<PAGE> 1
ANNUAL REPORT / OCTOBER 31, 2000
AIM EQUITY FUNDS, INC.
INSTITUTIONAL CLASSES
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM WEINGARTEN FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
TABLE OF CONTENTS
AIM CHARTER FUND 2
AIM CONSTELLATION FUND 18
AIM WEINGARTEN FUND 34
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:
It's an honor to address you as the AIM Funds' new chairman.
[PHOTO OF I feel privileged to succeed Ted Bauer, who recently retired
Robert H. from the funds' board and will soon retire as A I M
Graham, Management Group's chairman after a long, successful career
Chairman of in the investment industry. Ted has always shown the highest
the Board of degree of integrity and commitment to excellence, and I have
THE FUND always admired him. I'm also proud to be part of the team
APPEARS HERE] that launched AIM almost 25 years ago. From the beginning,
AIM has been a very people-oriented, service-minded company,
and I plan to carry on the tradition for our shareholders,
financial advisors and employees.
UNCERTAIN MARKETS
The markets this year have been particularly volatile and
confusing for many investors, especially for those who have
only experienced the bull market of the 1990s. After almost
a decade of double-digit returns, the S&P 500 was down 1.81% year-to-date as of
October 31, 2000. But market returns in the 20% to 30% range, such as we have
seen in recent years, are not typical. If you expect these kinds of returns
every year, you'll be disappointed. Historically, markets decline in one out of
every four years. What we're seeing now is a normal downturn.
This appears to be a worldwide trend. Throughout 2000, overseas markets
generally have been more turbulent than their U.S. counterpart.
REASONS FOR OPTIMISM
While investors may need to temper their expectations, there are plenty of
reasons to be optimistic. Economic fundamentals remain strong, and many believe
that the Federal Reserve Board may have succeeded in bringing the economy to a
"soft landing." Gross domestic product growth slowed to 2.4% in the third
quarter from the rapid pace of about 7% a year ago. With this slowdown, it seems
unlikely that the Fed will raise interest rates in the near future, and stable
interest rates provide a solid environment for both stocks and bonds.
In Europe, the region's economic and investment future continues to look
bright despite the weak euro. Restructuring, merger activity and tax reform bode
well for European economies. In Asia, most analysts think the continuing
strength of the U.S. economy will help boost Asian stock markets.
THE VALUE OF ADVICE
The current environment illustrates the value of professional money management.
Knowing when to buy and sell takes expertise and discipline even in the best of
markets. During downturns, many investors may be tempted to make decisions based
on emotions instead of strategy. The wisest choice is to rely on a professional
money manager to make these decisions for you.
In these uncertain times, it's important to keep market volatility in
perspective. Mutual fund investing should be a long-term endeavor. Remember why
you're investing, whether it's for your retirement or your child's education,
and think about your time frame. If you're unsure about whether your investments
can meet your goals, visit your financial advisor for help.
In the following pages, your fund's portfolio managers discuss market
activity, how they managed your fund during the fiscal year and their near-term
outlook. If you have any questions or comments, please call our Client Services
Department at 800-659-1005 during normal business hours.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
-------------------------------------
THE CURRENT
ENVIRONMENT
ILLUSTRATES THE VALUE
OF PROFESSIONAL
MONEY MANAGEMENT.
KNOWING WHEN TO BUY
AND SELL TAKES
EXPERTISE AND
DISCIPLINE EVEN IN THE
BEST OF MARKETS.
-------------------------------------
<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 in the securities of companies
that have prospects for both capital growth and dividend income.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Charter Fund's performance figures are historical, and they reflect the
reinvestment of distributions and changes in net asset value.
o One-year performance includes reinvested distributions of $1.35 per share.
o Average annual total returns for Institutional Class shares for periods
ended 9/30/00, the most recent calendar quarter-end, are as follows: one
year, 25.99%; five years, 21.62%; inception (7/30/91), 17.40%.
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 unmanaged Lipper Large-Cap Core Equity Fund Index represents an average
of the performance of the 30 largest large-capitalization core equity funds
tracked by Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged National Association of Securities Dealers Automated Quotation
System Composite Index (the Nasdaq) is a market-value-weighted index
comprising all domestic and non-U.S.-based common stocks listed on the
Nasdaq system.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
represents the performance of the U.S. stock market.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
RESULTS OF A $10,000 INVESTMENT
AIM CHARTER FUND VS. BENCHMARK INDEXES
7/30/91-10/31/00
in thousands
================================================================================
Lipper Large
AIM Charter Fund, Cap Core
Institutional Class S&P 500 Equity Fund Index
--------------------------------------------------------------------------------
7/30/91 10000 10000 10000
10/91 10512 10200 10346
10/92 10988 11215 11252
10/93 12898 12887 13129
10/94 12637 13384 13428
10/95 16105 16918 16333
10/96 18891 20992 19753
10/97 24379 27730 25374
10/98 27230 33834 29974
10/99 36644 42517 36989
10/00 41772 45101 40554
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
Performance results for the indexes are for the period
7/31/91-10/31/00.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/00
================================================================================
AIM CHARTER FUND, INSTITUTIONAL CLASS
Inception (7/30/91) 16.70%
5 years 21.01
1 year 14.01
================================================================================
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.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM CHARTER FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
AIM CHARTER FUND STAYS ON COURSE DESPITE MARKET UNCERTAINTY
THE STOCK MARKET WAS QUITE BUMPY DURING THE PAST YEAR. HOW DID AIM CHARTER FUND
PERFORM?
