weingarten Fund's Institutional Class performance figures are historical
and reflect reinvestment of all distributions and changes in net asset
value.
o Had fees and expenses not been waived during the reporting period, returns
would have been lower.
o One-year performance includes reinvested distributions of $1.5617 per share.
o Average annual total returns for periods ended 9/30/99 (the most recent
calendar quarter-end) are as follows: one year, 40.34%; five years, 23.98%;
inception (10/8/91), 17.04%.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lipper, Inc. is an independent mutual fund performance monitor.
o The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded primarily industrial stocks.
o The unmanaged Russell 1000 Index is generally considered representative of
large-capitalization stocks.
o The unmanaged Standard & Poor's Composite Index of 500 stocks (S&P 500) is
widely regarded by investors to be representative of the stock market in
general.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
o Performance results for the indexes are for the period 9/30/91-10/31/99
RESULTS OF A $10,000 INVESTMENT
AIM WEINGARTEN FUND VS. BENCHMARK INDEXES
10/8/91-10/31/99
In thousands
================================================================================
AIM Weingarten Fund,
Institutional Class S&P 500 Russell 1000
- --------------------------------------------------------------------------------
10/91 $10,368 $10,161 $10,134
10/92 11,110 11,256 11,142
10/93 11,836 13,030 12,804
10/94 12,354 13,434 13,297
10/95 15,898 17,062 16,809
10/96 18,337 20,973 20,857
10/97 23,356 27,650 27,552
10/98 26,343 33,101 33,616
10/99 36,682 41,569 42,243
Past performance cannot guarantee comparable future results.
Source: Lipper, Inc.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99
================================================================================
AIM Weingarten Fund Institutional Class
Inception (10/8/91) 17.49%
5 years 24.32
1 year 39.25
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
Since the last reporting period, AIM Weingarten Fund has elected to use the
Russell 1000 Index as its benchmark. This index more closely reflects the
performance of securities in which the fund invests. The fund will no longer
measure its performance against the S&P 500, the index published in previous
reports to shareholders. Because this is the first reporting period since we
have adopted the new index, SEC guidelines require that we compare the fund's
performance to both the old and the new index.
AIM WEINGARTEN FUND
32
<PAGE> 35
ANNUAL REPORT / MANAGER'S OVERVIEW
FUND BEATS INDEX, BOOSTED BY
TECHNOLOGY HOLDINGS
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED OCTOBER 31, 1999?
Benefiting from the technology sector's continued strength, AIM Weingarten
Fund's Institutional Class posted impressive gains for the fiscal year ended
October 31, 1999 with a total return of 39.25%. Fund performance handily
outpaced the Russell 1000 Index, which returned 25.58% for the same period, and
the S&P 500, whose total return was 25.66%.
At the reporting period's close, the fund's net assets totaled $114.1
million, up from $72.9 million a year earlier.
WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
Investor concern over interest rates and the year 2000 (Y2K) computer problem
caused the financial markets to be very volatile in 1999. In June and August,
the Federal Reserve Board (the Fed) raised interest rates in two quarter-point
moves. Investors were unsure what Fed policymakers would do at their October
meeting, and the uncertainty roiled the markets. The Fed chose to leave rates
unchanged but adopted a "tightening bias," indicating that it may be inclined to
raise rates in the near future.
Meanwhile the market transitioned from an exclusively large-cap growth
market of the last two years to a much broader market, which included value and
cyclical as well as small- and mid-cap stocks. These stocks had been undervalued
for some time, but they became attractive as many large companies suffered
earnings disappointments.
In October, the Dow Jones Industrial Average revised its membership to
include Microsoft, Intel, SBC Communications and Home Depot. In one of the
biggest shake-ups of its 103-year history, the industrial average replaced
Chevron, Union Carbide, Goodyear Tire and Sears. The move signaled the broader
markets' transition to the "new economy," dominated by technology,
telecomunications and warehouse retailers. (As of October 31, 1999 the fund did
not have any holdings in SBC Communications, Chevron, Union Carbide, Goodyear
Tire and Sears).
WHAT CONTRIBUTED TO THE FUND'S STRONG GAINS DURING THE REPORTING PERIOD?
