<PAGE> 1
ANNUAL REPORT / OCTOBER 31 1999
AIM BLUE CHIP FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------------
THE SWING BY PIERRE-AUGUSTE RENOIR
RENOIR BEGAN HIS CAREER AS A PAINTER IN A PORCELAIN FACTORY,
GAINING EXPERIENCE WITH THE COLORS THAT WOULD DISTINGUISH HIS
IMPRESSIONIST WORK AND LEARNING THE IMPORTANCE OF GOOD
CRAFTSMANSHIP. HIS PAINTINGS ARE AMONG SOME OF THE
BEST-KNOWN IN THE WORLD FOR THEIR SIGNIFICANCE AND THEIR
VALUE, AS ARE MANY OF THE BLUE-CHIP COMPANIES IN WHICH THIS
FUND INVESTS.
-------------------------------------
AIM Blue Chip Fund is for shareholders who seek long-term growth of capital with
a relatively conservative investment portfolio that contains the stocks of
top-performing companies across all business sectors of its benchmark index.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Blue Chip Fund's performance figures are historical, and they reflect
changes in net asset value and the reinvestment of all distributions.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B and Class C shares will differ from
that of its Class A shares due to differences in sales-charge structure and
expenses.
o The fund's average annual total returns, including sales charges, for
periods ended 9/30/99 (the most recent calendar quarter end) are as follows:
Class A shares, one year, 23.13%; five years, 22.99%; 10 years, 15.96%;
inception (2/4/87), 14.34%. Class B shares, one year, 24.37%; inception
(10/1/96), 22.33%. Class C shares, one year, 28.38%; inception (8/4/97),
15.95%.
o During the fiscal year ended 10/31/99, the fund paid distributions of
$0.1215 per share for Class A shares and $0.0970 per share for Class B and
Class C shares.
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 Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The unmanaged Lipper Growth and Income Funds Index represents an average of
the performance of the 30 largest growth-and-income funds. It is compiled by
Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged Nasdaq (National Association of Securities Dealers Automated
Quotation system) Composite Index is a group of more than 5,000
over-the-counter securities generally considered representative of the
small- and mid-capitalization company universe.
o The unmanaged Russell 1000 Stock Index is generally considered
representative of the performance of stocks of large-capitalization
companies.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a
group of securities widely regarded by investors as representative of the
stock market in general.
o You cannot invest in any index listed. Unless otherwise indicated, index
results include reinvested dividends and do not reflect sales charges.
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.
AIM BLUE CHIP 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 us, either at our Web site, aimfunds.com, or through our Client Services
department at 800-959-4246. Information about your account is also available
through our automated AIM Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
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.
-------------------------------------
AIM BLUE CHIP FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
AIM BLUE CHIP FUND OUTWITS FICKLE MARKETS
IN A YEAR THAT HAS SEEN NUMEROUS SHIFTS IN MARKET FAVORITES, HOW DID AIM BLUE
CHIP FUND PERFORM?
The fund stayed with its tried-and-true investment style and finished the
reporting period with excellent returns.
For the fiscal year ended October 31, 1999, the fund posted total returns of
29.01% for Class A shares, 28.08% for Class B shares and 28.09% for Class C
shares. (These returns exclude sales charges.) The fund outperformed both the
Russell 1000 Index and the Lipper Growth and Income Funds Index, which had total
returns of 25.58% and 16.03%, respectively, for the reporting period.
Total net assets in the fund shot up from $1.91 billion a year ago to $4.54
billion at the end of the fiscal year.
WHAT WAS THE MARKET ENVIRONMENT LIKE DURING THE FISCAL YEAR?
With the worst of the global financial crisis past, the question throughout much
of 1999 has been whether or not the Federal Reserve Board (the Fed) would need
to raise interest rates to forestall inflation. Inflation fears spawned
volatility in the markets, curbing high-flying technology, communications and
financial stocks in the spring and bringing on a resurgence of more cyclical
stocks, like energy and commodities. Although the fund was diversified across
numerous sectors, this shift negatively affected its performance during the
second quarter.
By mid-summer, the three most-watched stock indexes--the Dow, the Nasdaq and
the S&P 500--reached new record highs. But investors' fears dampened stocks as
key economic indicators, such as employment data and consumer prices, showed the
economy blazing ahead relentlessly. In response, on August 24 the Fed raised
both the federal funds rate and the discount rate to 5.25% and 4.75%,
respectively.
Markets rallied in October after data showed that inflation remained
relatively subdued. This boosted the fund's performance. Some analysts feel that
the Fed has merely taken back the rate cuts it was forced to make when last
year's global financial crisis seeped into U.S. markets. Despite persistent
inflation fears, the U.S. economy continues to experience a near-record level of
consumer confidence.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
The fund's 95 holdings were diversified across 11 sectors, with the top sectors
being technology, 27.8%; financials, 14.6%; health care, 13.3%; and consumer
staples, 10.4%. Our technology holdings performed especially well, while our
health-care holdings struggled along with the entire sector.