Despite volatile markets, AIM Charter Fund continued its run of strong
performance. For the fiscal year ended October 31, 2000, the Institutional Class
had total returns of 14.01%. The fund outperformed the S&P 500, which had a
total return of 6.08% for the same period.
AIM Charter Fund's performance for the fiscal year ended October 31 includes
gains made during late 1999 and early 2000, when markets were more exuberant
than they became later in the fiscal year. More recently, the fund's performance
has been affected by the technology sector sell-off and other market
difficulties.
WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
Markets rallied strongly during the first half of the fiscal year, but
experienced a choppy, downward trend in the second half. In late 1999 and early
2000, technology stocks led the surge, with the tech-laden Nasdaq soaring to
record levels well into March. However, investor concern about possible
overvaluations sparked a sharp tech sell-off late in the month. Investors were
also concerned that the Federal Reserve Board (the Fed) would keep raising
interest rates to slow torrid economic growth and to contain inflation. The
ensuing sell-off affected nearly every stock-market sector in April and caused
severe market volatility.
Amid mounting evidence that economic growth was slowing, markets rallied in
May and June at the prospect of no more Fed rate hikes. Indeed, the Fed left
interest rates unchanged for the rest of the fiscal year. However, in late
summer and early fall, a combination of rising oil prices, unrest in the Middle
East and concern about corporate earnings created another steep market decline.
A number of major corporations reported earnings disappointments in September
and October, as rising oil prices and a weak euro negatively affected profit
margins.
Major market indexes such as the S&P 500 and the Nasdaq peaked fairly early
in 2000, and as of the close of the fiscal year they had not regained those
levels. Even so, most market indexes recorded gains for the 12-month reporting
period. After tech stocks faded, stocks in several other sectors--including
financial services, health care, energy and utilities--posted healthy gains. And
while growth stocks (those perceived to have above-average growth potential)
outperformed value stocks (those perceived to be undervalued relative to the
broader market) during the first half of the year, value made a comeback in the
second half, leaving growth behind.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Our process of focusing on large, market-leading companies with above-average
growth prospects helped the fund outperform its benchmark (the S&P 500) for the
fiscal year. The fund's strategy of investing in companies that have experienced
long-term growth and growing dividends also proved beneficial in the uncertain
market environment, as did its diversification across many market sectors, which
offered some protection during extreme volatility.
WHAT WERE THE BEST-PERFORMING SECTORS FOR THE FUND?
The fund's overweightings in financial services, health care and capital goods
boosted performance. Financial and health-care stocks particularly benefited
when tech stocks fell out of favor because these sectors were perceived as more
fundamentally sound than technology. Although the fund's energy weighting was
fairly small, it also contributed to performance.
Consumer cyclicals, especially retail companies, were hurt by slowing growth
in consumer spending, so the fund remained underweighted in this sector while we
carefully followed earnings.
HAS YOUR TECHNOLOGY WEIGHTING CHANGED?
Technology stocks accounted for about 36% of the portfolio, up slightly from a
year ago, with an emphasis on stocks with
AIM CHARTER FUND
INSTITUTIONAL CLASS
VS. BENCHMARK INDEX
One-year returns, as of 10/31/00
================================================================================
FUND INSTITUTIONAL CLASS 14.01%
S&P 500 6.08%
================================================================================
-------------------------------------
MARKETS RALLIED STRONGLY DURING
THE FIRST HALF OF THE FISCAL YEAR
BUT EXPERIENCED A CHOPPY, DOWNWARD
TREND IN THE SECOND HALF.
-------------------------------------
AIM CHARTER FUND
3
<PAGE> 6
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/00, based on total net assets
<TABLE>
<CAPTION>
==========================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Tyco International Ltd. (Bermuda) 5.48% 1. Computers (Software & Services) 9.63%
2. Chase Manhattan Corp. (The) 4.89 2. Investment Banking/Brokerage 6.59
3. General Electric Co. 4.42 3. Health Care (Drugs-Major Pharmaceuticals) 6.34
4. Pfizer Inc. 4.18 4. Communications Equipment 6.19
5. Cisco Systems, Inc. 3.47 5. Manufacturing (Diversified) 6.06
6. Morgan Stanley Dean Witter & Co. 3.45 6. Financial (Diversified) 6.01
7. VERITAS Software Corp. 3.30 7. Electronics (Semiconductors) 5.90
8. Target Corp. 3.27 8. Electrical Equipment 5.06
9. American International Group, Inc. 3.16 9. Banks (Money Center) 4.89
10. Citigroup Inc. 3.11 10. Computers (Hardware) 3.53
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
==========================================================================================================
</TABLE>
solid earnings growth. Even though tech stocks have taken a beating in 2000,
which has been a drag on fund performance, we continue to find good long-term
growth prospects in this sector, focusing on companies involved in data storage
and the build-out of the Internet infrastructure.
WHAT STOCKS PERFORMED WELL FOR THE FUND?
Among financial stocks, brokerage firms and asset-management companies performed
well. Top U.S. retail broker Merrill Lynch and venerable investment bank Goldman
Sachs--both fund holdings--reported earnings ahead of analysts' estimates for
the third quarter on the strength of their core businesses: for Merrill Lynch,
asset management; for Goldman Sachs, initial public offering (IPO) underwriting
and mergers and acquisitions.
In health care, pharmaceutical giant Pfizer, which earlier this year merged
with Warner-Lambert, continued to be a standout performer for the fund. The
company reported a 30% jump in third-quarter profits over the previous year as
sales of its top drugs posted strong gains.