The fund's sterling performance can be credited to our exposure to the
technology sector, the only S&P 500 industry group to post a positive return
during the third quarter of 1999, when most sectors of the equity market
retreated. Microsoft, Cisco Systems, America Online and Gateway have all been
strong performers during the fiscal year. The fund has also benefited from its
holdings in the semiconductor industry. Toward the end of the fiscal year, the
semiconductor industry was the strongest-performing area within the technology
sector in terms of stock price.
Chipmakers recovered after several years in the doldrums and are expected to
post a 15% increase in production this year. This increase is fueled by the
proliferation of chips for communications and Internet infrastructure. As of
October 31, technology holdings accounted for more than 40% of the fund's total
net assets.
THE FUND'S LARGEST HOLDING IS MICROSOFT. HOW WILL THE RULING IN THE DEPARTMENT
OF JUSTICE CASE AFFECT YOUR INVESTMENT?
After the close of the reporting period, a federal judge ruled that Microsoft is
a monopoly. As of this writing, neither a settlement nor an appeal has been
announced, and it is unlikely that a final decision will be made until 2001.
While we cannot comment on our specific plans to buy or sell stocks, we can say
that as of
-------------------------------------
TOWARD THE END OF THE FISCAL YEAR,
THE SEMICONDUCTOR INDUSTRY WAS THE
STRONGEST PERFORMING AREA WITHIN THE
TECHNOLOGY SECTOR IN TERMS OF STOCK PRICE.
-------------------------------------
GROWTH OF NET ASSETS
In millions
================================================================================
10/31/98 $ 72.9
10/31/99 $114.1
================================================================================
AIM WEINGARTEN FUND INSTITUTIONAL CLASS VS. BENCHMARK INDEXES
One-year returns, as of 10/31/99
================================================================================
Fund 39.25%
S&P 500 25.66%
Russell 25.58%
================================================================================
AIM WEINGARTEN FUND
33
<PAGE> 36
ANNUAL REPORT / MANAGER'S OVERVIEW
this time, Microsoft remains a large holding in the fund. We believe that the
company's growth prospects remain strong, especially with the upcoming
introduction of two new software products: Office 2000 and Windows 2000. In the
short term, the stock may be volatile, but this is a core growth company that
should continue to be a part of our portfolio.
DID YOU MAKE ANY CHANGES TO THE FUND'S PORTFOLIO DURING THE FISCAL YEAR?
As earnings growth narrowed in 1999, we decided to cull the fund's holdings. The
number of holdings decreased to 82 from more than 120 a year ago. In keeping
with AIM's earnings-momentum investment strategy, we also sold stocks with
negative earnings revisions. These sales generated realized capital gains in
some cases but allowed us to concentrate on the highest growth stocks. We
believe that the overall effect of focusing on the best-performing stocks has
been positive and should improve fund performance over the long term.
The perception of risk surrounding Y2K may give the financial markets some
troubles for the remainder of 1999 as investors decide to stay on the sidelines
in terms of fund purchases. In anticipation of these events, the fund is holding
slightly more cash. Normally we hold 2% to 3% in cash. On October 31, cash
accounted for 6.05% of the fund's total net assets. The increase in cash was a
consequence of selling stocks that had disappointed during this earnings season,
and we have decided not to roll that cash into existing holdings. We believe
that having an extra 3% to 4% in cash when the year turns is a prudent stance.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
Shortly after the end of the fiscal year, Fed policymakers increased short-term
interest rates by a quarter of a percentage point, but shifted to a neutral
bias. We believe that this move may improve investor confidence in the near
future since it means that the Fed is serious about heading off inflationary
pressures.
The long-term outlook for the market remains positive. The United States is
experiencing one of the longest expansion periods in its history. The U.S.
economy remains strong, inflation is low and the country is enjoying a budget
surplus. Given these reasons, we remain excited about AIM Weingarten Fund. We
continue to find quality companies in the traditional growth sectors of
technology, health care and consumer cyclicals. And although market sectors will
always go in and out of favor, we believe that high-growth companies in the
large- and mid-cap sectors will continue to fare well in the current strong
business environment here and abroad.