As world markets were recovering from being whipsawed by volatility last
year, large-cap growth stocks, such as those in which this fund invests,
dominated the markets. We have seen many very large companies maintain high
growth rates and become an ever-larger part of the economy, which is a change
from years past.
-------------------------------------
WE HAVE SEEN MANY VERY LARGE
COMPANIES MAINTAIN HIGH GROWTH
RATES AND BECOME AN EVER-LARGER
PART OF THE ECONOMY, WHICH IS
A CHANGE FROM YEARS PAST.
-------------------------------------
GROWTH OF TOTAL NET ASSETS
in billions
Bar Chart
================================================================================
10/31/98 1.92
10/31/99 4.54
================================================================================
FUND OUTPERFORMS INDEXES
One-year total returns as of 10/31/99, excluding sales charges
Bar Chart
================================================================================
Lipper Growth and Income Funds Index 16.03
Russell 1000 Index 25.58
Blue Chip Class A Shares 29.01
Blue Chip Class B Shares 28.08
Blue Chip Class C Shares 28.09
================================================================================
See important fund and index disclosures inside front cover.
AIM BLUE CHIP FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
-------------------------------------
WE FEEL POSITIVE ABOUT THE
FUND'S POSITIONING GOING FORWARD
BECAUSE WE HAVE THE FLEXIBILITY
TO POSITION THE FUND IN
DIFFERENT MARKET ENVIRONMENTS.
-------------------------------------
WHY HAVE YOU INCREASED YOUR TECHNOLOGY WEIGHTING?
Technology has become a bigger and bigger part of not just the market, but the
economy as a whole. Tech companies are growth companies because they have to
keep innovating their products to stay ahead of their competitors. Tech holdings
that performed particularly well for the fund include Sun Microsystems, Cisco
Systems and EMC.
As a testament to technology's vigor, the venerable Dow Jones Industrial
Average welcomed four new stocks to its lineup on November 1, including
Microsoft, Intel and SBC Communications. (These stocks are all fund holdings.)
Experts say the new stocks represent the "new economy"--dominated largely by
technology and telecommunications--while the stocks they are replacing
represented the old, industrial economy.
WHY HAVE HEALTH-CARE STOCKS STRUGGLED?
For most of the decade, concerns about the aging American population and its
potential need for more and better health care sent the sector soaring,
particularly large drug and medical-device companies. However, these stocks lost
vitality as investors moved out of growth and into cyclical stocks. Many
investors also felt these stocks were too ex-pensive, and concerns about
political health-care reform also hung over these companies.
Even so, we continued to be overweighted in health care with a long-term
view that the sector will benefit from demographics and underlying business
strength. We believe these stocks will return to premium valuations because of
their consistent performance and above-average growth rates.
WHAT ABOUT THE FINANCIAL SECTOR?
Financial stocks have been plagued by interest-rate concerns for much of 1999,
particularly during the third quarter. But many analysts still expect
double-digit earnings growth for the year. Banks are particularly well poised to
rebound because so many of them have diversified into fee-based money manage-
ment and services, areas that are far less interest-rate sensitive than
traditional lending. Additionally, to take advantage of the e-commerce craze,
many traditional banks like fund holdings Wells Fargo and Citibank (part of
Citigroup) are moving much of their business to the Internet.
AFTER THE CLOSE OF THE REPORTING PERIOD, ONE OF THE FUND'S TOP HOLDINGS, TYCO
INTERNATIONAL, FELL VICTIM TO CONCERNS ABOUT ITS ACCOUNTING METHODS. WHAT HAS
BEEN YOUR RESPONSE?
In recent months, concerns have arisen over Tyco's accounting methods. While no
wrongdoing has been proven, Tyco and its stock price remain under scrutiny. Most
recently, the Securities and Exchange Commission launched an informal
investigation of the company, which Tyco voluntarily made public. While we have
no reason to believe that accounting irregularities exist, we do recognize that
this issue may take time to be resolved. While the outcome of this situation is
difficult to predict, we remain confident in the company and its management
team. They have proven to be significant creators of value for shareholders over
the years, and we expect they will continue this record of success despite
current issues.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
The fourth quarter has historically been the best quarter for markets over the
last decade, up an average 6%. Many analysts seem to believe that any Y2K
problems will be minor. In fact, some are predicting a "millennium meltup" in
the first quarter of 2000--a market resurgence caused by the reinvestment of
capital pulled from the market before the end of 1999.
We feel positive about the fund's positioning going forward because we have
the flexibility to position the fund in different market environments.
Regardless of market trends in the coming year, we will adhere to our discipline
and focus on fundamentals like earnings growth and attractive valuations to
determine which companies may benefit the fund in the year ahead.