In capital goods, fund holdings General Electric (GE) and Tyco International
both performed well. A highly diversified company, GE reported record earnings
on the strength of its power-systems, technical-products, plastics and
financial-services divisions. Tyco, a diversified manufacturing and services
company, reported its fiscal fourth-quarter earnings rose 40% over the previous
year on double-digit internal growth, surging electronics sales and the
integration of major acquisitions.
WHAT WERE SOME TECH STOCKS YOU FAVORED?
Among our technology holdings, VERITAS Software, Sun Microsystems and Celestica
performed well. VERITAS, a leading maker of data-storage software used in
corporate networks, reported an 81% increase in earnings. Sun Microsystems is
the leading supplier of network servers, the powerful computers that make up the
backbone of the Internet. The company reported earnings up 85% from the previous
year. And Celestica, a Toronto-based electronics manufacturer whose products are
used in computer servers, workstations, peripherals and communications devices,
reported a whopping 186% increase in third-quarter profits.
WHAT IS YOUR NEAR-TERM OUTLOOK?
The economic climate appeared favorable for stocks at the close of the reporting
period despite often-extreme market volatility. The nation's unemployment rate
had fallen to its lowest level in three decades. Consumer spending, sluggish for
much of the second half of the fiscal year, started to pick up again. And
inflation was moderate despite higher oil prices.
Perhaps most importantly, corporate profit growth, while declining for some,
was still impressive for many companies. However, because of a degree of
uncertainty surrounding near-term economic trends and future international
developments, markets may continue to be volatile. Investors would be wise to
maintain a long-term perspective in such an environment.
-------------------------------------
THE ECONOMIC CLIMATE APPEARED
FAVORABLE FOR STOCKS AT THE CLOSE OF
THE REPORTING PERIOD DESPITE
OFTEN-EXTREME MARKET VOLATILITY.
-------------------------------------
AIM CHARTER FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC STOCKS & OTHER EQUITY INTERESTS-78.41%
BANKS (MONEY CENTER)-4.89%
Chase Manhattan Corp. (The) 10,000,000 $ 455,000,000
===============================================================
BIOTECHNOLOGY-0.81%
Amgen Inc.(a) 1,300,000 75,318,750
===============================================================
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.38%
AT&T Corp.-Liberty Media
Corp.-Class A 5,500,000 99,000,000
---------------------------------------------------------------
Comcast Corp.-Class A(a) 3,000,000 122,250,000
===============================================================
221,250,000
===============================================================
CHEMICALS (DIVERSIFIED)-0.52%
Pharmacia Corp.-$2.60 Conv. Pfd.
ACES(b) 1,000,000 48,187,500
===============================================================
COMMUNICATIONS EQUIPMENT-1.71%
Comverse Technology, Inc.(a) 700,000 78,225,000
---------------------------------------------------------------
JDS Uniphase Corp.(a) 1,000,000 81,375,000
===============================================================
159,600,000
===============================================================
COMPUTERS (HARDWARE)-3.13%
Gateway, Inc.(a) 1,350,000 69,673,500
---------------------------------------------------------------
Sun Microsystems, Inc.(a) 2,000,000 221,750,000
===============================================================
291,423,500
===============================================================
COMPUTERS (NETWORKING)-3.47%
Cisco Systems, Inc.(a) 6,000,000 323,250,000
===============================================================
COMPUTERS (PERIPHERALS)-1.91%
EMC Corp.(a) 2,000,000 178,125,000
===============================================================
COMPUTERS (SOFTWARE & SERVICES)-7.63%
Ariba, Inc.(a) 800,000 101,100,000
---------------------------------------------------------------
Microsoft Corp.(a) 600,000 41,325,000
---------------------------------------------------------------
Oracle Corp.(a) 6,000,000 198,000,000
---------------------------------------------------------------
VERITAS Software Corp.(a) 2,178,800 307,244,844
---------------------------------------------------------------
Vitria Technology, Inc.(a) 2,325,000 62,484,375
===============================================================
710,154,219
===============================================================
ELECTRICAL EQUIPMENT-5.06%
General Electric Co. 7,500,000 411,093,750
---------------------------------------------------------------
Solectron Corp.(a) 1,350,000 59,400,000
===============================================================
470,493,750
===============================================================
ELECTRONICS (SEMICONDUCTORS)-2.06%
Analog Devices, Inc.(a) 1,500,000 97,500,000
---------------------------------------------------------------
Linear Technology Corp. 700,000 45,193,750
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Texas Instruments Inc. 1,000,000 $ 49,062,500
===============================================================
191,756,250
===============================================================
ENTERTAINMENT-1.83%
Time Warner Inc. 2,250,000 170,797,500
===============================================================
EQUIPMENT (SEMICONDUCTOR)-0.46%
Applied Materials, Inc.(a) 800,000 42,500,000
===============================================================
FINANCIAL (DIVERSIFIED)-6.01%
American Express Co. 4,500,000 270,000,000
---------------------------------------------------------------
Citigroup Inc. 5,500,000 289,437,500
===============================================================
559,437,500
===============================================================
HEALTH CARE (DIVERSIFIED)-1.36%
American Home Products Corp. 2,000,000 127,000,000
===============================================================
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.07%
Genentech, Inc.(a) 1,204,000 99,330,000
===============================================================
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-6.34%
Allergan, Inc. 1,250,000 105,078,125
---------------------------------------------------------------
Pfizer Inc. 9,000,000 388,687,500
---------------------------------------------------------------
Pharmacia Corp. 1,750,000 96,250,000
===============================================================