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
<TABLE>
<CAPTION>
====================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Microsoft Corp. 4.58% 1. Computers (Software & Services) 13.02%
2. Johnson & Johnson 3.04 2. Communications Equipment 9.33
3. Warner-Lambert Co. 2.91 3. Healthcare (Diversified) 7.95
4. Comcast Corp. 2.88 4. Broadcasting (Television, Radio & Cable) 7.88
5. America Online, Inc. 2.70 5. Computers (Hardware) 6.54
6. Home Depot, Inc. (The) 2.58 6. Electronics (Semiconductors) 5.88
7. Tyco International Ltd. 2.50 7. Financial (Diversified) 4.96
8. Gateway Inc. 2.48 8. Electrical Equipment 4.42
9. Outdoor Systems, Inc. 2.43 9. Retail (Building Supplies) 4.10
10. Cisco Systems, Inc. 2.22 10. Retail (General Merchandise) 3.01
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
====================================================================================================
</TABLE>
AIM WEINGARTEN FUND
34
<PAGE> 37
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS & OTHER
EQUITY INTERESTS-94.51%
BIOTECHNOLOGY-0.32%
Amgen, Inc.(a) 386,300 $ 30,807,425
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-7.88%
AT&T Corp. - Liberty Media
Group-Class A(a) 3,300,000 130,968,750
- ---------------------------------------------------------------
Cablevision Systems Corp.-Class
A(a) 579,700 39,165,981
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 2,000,000 160,750,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 6,554,600 276,112,525
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 2,330,900 105,910,269
- ---------------------------------------------------------------
Infinity Broadcasting Corp.-Class
A(a) 1,274,500 44,049,906
- ---------------------------------------------------------------
756,957,431
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.33%
General Instrument Corp.(a) 2,822,200 151,869,637
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 250,000 41,718,750
- ---------------------------------------------------------------
Lucent Technologies Inc. 2,500,000 160,625,000
- ---------------------------------------------------------------
Motorola, Inc. 1,100,000 107,181,250
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,000,000 115,562,500
- ---------------------------------------------------------------
Nortel Networks Corp. (Canada) 3,250,000 201,296,875
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 247,700 55,175,175
- ---------------------------------------------------------------
Tellabs, Inc.(a) 988,000 62,491,000
- ---------------------------------------------------------------
895,920,187
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-6.54%
Apple Computer, Inc.(a) 1,000,000 80,125,000
- ---------------------------------------------------------------
Gateway, Inc.(a) 3,600,000 237,825,000
- ---------------------------------------------------------------
International Business Machines
Corp. 1,000,000 98,375,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a)(b) 2,000,000 211,625,000
- ---------------------------------------------------------------
627,950,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.22%
Cisco Systems, Inc.(a)(b) 2,879,800 213,105,200
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.66%
EMC Corp.(a)(b) 900,000 65,700,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 1,204,400 94,018,475
- ---------------------------------------------------------------
159,718,475
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-13.02%
America Online, Inc.(a)(b) 2,000,000 259,375,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 634,800 40,746,225
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 1,581,700 101,426,512
- ---------------------------------------------------------------
Compuware Corp.(a)(b) 421,400 11,720,187
- ---------------------------------------------------------------
Intuit, Inc.(a) 1,198,200 34,897,575
- ---------------------------------------------------------------
Microsoft Corp.(a) 4,750,000 439,671,875
- ---------------------------------------------------------------
Oracle Corp.(a) 248,600 11,824,037
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Rational Software Corp.(a) 528,600 $ 22,597,650
- ---------------------------------------------------------------
Unisys Corp.(a) 2,977,600 72,206,800
- ---------------------------------------------------------------
VERITAS Software Corp.(a)(b) 1,250,000 134,843,750
- ---------------------------------------------------------------
Yahoo! Inc.(a)(b) 675,000 120,867,188
- ---------------------------------------------------------------
1,250,176,799
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.42%
General Electric Co. 1,000,000 135,562,500
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V.-ADR
(Netherlands) 506,000 52,592,375
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. (Netherlands) 948,520 97,294,320
- ---------------------------------------------------------------
Sanmina Corp.(a)(b) 1,023,000 92,133,938
- ---------------------------------------------------------------
Symbol Technologies, Inc. 1,188,000 47,223,000
- ---------------------------------------------------------------
424,806,133
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.44%
Waters Corp.(a) 800,000 42,500,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-5.88%
Analog Devices, Inc.(a) 1,300,000 69,062,500
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 2,500,000 63,906,250
- ---------------------------------------------------------------
Intel Corp.(b) 720,000 55,755,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 1,250,000 66,484,375
- ---------------------------------------------------------------
Texas Instruments, Inc. 1,700,000 152,575,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 2,000,000 157,250,000
- ---------------------------------------------------------------
565,033,125
- ---------------------------------------------------------------