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. 3.87% 1. Computers (Software & Services) 7.74%
2. General Electric Co. 2.99 2. Health Care (Diversified) 6.19
3. Cisco Systems, Inc. 2.65 3. Financial (Diversified) 5.31
4. MCI WorldCom, Inc. 2.41 4. Broadcasting (Television, Radio & Cable) 4.83
5. American International Group, Inc. 2.27 5. Computers (Hardware) 4.25
6. Tyco International Ltd. 2.11 6. Communications Equipment 4.24
7. Johnson & Johnson 2.08 7. Health Care (Drugs--Major Pharmaceuticals) 4.15
8. Wal-Mart Stores, Inc. 2.00 8. Retail (General Merchandise) 3.95
9. Bristol-Myers Squibb Co. 1.90 9. Electronics (Semiconductors) 3.44
10. Home Depot, Inc. (The) 1.83 10. Electrical Equipment 2.99
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
=======================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
AIM BLUE CHIP FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM BLUE CHIP FUND VS. BENCHMARK INDEXES
10/31/89-10/31/99
in thousands
Mountain Chart
================================================================================
Russell 1000 Lipper Growth and AIM Blue Chip Fund,
Index Income Funds Index Class A Shares
- --------------------------------------------------------------------------------
11/89 10000 10000 10000
10/90 9051 8844 9588
10/91 12362 11822 12288
10/92 13692 12874 13510
10/93 15854 15384 14178
10/94 16346 15871 15345
10/95 20760 19089 18992
10/96 25518 23173 23907
10/97 33642 29668 31003
10/98 40274 32473 37005
10/99 50578 37678 47807
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
ABOUT THIS CHART
The chart compares your fund's Class A shares to benchmark indexes. It is
intended to give you an idea of how your fund performed compared to the indexes
over the period 10/31/89-10/31/99. It is important to understand differences
between your fund and an index. An index measures the performance of a
hypothetical portfolio.
Your fund's total return is shown with the applicable sales charge, and it
includes fund expenses and management fees. A market index such as the Russell
1000 Index is not managed, incurring no sales charges, expenses or fees. An
index of funds such as the Lipper Growth and Income Funds Index includes a
number of mutual funds grouped by investment objective. Each of those funds
interprets that objective differently, and each employs a different management
style and investment strategy. If you could buy all the securities that make up
a market index, you would incur expenses that would affect your investment's
return.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99, including sales charges
================================================================================
CLASS A SHARES
10 years 16.94%
5 years 24.08
1 year 21.92*
* 29.01% excluding sales charges
CLASS B SHARES
Inception (10/2/96) 24.38%
1 year 23.08*
* 28.08% excluding sales charges
CLASS C SHARES
Inception (8/4/97) 18.82%
1 year 27.09*
* 28.09% excluding sales charges
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and Class C shares will differ from Class
A shares due to differing fees and expenses. For fund data performance
calculations and descriptions of indexes cited on this page, please refer to the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM BLUE CHIP FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-91.18%
AIRLINES-0.27%
Delta Air Lines, Inc. 225,000 $ 12,248,437
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.41%
Lear Corp.(a) 550,000 18,562,500
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.83%
Fifth Third Bancorp 450,000 33,215,625
- ---------------------------------------------------------------
State Street Corp. 275,000 20,934,375
- ---------------------------------------------------------------
Wells Fargo Co. 600,000 28,725,000
- ---------------------------------------------------------------
82,875,000
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-2.05%
Bank of America Corp. 325,000 20,921,875
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 825,000 72,084,375
- ---------------------------------------------------------------
93,006,250
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.59%
Coca-Cola Co. (The) 450,000 26,550,000
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.83%
AT&T Corp.-Liberty Media
Group-Class A(a) 975,000 38,695,312
- ---------------------------------------------------------------
CBS Corp.(a) 750,000 36,609,375
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 450,000 36,168,750
- ---------------------------------------------------------------
Comcast Corp.-Class A 1,550,000 65,293,750
- ---------------------------------------------------------------
MediaOne Group, Inc.(a) 600,000 42,637,500
- ---------------------------------------------------------------
219,404,687
- ---------------------------------------------------------------
CHEMICALS-0.53%
Du Pont (E.I.) de Nemours & Co. 375,000 24,164,062
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.49%
Monsanto Co. 575,000 22,137,500
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.24%
Lucent Technologies Inc. 1,200,000 77,100,000
- ---------------------------------------------------------------
Nokia Oyj (Finland) 40,000 4,578,942
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 425,000 49,114,062
- ---------------------------------------------------------------
Nortel Networks Corp. (Canada) 1,000,000 61,937,500
- ---------------------------------------------------------------
192,730,504
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-4.25%
Dell Computer Corp.(a) 1,050,000 42,131,250
- ---------------------------------------------------------------
International Business Machines
Corp. 725,000 71,321,875
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 750,000 79,359,375
- ---------------------------------------------------------------
192,812,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-2.65%
Cisco Systems, Inc.(a) 1,625,000 $ 120,250,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.45%
EMC Corp.(a) 900,000 65,700,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-7.74%
America Online, Inc.(a)(b) 492,900 63,922,969