590,015,625
===============================================================
HEALTH CARE (HOSPITAL MANAGEMENT)-0.74%
Health Management Associates,
Inc.-Class A(a) 3,500,000 69,343,750
===============================================================
HEALTH CARE (MANAGED CARE)-1.18%
UnitedHealth Group Inc. 1,000,000 109,375,000
===============================================================
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.02%
Medtronic, Inc. 1,000,000 54,312,500
---------------------------------------------------------------
PE Corp-PE Biosystems Group 350,000 40,950,000
===============================================================
95,262,500
===============================================================
INSURANCE (MULTI-LINE)-3.16%
American International Group, Inc. 3,000,000 294,000,000
===============================================================
INSURANCE BROKERS-0.84%
Marsh & McLennan Cos., Inc. 600,000 78,450,000
===============================================================
INVESTMENT BANKING/BROKERAGE-6.59%
Goldman Sachs Group, Inc. (The) 1,000,000 99,812,500
---------------------------------------------------------------
Merrill Lynch & Co., Inc. 2,000,000 140,000,000
---------------------------------------------------------------
</TABLE>
AIM CHARTER FUND
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT BANKING/BROKERAGE-(CONTINUED)
Morgan Stanley Dean Witter & Co. 4,000,000 $ 321,250,000
---------------------------------------------------------------
Schwab (Charles) Corp. (The) 1,500,000 52,687,500
===============================================================
613,750,000
===============================================================
INVESTMENT MANAGEMENT-0.72%
Stilwell Financial, Inc. 1,500,000 67,218,750
===============================================================
MANUFACTURING (DIVERSIFIED)-0.58%
Honeywell International Inc. 1,000,000 53,812,500
===============================================================
NATURAL GAS-1.00%
Dynegy Inc.-Class A 2,000,000 92,625,000
===============================================================
OIL & GAS (DRILLING & EQUIPMENT)-3.01%
Diamond Offshore Drilling, Inc. 500,000 17,281,250
---------------------------------------------------------------
R&B Falcon Corp.(a) 2,000,000 50,000,000
---------------------------------------------------------------
Schlumberger Ltd. 1,750,000 133,218,750
---------------------------------------------------------------
Transocean Sedco Forex Inc. 1,500,000 79,500,000
===============================================================
280,000,000
===============================================================
OIL (INTERNATIONAL INTEGRATED)-1.68%
Exxon Mobil Corp. 1,750,000 156,078,125
===============================================================
POWER PRODUCERS (INDEPENDENT)-0.47%
Calpine Corp.(a) 550,000 43,415,625
===============================================================
RETAIL (BUILDING SUPPLIES)-0.46%
Home Depot, Inc. (The) 1,000,000 43,000,000
===============================================================
RETAIL (DEPARTMENT STORES)-0.67%
Kohl's Corp.(a) 1,150,000 62,315,625
===============================================================
RETAIL (DRUG STORES)-0.98%
Walgreen Co. 2,000,000 91,250,000
===============================================================
RETAIL (GENERAL MERCHANDISE)-3.26%
Target Corp. 11,000,000 303,875,000
===============================================================
SERVICES (COMMERCIAL & CONSUMER)-0.32%
Cendant Corp.-$3.75 Conv. PRIDES 1,000,000 29,375,000
===============================================================
SERVICES (DATA PROCESSING)-0.34%
Ceridian Corp.(a) 1,250,000 31,250,000
===============================================================
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-0.75%
Phone.com, Inc.(a) 750,000 69,421,875
===============================================================
Total Domestic Stocks & Other
Equity Interests (Cost
$4,995,515,075) 7,297,458,344
===============================================================
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-11.78%
BERMUDA-5.48%
Tyco International Ltd.
(Manufacturing-Diversified) 9,000,000 $ 510,187,500
===============================================================
CANADA-5.18%
Celestica Inc.
(Electronics-Semiconductors)(a) 3,000,000 215,625,000
---------------------------------------------------------------
Nortel Networks Corp.
(Communications Equipment) 4,000,000 182,000,000
---------------------------------------------------------------
PMC-Sierra, Inc.
(Electronics-Semiconductors)(a) 500,000 84,750,000
===============================================================
482,375,000
===============================================================
FINLAND-0.58%
Nokia Oyj-ADR (Communications
Equipment) 1,250,000 53,437,500
===============================================================
UNITED KINGDOM-0.54%
Shire Pharmaceuticals Group
PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 800,000 50,300,000
===============================================================
Total Foreign Stocks & Other
Equity Interests (Cost
$806,019,092) 1,096,300,000
===============================================================
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE NOTES-4.95%
COMMUNICATIONS EQUIPMENT-1.95%
Juniper Networks, Inc., Unsec.
Conv. Notes, 4.75%, 03/15/07 $80,000,000 $ 111,600,000
---------------------------------------------------------------
Redback Networks Inc., Conv.
Notes, 5.00%, 04/01/07
(Acquired 04/13/00-07/14/00;
Cost $66,966,675)(c) 80,000,000 69,500,000
===============================================================
181,100,000
===============================================================
COMPUTERS (HARDWARE)-0.40%
Candescent Technologies Corp.,
Conv. Notes, 8.00%, 05/01/03
(Acquired 04/17/98-08/31/00;
Cost $36,693,750)(c) 40,800,000 28,968,000
---------------------------------------------------------------
Candescent Technologies Corp.,
Sr. Conv. Gtd. Sub. Debs.,
8.00%, 05/01/03 (Acquired
03/07/00; Cost $9,360,000)(c) 11,700,000 8,307,000
===============================================================
37,275,000
===============================================================
COMPUTERS (SOFTWARE & SERVICES)-1.99%
VERITAS Software Corp., Conv.
Unsec. Notes, 5.25%, 11/01/04 12,500,000 185,671,875
===============================================================
ELECTRONICS (SEMICONDUCTORS)-0.61%
TranSwitch Corp., Conv. Unsec.