ENTERTAINMENT-1.38%
Time Warner, Inc. 1,900,000 132,406,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.96%
American Express Co. 700,000 107,800,000
- ---------------------------------------------------------------
Fannie Mae 2,263,900 160,170,925
- ---------------------------------------------------------------
Freddie Mac 3,859,600 208,659,625
- ---------------------------------------------------------------
476,630,550
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-7.95%
Bristol-Myers Squibb Co. 2,500,000 192,031,250
- ---------------------------------------------------------------
Johnson & Johnson 2,785,947 291,827,948
- ---------------------------------------------------------------
Warner-Lambert Co. 3,500,000 279,343,750
- ---------------------------------------------------------------
763,202,948
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.73%
Pfizer, Inc. 1,076,200 42,509,900
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 1,500,000 80,906,250
- ---------------------------------------------------------------
Schering-Plough Corp. 2,795,700 138,387,150
- ---------------------------------------------------------------
261,803,300
- ---------------------------------------------------------------
</TABLE>
AIM WEINGARTEN FUND 35
<PAGE> 38
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.44%
Bausch & Lomb, Inc. 412,200 $ 22,258,800
- ---------------------------------------------------------------
Guidant Corp. 4,297,100 212,169,313
- ---------------------------------------------------------------
234,428,113
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.18%
American International Group,
Inc. 2,030,500 209,014,594
- ---------------------------------------------------------------
LODGING-HOTELS-2.05%
Carnival Corp. 2,318,800 103,186,600
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 1,762,300 93,512,044
- ---------------------------------------------------------------
196,698,644
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.50%
Tyco International Ltd. 6,000,000 239,625,000
- ---------------------------------------------------------------
NATURAL GAS-0.48%
Enron Corp. 1,150,000 45,928,125
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-4.10%
Home Depot, Inc. (The) 3,275,000 247,262,500
- ---------------------------------------------------------------
Lowe's Companies, Inc. 2,660,000 146,300,000
- ---------------------------------------------------------------
393,562,500
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.51%
Best Buy Co., Inc.(a) 1,340,000 74,453,750
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 1,700,000 72,568,750
- ---------------------------------------------------------------
Tandy Corp. 1,500,000 94,406,250
- ---------------------------------------------------------------
241,428,750
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.15%
Dollar Tree Stores, Inc.(a) 324,600 14,140,388
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.42%
Kroger Co. (The)(a) 1,950,000 40,584,375
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-3.01%
Costco Wholesale Corp.(a) 700,000 56,218,750
- ---------------------------------------------------------------
Dayton Hudson Corp. 1,405,300 90,817,513
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-(CONTINUED)
Wal-Mart Stores, Inc. 2,500,000 $ 141,718,750
- ---------------------------------------------------------------
288,755,013
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.38%
Tiffany & Co. 609,000 36,235,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.65%
Gap, Inc. (The) 670,000 24,873,750
- ---------------------------------------------------------------
Intimate Brands, Inc.(c) 909,100 37,273,100
- ---------------------------------------------------------------
62,146,850
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.43%
Outdoor Systems, Inc.(a) 5,500,000 233,062,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.94%
Concord EFS, Inc.(a) 323,700 8,760,131
- ---------------------------------------------------------------
First Data Corp. 1,440,000 65,790,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 477,175 15,269,600
- ---------------------------------------------------------------
89,819,731
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.54%
Nextel Communications, Inc.-Class
A(a) 1,300,000 112,043,750
- ---------------------------------------------------------------
Western Wireless Corp.-Class A(a) 672,900 35,579,588
- ---------------------------------------------------------------
147,623,338
- ---------------------------------------------------------------
Total Domestic Common Stocks
& Other Equity Interests
(Cost $5,900,438,167) 9,074,071,244
- ---------------------------------------------------------------
MONEY MARKET FUNDS-6.05%
STIC Liquid Assets Portfolio(d) 290,412,117 290,412,117
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 290,412,117 290,412,117
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $580,824,234) 580,824,234
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.56% 9,654,895,478
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.56%) (54,205,007)
- ---------------------------------------------------------------
NET ASSETS-100.00% $9,600,690,471
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of the issuer
to have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value as of 10/31/99 represented 0.39% of the Fund's net
assets.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
36 AIM WEINGARTEN FUND
<PAGE> 39
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$6,481,262,401) $9,654,895,478
- --------------------------------------------------------
Receivables for:
Investments sold 292,802,227
- --------------------------------------------------------
Capital stock sold 9,059,459
- --------------------------------------------------------
Dividends and interest 3,724,856
- --------------------------------------------------------