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,900,000 175,868,750
- ---------------------------------------------------------------
Oracle Corp.(a) 850,000 40,428,125
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 435,000 46,925,625
- ---------------------------------------------------------------
Yahoo! Inc.(a) 135,000 24,173,437
- ---------------------------------------------------------------
351,318,906
- ---------------------------------------------------------------
CONSUMER FINANCE-0.54%
Providian Financial Corp. 225,000 24,525,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-1.17%
Duke Power Co. 265,000 14,972,500
- ---------------------------------------------------------------
Edison International 800,000 23,700,000
- ---------------------------------------------------------------
Texas Utilities Co. 375,000 14,531,250
- ---------------------------------------------------------------
53,203,750
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.99%
General Electric Co. 1,000,000 135,562,500
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-3.44%
Intel Corp. 900,000 69,693,750
- ---------------------------------------------------------------
Texas Instruments, Inc. 550,000 49,362,500
- ---------------------------------------------------------------
Xilinx, Inc.(a) 475,000 37,346,875
- ---------------------------------------------------------------
156,403,125
- ---------------------------------------------------------------
ENTERTAINMENT-1.38%
Time Warner Inc. 900,000 62,718,750
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.69%
Applied Materials, Inc.(a) 350,000 31,434,375
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-5.31%
American Express Co. 350,000 53,900,000
- ---------------------------------------------------------------
Citigroup Inc. 1,100,000 59,537,500
- ---------------------------------------------------------------
Fannie Mae 800,000 56,600,000
- ---------------------------------------------------------------
Freddie Mac 1,000,000 54,062,500
- ---------------------------------------------------------------
MBIA, Inc. 300,000 17,118,750
- ---------------------------------------------------------------
241,218,750
- ---------------------------------------------------------------
FOOTWEAR-0.40%
Nike, Inc.-Class B 325,000 18,342,188
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED)-6.19%
American Home Products Corp. 700,000 $ 36,575,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 1,125,000 86,414,063
- ---------------------------------------------------------------
Johnson & Johnson 900,000 94,275,000
- ---------------------------------------------------------------
Warner-Lambert Co. 800,000 63,850,000
- ---------------------------------------------------------------
281,114,063
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.15%
Lilly (Eli) & Co. 350,000 24,106,250
- ---------------------------------------------------------------
Merck & Co., Inc. 425,000 33,814,063
- ---------------------------------------------------------------
Pfizer, Inc. 1,615,600 63,816,200
- ---------------------------------------------------------------
Schering-Plough Corp. 1,350,000 66,825,000
- ---------------------------------------------------------------
188,561,513
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.11%
Guidant Corp. 1,100,000 54,312,500
- ---------------------------------------------------------------
Medtronic, Inc. 1,200,000 41,550,000
- ---------------------------------------------------------------
95,862,500
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.67%
Colgate-Palmolive Co. 600,000 36,300,000
- ---------------------------------------------------------------
Procter & Gamble, Co. (The) 375,000 39,328,125
- ---------------------------------------------------------------
75,628,125
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.27%
American International Group,
Inc. 1,000,000 102,937,500
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.84%
Merrill Lynch & Co., Inc. 325,000 25,512,500
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 525,000 57,914,063
- ---------------------------------------------------------------
83,426,563
- ---------------------------------------------------------------
LODGING-HOTELS-1.15%
Carnival Corp. 1,175,000 52,287,500
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.58%
Ingersoll-Rand Co. 500,000 26,125,000
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-2.91%
Tyco International Ltd. 2,400,000 95,850,000
- ---------------------------------------------------------------
United Technologies Corp. 600,000 36,300,000
- ---------------------------------------------------------------
132,150,000
- ---------------------------------------------------------------
NATURAL GAS-1.09%
El Paso Energy Corp. 475,000 19,475,000
- ---------------------------------------------------------------
Enron Corp. 750,000 29,953,125
- ---------------------------------------------------------------
49,428,125
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING &
EQUIPMENT)-1.09%
Halliburton Co. 750,000 $ 28,265,625
- ---------------------------------------------------------------
Schlumberger Ltd. 350,000 21,196,875
- ---------------------------------------------------------------
49,462,500
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.28%
Conoco Inc.-Class B 460,657 12,495,321
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.74%
Exxon Corp. 450,000 33,328,125
- ---------------------------------------------------------------
Mobil Corp. 225,000 21,712,500
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.-New
York Shares-ADR (Netherlands) 400,000 23,975,000
- ---------------------------------------------------------------
79,015,625
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.93%
Bowater, Inc. 300,000 15,750,000
- ---------------------------------------------------------------
International Paper Co. 500,000 26,312,500
- ---------------------------------------------------------------
42,062,500
- ---------------------------------------------------------------
RAILROADS-0.30%
Canadian National Railway Co.