Unsub. Notes, 4.50%, 09/12/05
(Acquired 09/06/00-09/22/00;
Cost $51,641,510)(c) 50,000,000 57,125,000
===============================================================
Total Convertible Notes (Cost
$265,048,751) 461,171,875
===============================================================
</TABLE>
AIM CHARTER FUND
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.31%
STIC Liquid Assets Portfolio(d) 200,389,105 $ 200,389,105
---------------------------------------------------------------
STIC Prime Portfolio(d) 200,389,105 200,389,105
===============================================================
Total Money Market Funds
(Cost $400,778,210) 400,778,210
===============================================================
TOTAL INVESTMENTS-99.45% (Cost
$6,467,361,128) 9,255,708,429
===============================================================
OTHER ASSETS LESS
LIABILITIES-0.55% 50,876,880
===============================================================
NET ASSETS-100.00% $9,306,585,309
_______________________________________________________________
===============================================================
</TABLE>
Investment Abbreviations:
ACES - Adjustable Conversion-Rate Equity Security
ADR - American Depositary Receipt
Conv. - Convertible
Gtd. - Guaranteed
Pfd. - Preferred
PRIDES - Preferred Redeemable Increased Dividend Security
Sr. - Senior
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Affiliated issuer in which the Fund's holdings of the 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 10/31/00 represented 0.52% of the Fund's net assets.
(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 aggregate market value at 10/31/00 was $163,900,000
which represented 1.76% of the Fund's net assets.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
AIM CHARTER FUND
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$6,467,361,128) $9,255,708,429
-------------------------------------------------------------
Receivables for:
Investments sold 125,862,482
-------------------------------------------------------------
Fund shares sold 20,439,092
-------------------------------------------------------------
Dividends and interest 6,895,834
-------------------------------------------------------------
Collateral for securities loaned 223,052,700
-------------------------------------------------------------
Investment for deferred compensation plan 111,896
-------------------------------------------------------------
Other assets 167,162
=============================================================
Total assets 9,632,237,595
=============================================================
LIABILITIES:
Payables for:
Investments purchased 83,099,731
-------------------------------------------------------------
Collateral upon return of securities loaned 223,052,700
-------------------------------------------------------------
Fund shares reacquired 8,160,666
-------------------------------------------------------------
Deferred compensation plan 111,896
-------------------------------------------------------------
Accrued advisory fees 4,699,610
-------------------------------------------------------------
Accrued administrative services fees 33,945
-------------------------------------------------------------
Accrued distribution fees 5,099,913
-------------------------------------------------------------
Accrued trustees' fees 2,320
-------------------------------------------------------------
Accrued transfer agent fees 1,239,008
-------------------------------------------------------------
Accrued operating expenses 152,497
=============================================================
Total liabilities 325,652,286
=============================================================
Net assets applicable to shares outstanding $9,306,585,309
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $5,801,868,972
_____________________________________________________________
=============================================================
Class B $3,088,610,539
_____________________________________________________________
=============================================================
Class C $ 412,871,584
_____________________________________________________________
=============================================================
Institutional Class $ 3,234,214
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE:
Class A 321,076,686
_____________________________________________________________
=============================================================
Class B 174,315,501
_____________________________________________________________
=============================================================
Class C 23,239,560
_____________________________________________________________
=============================================================
Institutional Class 176,469
_____________________________________________________________
=============================================================
Class A:
Net asset value and redemption price per
share $ 18.07
-------------------------------------------------------------
Offering price per share:
(Net asset value of $18.07 divided by
94.50%) $ 19.12
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 17.72
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 17.77
_____________________________________________________________
=============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 18.33
_____________________________________________________________
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$260,470) $ 44,621,886
------------------------------------------------------------
Dividends from affiliated money market funds 19,976,756
------------------------------------------------------------
Interest 12,038,522
------------------------------------------------------------
Security lending income 57,484
============================================================
Total investment income 76,694,648
============================================================
EXPENSES:
Advisory fees 56,142,463
------------------------------------------------------------
Administrative services fee 383,224
------------------------------------------------------------
Custodian fees 436,940
------------------------------------------------------------
Distribution fees -- Class A 17,302,500
------------------------------------------------------------
Distribution fees -- Class B 28,390,889
------------------------------------------------------------
Distribution fees -- Class C 2,875,637
------------------------------------------------------------
Transfer agent fees -- Class A 6,483,464
------------------------------------------------------------
Transfer agent fees -- Class B 4,193,264
------------------------------------------------------------
Transfer agent fees -- Class C 424,724
------------------------------------------------------------
Transfer agent fees -- Institutional Class 6,987
------------------------------------------------------------
Trustees' fees 32,886
------------------------------------------------------------
Other 2,491,474
============================================================
Total expenses 119,164,452
============================================================
Less: Fees waived (1,484,073)
------------------------------------------------------------
Expenses paid indirectly (142,391)
============================================================
Net expenses 117,537,988
============================================================
Net investment income (loss) (40,843,340)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 479,025,042
------------------------------------------------------------
Foreign currencies (19)
------------------------------------------------------------
Option contracts written (7,070,524)
============================================================
471,954,499
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 506,772,676
------------------------------------------------------------
Foreign currencies (57,630)
------------------------------------------------------------
Option contracts written 174,690
============================================================
506,889,736
============================================================
Net gain on investment securities, foreign
currencies and option contracts 978,844,235
============================================================
Net increase in net assets resulting from
operations $938,000,895
____________________________________________________________
============================================================
</TABLE>
See Notes to Financial Statements.