Investment for deferred compensation
plan 132,089
- --------------------------------------------------------
Other assets 170,438
- --------------------------------------------------------
Total assets 9,960,784,547
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 200,543,565
- --------------------------------------------------------
Capital stock reacquired 11,182,096
- --------------------------------------------------------
Deferred compensation 132,089
- --------------------------------------------------------
Options written (premiums received
$116,996,621) 137,381,137
- --------------------------------------------------------
Accrued advisory fees 4,560,939
- --------------------------------------------------------
Accrued administrative services fees 33,365
- --------------------------------------------------------
Accrued directors' fees 3,745
- --------------------------------------------------------
Accrued distribution fees 4,061,117
- --------------------------------------------------------
Accrued transfer agent fees 1,100,647
- --------------------------------------------------------
Accrued operating expenses 1,095,376
- --------------------------------------------------------
Total liabilities 360,094,076
- --------------------------------------------------------
Net assets applicable to shares
outstanding $9,600,690,471
========================================================
NET ASSETS:
Class A $8,089,739,193
========================================================
Class B $1,291,455,555
========================================================
Class C $ 105,419,980
========================================================
Institutional Class $ 114,075,743
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 285,748,483
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 47,327,507
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 3,860,919
========================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 3,938,787
========================================================
Class A:
Net asset value and redemption price
per share $ 28.31
- --------------------------------------------------------
Offering price per share:
(Net asset value of
$28.31 / 94.50%) $ 29.96
========================================================
Class B:
Net asset value and offering price per
share $ 27.29
========================================================
Class C:
Net asset value and offering price per
share $ 27.30
========================================================
Institutional Class:
Net asset value, offering and
redemption price per share $ 28.96
========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $491,673 foreign
withholding tax) $ 35,922,859
- ----------------------------------------------------------
Interest 20,631,177
- ----------------------------------------------------------
Total investment income 56,554,036
- ----------------------------------------------------------
EXPENSES:
Advisory fees 54,999,214
- ----------------------------------------------------------
Administrative services fees 281,500
- ----------------------------------------------------------
Custodian fees 560,875
- ----------------------------------------------------------
Directors' fees 63,384
- ----------------------------------------------------------
Distribution fees-Class A 22,561,363
- ----------------------------------------------------------
Distribution fees-Class B 10,382,904
- ----------------------------------------------------------
Distribution fees-Class C 593,913
- ----------------------------------------------------------
Transfer agent fees-Class A 8,377,262
- ----------------------------------------------------------
Transfer agent fees-Class B 2,106,122
- ----------------------------------------------------------
Transfer agent fees-Class C 144,793
- ----------------------------------------------------------
Transfer agent fees-Institutional Class 11,831
- ----------------------------------------------------------
Other 2,155,285
- ----------------------------------------------------------
Total expenses 102,238,446
- ----------------------------------------------------------
Less: Fees waived by advisor (4,288,405)
- ----------------------------------------------------------
Expenses paid indirectly (164,622)
- ----------------------------------------------------------
Net expenses 97,785,419
- ----------------------------------------------------------
Net investment income (loss) (41,231,383)
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,362,280,575
- ----------------------------------------------------------
Foreign currencies (5,296,267)
- ----------------------------------------------------------
Futures contracts 10,089,965
- ----------------------------------------------------------
Option contracts purchased (4,655,890)
- ----------------------------------------------------------
Option contracts written (109,805,107)
- ----------------------------------------------------------
1,252,613,276
- ----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,465,393,764
- ----------------------------------------------------------
Foreign currencies 25,402
- ----------------------------------------------------------
Futures contracts (6,756,866)
- ----------------------------------------------------------
Option contracts purchased (3,182,585)
- ----------------------------------------------------------
Option contracts written (27,511,086)
- ----------------------------------------------------------
1,427,968,629
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 2,680,581,905
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $2,639,350,522
==========================================================
</TABLE>
AIM WEINGARTEN FUND 37
<PAGE> 40
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (41,231,383) $ 89,216
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 1,252,613,276 514,276,104