(Canada) 450,000 13,725,000
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.83%
Home Depot, Inc. (The) 1,100,000 83,050,000
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.12%
Kroger Co. (The)(a) 1,000,000 20,812,500
- ---------------------------------------------------------------
Safeway, Inc.(a) 850,000 30,015,625
- ---------------------------------------------------------------
50,828,125
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-3.95%
Costco Wholesale Corp.(a) 500,000 40,156,250
- ---------------------------------------------------------------
Dayton Hudson Corp. 750,000 48,468,750
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 1,600,000 90,700,000
- ---------------------------------------------------------------
179,325,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.85%
Gap, Inc. (The) 750,000 27,843,750
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 400,000 10,850,000
- ---------------------------------------------------------------
38,693,750
- ---------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-0.39%
Interpublic Group of Companies,
Inc. 440,000 17,875,000
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.31%
First Data Corp. 900,000 41,118,750
- ---------------------------------------------------------------
Fiserv, Inc.(a) 577,500 18,480,000
- ---------------------------------------------------------------
59,598,750
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.79%
Vodafone AirTouch PLC-ADR
(United Kingdom) 750,000 $ 35,953,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.92%
AT&T Corp. 500,000 23,375,000
- ---------------------------------------------------------------
MCI WorldCom, Inc.(a) 1,275,000 109,410,938
- ---------------------------------------------------------------
132,785,938
- ---------------------------------------------------------------
TELEPHONE-2.47%
BellSouth Corp. 950,000 42,750,000
- ---------------------------------------------------------------
GTE Corp. 350,000 26,250,000
- ---------------------------------------------------------------
SBC Communications, Inc. 850,000 43,296,875
- ---------------------------------------------------------------
112,296,875
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$3,096,180,214) 4,139,857,182
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-0.09%
U.S. TREASURY BILLS-0.09%(c)(d)
4.748%, 12/23/99 (Cost
$4,181,906) $ 4,210,000 $ 4,180,825
- ---------------------------------------------------------------
MONEY MARKET FUNDS-8.57%
STIC Liquid Assets Portfolio(e) 194,612,715 194,612,715
- ---------------------------------------------------------------
STIC Prime Portfolio(e) 194,612,715 194,612,715
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $389,225,430) 389,225,430
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.84% 4,533,263,437
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.16% 7,409,742
- ---------------------------------------------------------------
NET ASSETS-100.00% $4,540,673,179
===============================================================
</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) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 8.
(e) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,489,587,550) $4,533,263,437
- ---------------------------------------------------------
Receivables for:
Investments sold 36,197,016
- ---------------------------------------------------------
Capital stock sold 17,637,457
- ---------------------------------------------------------
Dividends and interest 2,956,130
- ---------------------------------------------------------
Variation margin 1,300,000
- ---------------------------------------------------------
Investment for deferred compensation plan 25,701
- ---------------------------------------------------------
Other assets 146,973
- ---------------------------------------------------------
Total assets 4,591,526,714
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 29,463,474
- ---------------------------------------------------------
Capital stock reacquired 7,446,032
- ---------------------------------------------------------
Deferred compensation 25,701
- ---------------------------------------------------------
Options written (Premiums received
$5,063,081) 8,228,238
- ---------------------------------------------------------
Accrued advisory fees 2,312,383
- ---------------------------------------------------------
Accrued administrative services fees 18,976
- ---------------------------------------------------------
Accrued directors' fees 4,732
- ---------------------------------------------------------
Accrued distribution fees 2,712,527
- ---------------------------------------------------------
Accrued transfer agent fees 618,108
- ---------------------------------------------------------
Accrued operating expenses 23,364
- ---------------------------------------------------------
Total liabilities 50,853,535
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $4,540,673,179
=========================================================
</TABLE>
<TABLE>
<S> <C>
NET ASSETS:
Class A $2,299,550,866
- ---------------------------------------------------------
Class B $1,891,170,839
- ---------------------------------------------------------
Class C $ 349,951,474
- ---------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 49,473,559
- ---------------------------------------------------------
Class B:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 41,426,916
- ---------------------------------------------------------
Class C:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 7,668,239
- ---------------------------------------------------------
Class A:
Net asset value and redemption price
per share $ 46.48
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $46.48/ 94.50%) $ 49.19
- ---------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 45.65
- ---------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 45.64
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $160,836 foreign
withholding tax) $ 24,286,072
- --------------------------------------------------------
Interest 17,149,758
- --------------------------------------------------------
Total investment income 41,435,830
- --------------------------------------------------------