AIM CHARTER FUND
8
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (40,843,340) $ (7,207,717)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 471,954,499 657,364,994
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and option contracts 506,889,736 1,116,552,041
==============================================================================================
Net increase in net assets resulting from operations 938,000,895 1,766,709,318
==============================================================================================
Distributions to shareholders from net investment income:
Class A -- (9,134,542)
----------------------------------------------------------------------------------------------
Institutional Class -- (216,682)
----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (388,576,691) (149,620,112)
----------------------------------------------------------------------------------------------
Class B (178,887,093) (57,712,333)
----------------------------------------------------------------------------------------------
Class C (12,095,934) (1,614,093)
----------------------------------------------------------------------------------------------
Institutional Class (5,231,737) (1,761,967)
----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 584,181,510 151,495,357
----------------------------------------------------------------------------------------------
Class B 797,259,785 370,892,559
----------------------------------------------------------------------------------------------
Class C 277,016,670 84,930,162
----------------------------------------------------------------------------------------------
Institutional Class (65,767,394) 9,431,197
==============================================================================================
Net increase in net assets 1,945,900,011 2,163,398,864
==============================================================================================
NET ASSETS:
Beginning of year 7,360,685,298 5,197,286,434
==============================================================================================
End of year $9,306,585,309 $7,360,685,298
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $6,086,848,912 $4,466,453,244
----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (265,564) (217,108)
----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and option contracts 431,720,148 613,057,085
----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and option contracts 2,788,281,813 2,281,392,077
==============================================================================================
$9,306,585,309 $7,360,685,298
______________________________________________________________________________________________
==============================================================================================
</TABLE>
See Notes to Financial Statements.
AIM CHARTER FUND
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of eleven separate portfolios, each
having an unlimited number of shares of beneficial interest. Prior to June 17,
2000 the Fund was organized as a series portfolio of AIM Equity Funds, Inc. At a
meeting held on February 3, 2000, the Board of Directors of AIM Equity Funds,
Inc. approved an Agreement and Plan of Reorganization (the "Reorganization")
which reorganized the Fund as a series portfolio of the Trust. Shareholders of
the Fund approved the Reorganization at a meeting held on June 16, 2000. 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. Institutional Class shares are sold without a
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 accounting
principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session 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 as of the
close of the customary trading session 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 Trust's officers in a manner specifically authorized
by the Board of Trustees. 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 option
contracts generally will be valued 15 minutes after the close of the
customary trading session 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 customary
trading session 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 Trustees.
B. Securities Transactions and Investment Income -- 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$40,794,884, undistributed net realized gains decreased by $68,499,981 and
paid in capital increased by $27,705,097 as a result of differences due to
utilization of a portion of the proceeds from redemptions as distributions
for federal income tax purposes and net operating loss reclassifications. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
D. 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.
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
AIM CHARTER FUND
10
<PAGE> 13
U.S. dollar amounts on the respective dates of such transactions. The Fund
does not separately account for the 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, 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. Bond Premiums -- It has been the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes. In November 2000, a
revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was
issued and is effective for fiscal years beginning after December 15, 2000.
The revised Guide will require the Fund to amortize premium and discount on
all fixed-income securities. Upon initial adoption, the Fund will be required
to adjust the cost of its fixed-income securities by the cumulative amount of
amortization that would have been recognized had amortization been in effect
from the purchase date of each holding. Adopting this accounting principle
will not effect the Fund's net asset value, but will change the
classification of certain amounts between interest income and realized and
unrealized gain/loss in the Statement of Operations. The Fund expects that
the impact of the adoption of this principle will not be material to the
financial statements.
I. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 Trust 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
agreed to waive advisory fees payable by the Fund to AIM at the annual rate of
0.025% for each $5 billion increment in net assets over $5 billion, up to a
maximum waiver of 0.175% on net assets in excess of $35 billion. During the year
ended October 31, 2000, AIM waived fees of $1,484,073. 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. For the year ended October 31, 2000, AIM was
paid $383,224 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. For the year ended October 31, 2000, AFS was
paid $5,656,971 for such services.
The Trust 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, Class C and the Institutional Class shares of the Fund. The
Trust has adopted plans 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
AIM CHARTER FUND
11
<PAGE> 14
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,
2000, the Class A, Class B and Class C shares paid AIM Distributors $17,302,500,
$28,390,889 and $2,875,637, respectively, as compensation under the Plans.
AIM Distributors received commissions of $3,447,012 from sales of the Class
A shares of the Fund during the year ended October 31, 2000. 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,
2000, AIM Distributors received $148,823 in contingent deferred sales charges
imposed on redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and AIM Distributors.
During the year ended October 31, 2000, the Fund paid legal fees of $17,752
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $120,163 and reductions in
custodian fees of $22,228 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $142,391.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, 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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the lender did not increase the
collateral accordingly.
At October 31, 2000, securities with an aggregate value of $217,561,694 were
on loan to brokers. The loans were secured by cash collateral of $223,052,700.
For the year ended October 31, 2000, the Fund received fees of $57,484 for
securities lending. For the year ended October 31, 2000, the Fund received fees
of $57,484 for securities lending.
NOTE 7-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, 2000 was
$7,614,658,355 and $6,854,206,652, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of October 31, 2000 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,929,797,242
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (168,568,503)
==========================================================
Net unrealized appreciation of investment
securities $2,761,228,739
__________________________________________________________
==========================================================
</TABLE>
Cost of investments for tax purposes is $6,494,479,690.