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 1,427,968,629 255,708,695
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,639,350,522 770,074,015
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (3,691,627) --
- ----------------------------------------------------------------------------------------------
Institutional Class (343,112) --
- ----------------------------------------------------------------------------------------------
Distribution in excess of net investment income:
Class A (377,640)
- ----------------------------------------------------------------------------------------------
Institutional Class (5,008)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (404,965,108) (864,947,763)
- ----------------------------------------------------------------------------------------------
Class B (49,731,739) (76,736,323)
- ----------------------------------------------------------------------------------------------
Class C (1,700,816) (626,936)
- ----------------------------------------------------------------------------------------------
Institutional Class (4,837,664) (9,231,714)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 95,538,920 442,079,076
- ----------------------------------------------------------------------------------------------
Class B 347,953,526 240,674,117
- ----------------------------------------------------------------------------------------------
Class C 70,937,422 21,194,188
- ----------------------------------------------------------------------------------------------
Institutional Class 16,644,022 12,302,794
- ----------------------------------------------------------------------------------------------
Net increase in net assets 2,704,771,698 534,781,454
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,895,918,773 6,361,137,319
- ----------------------------------------------------------------------------------------------
End of period $9,600,690,471 $6,895,918,773
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $5,279,351,381 $4,682,377,491
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (317,554) 4,034,739
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 1,168,419,727 484,238,255
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 3,153,236,917 1,725,268,288
- ----------------------------------------------------------------------------------------------
$9,600,690,471 $6,895,918,773
==============================================================================================
</TABLE>
See Notes to Financial Statements.
38 AIM WEINGARTEN FUND
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital primarily by
investing in common stocks of seasoned and better-capitalized companies.
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 closing bid price on that day. 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 closing bid
price. 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 prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
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 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 is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$41,296,477, undistributed net realized gains decreased by $107,196,477 and
paid-in capital increased by $65,900,000 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and net
operating loss reclassifications 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 reclassification
discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. 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
AIM WEINGARTEN FUND 39
<PAGE> 42
foreign currency contract to attempt to minimize the risk to the Fund from
adverse changes in the relationship between currencies. The Fund may also
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 or if the value of
the foreign currency changes unfavorably.
F. Futures Contracts -- The Fund may purchase or sell 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.
G. 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 may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
I. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $350
million, plus 0.625% of the Fund's average daily net assets in excess of $350
million. AIM has contractually agreed to waive a portion of its advisory fees
payable by the Fund to AIM to the extent necessary to reduce the fees paid by
the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver is contractual and may not be terminated
without approval of the Board of Directors. During the year ended October 31,
1999, AIM waived fees of $4,288,405. Under the terms of a master sub-advisory
agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM
pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $281,500 for such services.
40 AIM WEINGARTEN FUND
<PAGE> 43
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $5,776,859 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 and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays
AIM Distributors compensation at the annual rate of 0.30% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C 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 Class 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, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $22,561,363, $10,382,904 and
$593,913, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,209,013 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $156,642 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $20,003
for services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$102,746 and $61,876, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $164,622 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$10,278,536,302 and $10,386,655,927, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $3,184,683,541
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (14,585,229)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $3,170,098,312
==========================================================
Cost of investments for tax purposes is $6,484,797,166.