EXPENSES:
Advisory fees 21,592,076
- --------------------------------------------------------
Administrative services fees 153,309
- --------------------------------------------------------
Custodian fees 181,652
- --------------------------------------------------------
Directors' fees 25,214
- --------------------------------------------------------
Distribution fees -- Class A 6,217,528
- --------------------------------------------------------
Distribution fees -- Class B 13,837,276
- --------------------------------------------------------
Distribution fees -- Class C 2,245,680
- --------------------------------------------------------
Transfer agent fees -- Class A 2,899,316
- --------------------------------------------------------
Transfer agent fees -- Class B 3,281,701
- --------------------------------------------------------
Transfer agent fees -- Class C 464,980
- --------------------------------------------------------
Other 960,439
- --------------------------------------------------------
Total expenses 51,859,171
- --------------------------------------------------------
Less: Expenses paid indirectly (43,470)
- --------------------------------------------------------
Net expenses 51,815,701
- --------------------------------------------------------
Net investment income (loss) (10,379,871)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities (53,258,921)
- --------------------------------------------------------
Foreign currencies (480,726)
- --------------------------------------------------------
Futures contracts 20,856,520
- --------------------------------------------------------
Option contracts written (2,951,257)
- --------------------------------------------------------
(35,834,384)
- --------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 763,733,398
- --------------------------------------------------------
Foreign currencies (9,454)
- --------------------------------------------------------
Futures contracts (4,034,067)
- --------------------------------------------------------
Option contracts written (3,165,157)
- --------------------------------------------------------
756,524,720
- --------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 720,690,336
- --------------------------------------------------------
Net increase in net assets resulting from
operations $710,310,465
========================================================
</TABLE>
See Notes to Financial Statements.
8
<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) $ (10,379,871) $ 664,009
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures and option contracts (35,834,384) 1,200,650
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 756,524,720 175,782,639
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 710,310,465 177,647,298
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (776,772) (1,249,305)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (3,128,249) (10,987,892)
- ----------------------------------------------------------------------------------------------
Class B (2,256,383) (6,118,620)
- ----------------------------------------------------------------------------------------------
Class C (293,473) (150,526)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 830,315,460 486,282,009
- ----------------------------------------------------------------------------------------------
Class B 866,521,395 425,444,112
- ----------------------------------------------------------------------------------------------
Class C 220,917,321 81,733,726
- ----------------------------------------------------------------------------------------------
Net increase in net assets 2,621,609,764 1,152,600,802
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,919,063,415 766,462,613
- ----------------------------------------------------------------------------------------------
End of period $4,540,673,179 $1,919,063,415
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,540,120,284 $1,631,900,085
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (97,169) 706,247
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, futures and option
contracts (41,676,121) 655,618
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 1,042,326,185 285,801,465
- ----------------------------------------------------------------------------------------------
$4,540,673,179 $1,919,063,415
==============================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term 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, $10,353,227 was reclassified to undistributed net
investment income (loss), $819,250 was reclassified from undistributed gains
and $9,533,977 from paid in capital as a result of 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. The Fund has a capital loss
carryforward of $38,614,682 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2007.
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
10
<PAGE> 13
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 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. Expenses -- Distribution expenses 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 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $153,309 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 $3,853,483 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted 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
0.35% 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
11
<PAGE> 14
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 $6,217,528, $13,837,276 and $2,245,680,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,766,799 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 $177,813 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 and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $9,059 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
$37,203 and $6,267, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $43,470 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
$2,389,864,659 and $651,658,838, 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 $1,077,403,176
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (34,962,485)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,042,440,691
==========================================================
Cost of investments for tax purposes is $3,490,822,746.