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year 22,500 $ 27,510,348
-----------------------------------------------------------------------------------------
Written 32,000 15,761,611
-----------------------------------------------------------------------------------------
Closed (27,181) (27,941,081)
-----------------------------------------------------------------------------------------
Exercised (10,500) (6,227,291)
-----------------------------------------------------------------------------------------
Expired (16,819) (9,103,587)
=========================================================================================
End of year -- $ --
_________________________________________________________________________________________
=========================================================================================
</TABLE>
AIM CHARTER FUND
12
<PAGE> 15
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 2000 and 1999
were as follows:
<TABLE>
<CAPTION>
2000 1999
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 57,178,653 $1,066,455,209 51,272,783 $ 809,088,837
---------------------------------------------------------------------------------------------------------------------------
Class B 53,229,017 974,381,372 36,310,602 576,056,633
---------------------------------------------------------------------------------------------------------------------------
Class C 16,418,781 302,161,441 6,968,661 111,866,437
---------------------------------------------------------------------------------------------------------------------------
Institutional Class 579,610 10,786,891 828,138 13,421,969
===========================================================================================================================
Issued as reinvestment of dividends:
Class A 21,344,032 366,468,078 10,532,077 149,384,623
---------------------------------------------------------------------------------------------------------------------------
Class B 9,983,505 169,088,645 3,894,826 54,866,091
---------------------------------------------------------------------------------------------------------------------------
Class C 672,773 11,427,814 107,859 1,525,822
---------------------------------------------------------------------------------------------------------------------------
Institutional Class 294,477 5,109,184 134,608 1,929,704
===========================================================================================================================
Reacquired:
Class A (45,774,876) (848,741,777) (51,731,503) (806,978,103)
---------------------------------------------------------------------------------------------------------------------------
Class B (18,927,570) (346,210,232) (16,551,587) (260,030,165)
---------------------------------------------------------------------------------------------------------------------------
Class C (1,991,214) (36,572,585) (1,788,368) (28,462,097)
---------------------------------------------------------------------------------------------------------------------------
Institutional Class (4,553,078) (81,663,469) (372,429) (5,920,476)
===========================================================================================================================
88,454,110 $1,592,690,571 39,605,667 $ 616,749,275
___________________________________________________________________________________________________________________________
===========================================================================================================================
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
--------------------------------------------------
YEAR ENDED OCTOBER 31,
2000 1999 1998 1997 1996
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.33 $ 13.42 $ 13.48 $ 11.24 $ 10.66
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.52 0.09 0.18 0.16 0.24
----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.83 4.43 1.24 2.91 1.44
================================================================================================================
Total from investment operations 2.35 4.52 1.42 3.07 1.68
================================================================================================================
Less distributions:
Dividends from net investment income -- (0.07) (0.14) (0.16) (0.20)
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.35) (0.54) (1.34) (0.67) (0.90)
================================================================================================================
Total distributions (1.35) (0.61) (1.48) (0.83) (1.10)
================================================================================================================
Net asset value, end of period $18.33 $ 17.33 $ 13.42 $ 13.48 $ 11.24
________________________________________________________________________________________________________________
================================================================================================================
Total return 14.02% 34.61% 11.69% 29.05% 17.29%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,234 $66,801 $43,815 $40,191 $29,591
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.66%(a) 0.65% 0.66% 0.67% 0.69%
----------------------------------------------------------------------------------------------------------------
Without fee waivers 0.68%(a) 0.67% 0.67% 0.68% 0.70%
================================================================================================================
Ratio of net investment income to average net assets 0.20%(a) 0.51% 1.37% 1.21% 2.24%
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate 80% 107% 154% 170% 164%
________________________________________________________________________________________________________________
================================================================================================================
</TABLE>
(a) Ratios are based on average net assets of $46,641,532.
AIM CHARTER FUND
13
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
AIM Equity Funds:
We have audited the accompanying statement of assets and
liabilities of the AIM Charter Fund (a portfolio of AIM
Equity Funds), including the schedule of investments, as
of October 31, 2000, 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
periods 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 auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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
periods in the five-year period then ended, in conformity
with accounting principles generally accepted in the
United States of America.
KPMG LLP
December 6, 2000
Houston, Texas
AIM CHARTER FUND
14
<PAGE> 17
PROXY RESULTS (UNAUDITED)
A Special Meeting of Shareholders of AIM Charter Fund (the "Fund"), a portfolio
of AIM Equity Funds, Inc., a Maryland corporation (the "Company"), reorganized
as AIM Equity Funds, a Delaware business trust (the "Trust"), was held on May 3,
2000. The meeting was held for the following purposes:
(1)* To elect the following Directors: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H.
Graham, Prema Mathai-Davis, Lewis F. Pennock and Louis S. Sklar.
(2)* To approve an Agreement and Plan of Reorganization which provides for the
reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(4) To approve changing the fundamental investment restrictions of the Fund.
(5) To ratify the selection of KPMG LLP as independent accountants of the Fund
for the fiscal year ending in 2000.