</TABLE>
AIM WEINGARTEN FUND 41
<PAGE> 44
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -------------
<S> <C> <C>
Beginning of period 76,233 $ 44,508,416
- ---------------------------------------------------------------------------------------
Written 341,015 393,780,650
- ---------------------------------------------------------------------------------------
Closed (271,232) (293,502,772)
- ---------------------------------------------------------------------------------------
Exercised (46,212) (3,522,927)
- ---------------------------------------------------------------------------------------
Expired (7,902) (24,266,746)
- ---------------------------------------------------------------------------------------
End of period 91,902 $ 116,996,621
=======================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- -------------------------------------- -------- ------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Apr-00 $120 20,000 $ 44,712,107 $51,500,000 $ (6,787,893)
- --------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. Jan-00 70 28,798 22,892,140 24,118,325 (1,226,185)
- --------------------------------------------------------------------------------------------------------------------
Compuware Corp. Jan-00 30 4,214 1,409,536 1,211,525 198,011
- --------------------------------------------------------------------------------------------------------------------
EMC Corp. Apr-00 70 9,000 8,164,527 11,306,250 (3,141,723)
- --------------------------------------------------------------------------------------------------------------------
Intel Corp. Apr-00 75 7,200 6,278,190 7,875,000 (1,596,810)
- --------------------------------------------------------------------------------------------------------------------
Sanmina Corp. Jan-00 85 6,230 5,665,996 7,281,312 (1,615,316)
- --------------------------------------------------------------------------------------------------------------------
Sun Microsystems, Inc. Apr-00 90 5,609 7,835,511 13,636,881 (5,801,370)
- --------------------------------------------------------------------------------------------------------------------
VERITAS Software Corp. Dec-99 95 7,530 6,471,819 13,083,375 (6,611,556)
- --------------------------------------------------------------------------------------------------------------------
Yahoo! Inc. Jan-00 175 3,321 13,566,795 7,368,469 6,198,326
- --------------------------------------------------------------------------------------------------------------------
91,902 $116,996,621 137,381,137 (20,384,516)
====================================================================================================================
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 38,697,927 $ 994,480,979 62,788,326 $ 1,368,867,407
- ---------------------------------------------------------------------------------------------------------------------
Class B 17,982,789 456,125,945 12,056,594 257,385,548
- ---------------------------------------------------------------------------------------------------------------------
Class C 3,622,407 92,753,207 1,204,025 25,772,311
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 826,477 21,885,030 593,328 13,533,791
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 16,540,521 383,078,048 41,795,514 813,441,370
- ---------------------------------------------------------------------------------------------------------------------
Class B 2,102,927 47,274,883 3,831,332 73,061,374
- ---------------------------------------------------------------------------------------------------------------------
Class C 71,213 1,602,275 31,251 600,022
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 217,868 5,146,039 456,144 9,035,386
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (50,133,647) (1,282,020,107) (79,734,776) (1,740,229,701)
- ---------------------------------------------------------------------------------------------------------------------
Class B (6,174,366) (155,447,302) (4,228,997) (89,772,805)
- ---------------------------------------------------------------------------------------------------------------------
Class C (926,007) (23,418,060) (246,074) (5,178,145)
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class (391,478) (10,387,047) (458,838) (10,266,383)
- ---------------------------------------------------------------------------------------------------------------------
22,436,631 $ 531,073,890 38,087,829 $ 716,250,175
=====================================================================================================================
</TABLE>
42 AIM WEINGARTEN FUND
<PAGE> 45
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 22.18 $ 23.05 $ 20.46 $ 20.48 $ 17.94
- -------------------------------- -------- ------- -------- -------- --------