</TABLE>
12
<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 -- $ --
- -------------------------------------------------------------------------------------
Written 5,929 8,218,226
- -------------------------------------------------------------------------------------
Closed (3,429) (3,099,518)
- -------------------------------------------------------------------------------------
Exercised (71) (55,627)
- -------------------------------------------------------------------------------------
End of year 2,429 $ 5,063,081
- -------------------------------------------------------------------------------------
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE DEPRECIATION
----- -------- ------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Jan. 00 $100 2,429 $5,063,081 $8,228,238 $(3,165,157)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-FUTURES CONTRACTS
On October 31, 1999, $4,167,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
- -------- --------- ---------- ------------
<S> <C> <C> <C>
S&P 500 Index 200 Dec. 99 $1,817,528
- ---------------------------------------------------------------------------------------------------
</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 31,555,257 $1,348,329,456 26,179,983 $ 915,652,812
- -----------------------------------------------------------------------------------------------------------------------
Class B 24,939,694 1,053,306,393 14,239,927 492,929,849
- -----------------------------------------------------------------------------------------------------------------------
Class C 6,902,119 292,602,692 2,711,151 95,200,193
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 93,903 3,711,997 371,504 11,699,310
- -----------------------------------------------------------------------------------------------------------------------
Class B 54,813 2,141,056 184,940 5,805,443
- -----------------------------------------------------------------------------------------------------------------------
Class C 7,197 281,069 3,949 128,203
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (12,216,671) (521,725,993) (12,601,919) (441,070,113)
- -----------------------------------------------------------------------------------------------------------------------
Class B (4,443,246) (188,926,054) (2,143,627) (73,291,180)
- -----------------------------------------------------------------------------------------------------------------------
Class C (1,692,129) (71,966,440) (392,399) (13,594,670)
- -----------------------------------------------------------------------------------------------------------------------
45,200,937 $1,917,754,176 28,553,509 $ 993,459,847
=======================================================================================================================
</TABLE>
13
<PAGE> 16
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended October 31,
1999, the one month ended October 31, 1996 and each of the years in the two year
period ended September 30, 1996, for a share of Class B capital stock
outstanding during each of the years in the three-year period ended October 31,
1999 and the period October 1, 1996 (date sales commenced) through October 31,
1996, and for a share of Class C capital stock outstanding during each of the
years in the two year period ended October 31, 1999 and the period August 4,
1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
OCTOBER 31, SEPTEMBER 30,
------------------------------------------------- -------------------
1999 1998 1997 1996 1996(a) 1995
---------- ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 36.14 $ 30.96 $ 26.08 $ 25.56 $ 23.83 $ 19.22
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.02 0.13(b) 0.17(b) -- 0.33 0.14
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Net gains on securities (both realized and
unrealized) 10.44 5.75 6.93 0.52 4.61 5.05
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Total from investment operations 10.46 5.88 7.10 0.52 4.94 5.19
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.02) (0.07) (0.05) -- (0.21) (0.12)
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Distributions from net realized gains (0.10) (0.63) (2.17) -- (3.00) (0.46)
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Total distributions (0.12) (0.70) (2.22) -- (3.21) (0.58)
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Net asset value, end of period $ 46.48 $ 36.14 $ 30.96 $ 26.08 $ 25.56 $ 23.83
====================================================== ========== ========== ======== ======== ======== =======
Total return(c) 29.01% 19.36% 29.68% 2.04% 22.39% 27.84%
====================================================== ========== ========== ======== ======== ======== =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $2,299,551 $1,085,648 $498,178 $120,448 $106,415 $71,324
====================================================== ========== ========== ======== ======== ======== =======
Ratio of expenses to average net assets(d) 1.19%(e) 1.22%() 1.31% 1.30%(f) 1.26% 1.3%
====================================================== ========== ========== ======== ======== ======== =======
Ratio of net investment income to average net
assets(g) 0.03%(e) 0.33%() 0.50% 0.12%(f) 0.53% 0.7%
====================================================== ========== ========== ======== ======== ======== =======
Portfolio turnover rate 22% 27% 43% 10% 58% 17%
====================================================== ========== ========== ======== ======== ======== =======
</TABLE>
(a) The Fund changed investment advisors on June 3, 1996.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.32%, 1.37% (annualized) and 1.28% for the periods 1997-1996 and September
30, 1996.
(e) Ratios are based on average net assets of $1,776,436,482.
(f) Annualized.
(g) 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 0.49%, 0.05% (annualized) and 0.51% for the periods
1997-1996 and September 30, 1996.
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------- ---------------------------------
1999 1998 1997 1996 1999 1998 1997
---------- -------- -------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 35.73 $ 30.76 $ 26.07 $ 25.56 $ 35.72 $ 30.75 $ 31.72
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.29)(a) (0.12) (0.03)(a) (0.01) (0.29)(a) (0.12)(a) (0.01)(a)
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 10.31 5.72 6.92 0.52 10.31 5.72 (0.96)
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Total from investment
operations 10.02 5.60 6.89 0.51 10.02 5.60 (0.97)
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income -- -- (0.03) -- -- -- --
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Distributions from net realized
gains (0.10) (0.63) (2.17) -- (0.10) (0.63) --
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Total distributions (0.10) (0.63) (2.20) -- (0.10) (0.63) --
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Net asset value, end of period $ 45.65 $ 35.73 $ 30.76 $ 26.07 $ 45.64 $ 35.72 $ 30.75
===================================== ========== ======== ======== ======== ======== ======= =======
Total return(b) 28.08% 18.52% 28.81% 2.00% 28.09% 18.52% (3.06)%
===================================== ========== ======== ======== ======== ======== ======= =======
Ratios/supplement data:
Net assets, end of period (000s
omitted) $1,891,171 $745,862 $264,337 $ 8,101 $349,951 $87,554 $ 3,947
===================================== ========== ======== ======== ======== ======== ======= =======
Ratio of expenses to average net
assets(c) 1.91%(d) 1.94% 2.10% 2.01%(e) 1.90%(d) 1.94% 2.10%(e)
===================================== ========== ======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets(f) (0.68)%(d) (0.38)% (0.28)% (0.58)%(e) (0.68)%(d) (0.38)% (0.28)%(e)
===================================== ========== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 22% 27% 43% 10% 22% 27% 43%
===================================== ========== ======== ======== ======== ======== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.12% and 2.08% (annualized) for 1997-1996 for Class B and 2.12%
(annualized) for 1997 for Class C.