Income from investment
operations:
Net investment income 0.02 0.10 0.08 0.17 0.10
- -------------------------------- -------- ------- -------- -------- --------
Net gains on securities (both
realized and unrealized) 8.32 2.43 4.90 2.52 4.35
- -------------------------------- -------- ------- -------- -------- --------
Total from investment
operations 8.34 2.53 4.98 2.69 4.45
- -------------------------------- -------- ------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.10) -- (0.15) -- (0.13)
- -------------------------------- -------- ------- -------- -------- --------
Distributions from net
realized gains (1.46) (3.40) (2.24) (2.71) (1.78)
- -------------------------------- -------- ------- -------- -------- --------
Total distributions (1.56) (3.40) (2.39) (2.71) (1.91)
- -------------------------------- -------- ------- -------- -------- --------
Net asset value, end of period $ 28.96 $ 22.18 $ 23.05 $ 20.46 $ 20.48
================================ ======== ======= ======== ======== ========
Total return 39.20% 12.79% 27.37% 15.34% 28.69%
================================ ======== ======= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $114,076 $72,884 $ 62,124 $ 60,483 $ 54,332
================================ ======== ======= ======== ======== ========
Ratio of expenses to average net
assets(a) 0.63%(b) 0.62% 0.64% 0.65% 0.70%
================================ ======== ======= ======== ======== ========
Ratio of net investment income
to average net assets(c) 0.02%(b) 0.49% 0.50% 0.80% 0.45%
================================ ======== ======= ======== ======== ========
Portfolio turnover rate 124% 125% 128% 159% 139%
================================ ======== ======= ======== ======== ========
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68%, 0.67%, 0.68%, 0.68% and 0.72% for 1998-1995.
(b) Ratios are based on average net assets of $99,738,345.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were (0.03)%, 0.44%, 0.46%, 0.77% and 0.43% for 1998-1995.
43
AIM WEINGARTEN FUND
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended, and financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Weingarten Fund as of October 31, 1999, the results of
its operations for the year then ended, the changes in
its net assets for each of the years in the two-year
period then ended, and the financial highlights for each
of the years in the five-year period then ended in
conformity with generally accepted accounting principles.
KPMG LLP
December 3, 1999
Houston, Texas
44 AIM WEINGARTEN FUND
<PAGE> 47
BOARD OF DIRECTORS
Charles T. Bauer
Chairman
A I M Management Group Inc.
Bruce L. Crockett
Director
ACE Limited;
Formerly Director, President, and
Chief Executive Officer
COMSAT Corporation
Owen Daly II
Director
Cortland Trust Inc.
Edward K. Dunn Jr.
Chairman, Mercantile Mortgage Corp.;
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares
Jack Fields
Chief Executive Officer
Texana Global, Inc.;
Formerly Member
of the U.S. House of Representatives
Carl Frischling
Partner
Kramer, Levin, Naftalis & Frankel LLP
Robert H. Graham
President and Chief Executive Officer
A I M Management Group Inc.
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.;
Commissioner, New York City Dept. for the
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of
New York State
Lewis F. Pennock
Attorney
Louis S. Sklar
Executive Vice President
Hines Interests
Limited Partnership
OFFICERS
Charles T. Bauer
Chairman
Robert H. Graham
President
Carol F. Relihan
Senior Vice President and Secretary
Gary T. Crum
Senior Vice President
Edgar M. Larsen
Senior Vice President
Dana R. Sutton
Vice President and Treasurer
Melville B. Cox
Vice President
Mary J. Benson
Assistant Vice President
and Assistant Treasurer
Sheri Morris
Assistant Vice President
and Assistant Treasurer
Renee A. Friedli
Assistant Secretary
P. Michelle Grace
Assistant Secretary
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
OFFICE OF THE FUND
11 Greenway Plaza
Suite 100
Houston, TX 77046
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
SUB-ADVISOR
A I M Capital Management, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
TRANSFER AGENT
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
COUNSEL TO THE FUND
Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE DIRECTORS
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza
Suite 100
Houston, TX 77002
AUDITORS
KPMG LLP
700 Louisiana
Houston, TX 77002
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Weingarten Fund Institutional Class paid ordinary dividends in the amount of
$0.1041 per share during the Fund's tax year ended October 31, 1999. Of this
amount 12.47% is eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $527,231,000 during the
Fund's tax year ended October 31, 1999.
AIM WEINGARTEN FUND