(d) Ratios are based on average net assets of $1,383,727,625 and $224,568,052
for Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.31)% and (0.65)% (annualized) for 1997-1996 for Class
B and (0.31)% (annualized) for 1997 for Class C.
14
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statements of assets and
liabilities of AIM Blue Chip 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 three-year period
then ended, the one month period ended October 31, 1996,
and the year ended September 30, 1996. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits. The financial highlights for each of the
years in the two-year period ended September 30, 1995
were audited by other auditors whose report thereon,
dated October 25, 1995, expressed an unqualified opinion
on those financial highlights.
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 Blue
Chip 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 financial highlights for each of the years
in the three-year period then ended, the one-month ended
October 31, 1996, and the year ended September 30, 1996
in conformity with generally accepted accounting
principles.
KPMG LLP
December 3, 1999
Houston, Texas
15
<PAGE> 18
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Edgar M. Larsen
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Melville B. Cox
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Mary J. Benson Boston, MA 02110
Chief Executive Officer Assistant Vice President and
Texana Global, Inc.; Assistant Treasurer COUNSEL TO THE FUND
Formerly Member
of the U.S. House of Representatives Sheri Morris Ballard Spahr
Assistant Vice President and Andrews & Ingersoll, LLP
Carl Frischling Assistant Treasurer 1735 Market Street
Partner Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP Renee A. Friedli
Assistant Secretary COUNSEL TO THE DIRECTORS
Robert H. Graham
President and Chief Executive Officer P. Michelle Grace Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
Prema Mathai-Davis Nancy L. Martin
Chief Executive Officer, YWCA of the U.S.A.; Assistant Secretary DISTRIBUTOR
Commissioner, New York City Dept. for the
Aging; and member of the Board of Directors, Ofelia M. Mayo A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
Lisa A. Moss Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney AUDITORS
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary KPMG LLP
Executive Vice President 700 Louisiana
Hines Interests Samuel D. Sirko Houston, TX 77002
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Blue Chip Fund paid ordinary dividends in the amount of $0.0245 per share to
Class A shareholders during the Fund's tax year ended October 31, 1999. Of the
amounts 87.67% is eligible for the dividends received deduction for
corporations. The Fund also distributed long-term capital gains of $6,978,105
during the year ended October 31, 1999.
STATE TAX INFORMATION
Of the total ordinary dividends paid, 5.28% for Class A shares were derived from
U.S. Treasury obligations.
16
<PAGE> 19
-------------------------------------
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AIM INVESTOR LINE,
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PROVIDES CURRENT ACCOUNT
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<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has
AIM Aggressive Growth Fund(1) AIM Money Market Fund provided leadership in the mutual
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund fund industry since 1976 and
AIM Capital Development Fund managed approximately $120 billion
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS in assets for more than 6.4 million
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund shareholders, including individual
AIM Large Cap Growth Fund AIM Asian Growth Fund investors, corporate clients and
AIM Mid Cap Equity Fund AIM Developing Markets Fund financial institutions, as of
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) September 30, 1999.
AIM Mid Cap Opportunities Fund AIM European Development Fund The AIM Family of Funds
AIM Select Growth Fund AIM International Equity Fund --Registered Trademark-- is
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund distributed nationwide, and AIM
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund today is the 10th-largest mutual
AIM Value Fund AIM New Pacific Growth Fund fund complex in the United States
AIM Weingarten Fund in assets under management,
GLOBAL GROWTH FUNDS according to Strategic Insight, an
GROWTH & INCOME FUNDS AIM Global Aggressive Growth Fund independent mutual fund monitor.
AIM Advisor Flex Fund AIM Global Growth Fund
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TAX-FREE INCOME FUNDS AIM Global Health Care Fund
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AIM Tax-Free Intermediate Fund AIM Global Trends Fund(6)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors on November 16, 1998.
(2) AIM Small Cap Growth Fund closed to new investors on November 8, 1999. (3)
AIM Small Cap Opportunities Fund closed to new investors on November 4, 1999.
(4) On September 1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth
Fund. Previously the fund invested in all size companies in most areas of
Europe. The fund now seeks to invest at least 65% of its assets in large-cap
companies within countries using the euro as their currency (EMU-member
countries). (5) On June 1, 1999, AIM Global Telecommunications Fund was renamed
AIM Global Telecommunications and Technology Fund. (6) Effective August 27,
1999, AIM Global Trends Fund was restructured to operate as a traditional mutual
fund. Before that date, the fund operated as a fund of funds. For more complete
information about any AIM fund(s), including sales charges and expenses, ask
your financial advisor or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money. If used as
sales material after January 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
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