The results of the voting on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES WITHHELD/
DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS
---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
(1)* Charles T. Bauer............................................ 880,499,527 N/A 21,899,315
Bruce L. Crockett........................................... 880,943,079 N/A 21,455,763
Owen Daly II................................................ 880,468,204 N/A 21,930,638
Edward K. Dunn, Jr.......................................... 880,922,500 N/A 21,476,342
Jack M. Fields.............................................. 880,960,800 N/A 21,438,042
Carl Frischling............................................. 880,836,332 N/A 21,562,510
Robert H. Graham............................................ 880,965,547 N/A 21,433,295
Prema Mathai-Davis.......................................... 880,635,296 N/A 21,763,546
Lewis F. Pennock............................................ 880,899,481 N/A 21,499,361
Louis S. Sklar.............................................. 880,825,241 N/A 21,573,601
(2)* Adjournment of approval of an Agreement and Plan of
Reorganization which provides for the reorganization of AIM
Equity Funds, Inc. as a Delaware business trust............. 610,634,359 17,637,580 274,126,903**
(3) Approval of a new Master Investment Advisory Agreement with
A I M Advisors, Inc......................................... 198,072,354 4,443,810 58,954,098**
(4)(a) Approval of changing or adding the Fundamental Restriction
on Issuer Diversification................................... 195,535,393 5,769,173 60,165,696**
(4)(b) Approval of changing the Fundamental Restriction on
Underwriting Securities..................................... 195,049,790 6,189,440 60,231,032**
(4)(c) Approval of changing the Fundamental Restriction on Industry
Concentration............................................... 195,332,446 5,942,292 60,195,524**
(4)(d) Approval of changing the Fundamental Restriction on
Purchasing or Selling Real Estate........................... 194,631,850 6,712,959 60,125,453**
(4)(e) Approval of changing the Fundamental Restriction on
Purchasing or Selling Commodities........................... 194,133,929 7,236,966 60,099,367**
(4)(f) Approval of changing the Fundamental Restriction on Making
Loans....................................................... 193,797,885 7,364,819 60,307,558**
(4)(g) Approval of a new Fundamental Investment Restriction on
Investing all of the Fund's Assets in an Open-End Fund...... 194,572,382 6,731,052 60,166,828**
(4)(h) Approval of the Elimination of Fundamental Restriction on
Margin Transactions......................................... 191,833,892 9,274,126 60,362,244**
(4)(i) Approval of the Elimination of Fundamental Restriction on
Short Sales of Securities................................... 192,813,406 8,434,283 60,222,573**
(4)(j) Approval of the Elimination of Fundamental Restriction on
Investing for the Purpose of Control........................ 193,458,648 7,690,442 60,321,172**
(4)(k) Approval of the Elimination of Fundamental Restriction on
Purchasing Securities of Issuers in which Officers and
Directors of the Company and its Affiliates own
Securities.................................................. 192,351,448 8,842,141 60,276,673**
(4)(l) Approval of the Elimination of Fundamental Restriction on
transactions with Officers and Directors of Charter in
Securities other than Capital Stock of Charter.............. 192,342,732.. 8,746,755 60,380,775**
(5) Ratification of the selection of KPMG LLP as Independent
Accountants of the Fund..................................... 249,488,386 1,958,184 10,023,692
</TABLE>
AIM CHARTER FUND
15
<PAGE> 18
The Special Meeting of Shareholders of the Company was reconvened on May
31, 2000. The following matter was then considered:
<TABLE>
<CAPTION>
VOTES WITHHELD/
MATTER VOTES FOR AGAINST ABSTENTIONS
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
(2)* Adjournment of approval of an Agreement and Plan of
Reorganization which provides for the reorganization of AIM
Equity Funds, Inc. as a Delaware business trust............. 771,237,475 25,045,711 214,550,642**
</TABLE>
The Special Meeting of Shareholders of the Company was reconvened on June
16, 2000. The following matter was then considered:
<TABLE>
<CAPTION>
VOTES WITHHELD/
MATTER VOTES FOR AGAINST ABSTENTIONS
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
(2)* Approval of an Agreement and Plan of Reorganization which
provides for the reorganization of AIM Equity Funds, Inc. as
a Delaware business trust................................... 824,680,935 26,389,312 203,059,248**
</TABLE>
---------------
* Proposal 1 required approval by a combined vote of all of the portfolios of
AIM Equity Funds, Inc.
** Includes Broker Non-Votes
---------------
Effective September 30, 2000, Charles T. Bauer retired from his positions as an
officer and trustee of the Trust and Robert H. Graham succeeded Mr. Bauer as
Chairman of the Board.
AIM CHARTER FUND
16
<PAGE> 19
ABOUT YOUR FUND'S BOARD
The board of trustees is elected by you to look after your interests as a
mutual-fund shareholder. Trustees' responsibilities include choosing investment
advisors for your fund; keeping an eye on performance, operations and expenses;
making decisions regarding dividends and other duties.
Nine of your fund's 10 trustees are independent. In other words, they have
no affiliation with AIM except as independent fund trustees charged with
representing the interest of fund investors. Representing a cross section of
businesses and industries, they have achieved success and recognition in their
respective fields. They bring their considerable expertise and experience to
their positions as trustees.
Listed below are the members of the board of trustees of your mutual fund
and their respective titles.
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman, President and President Suite 100
Chief Executive Officer Houston, TX 77046
A I M Management Group Inc. Carol F. Relihan
Senior Vice President and Secretary INVESTMENT ADVISOR
Bruce L. Crockett
Director Gary T. Crum A I M Advisors, Inc.
ACE Limited; Senior Vice President 11 Greenway Plaza
Formerly Director, President, and Suite 100
Chief Executive Officer Edgar M. Larsen Houston, TX 77046
COMSAT Corporation Vice President
SUB-ADVISOR
Owen Daly II Dana R. Sutton
Formerly Director Vice President and Treasurer A I M Capital Management, Inc.
Cortland Trust Inc. 11 Greenway Plaza
Jim A. Coppedge Suite 100
Albert R. Dowden Assistant Secretary Houston, TX 77046
Chairman of the Board of Directors,
The Cortland Trust and DHJ Media, Inc.; and Melville B. Cox TRANSFER AGENT
Director, Magellan Insurance Company, Vice President
Formerly Director, President and A I M Fund Services, Inc.
Chief Executive Officer, Mary J. Benson P.O. Box 4739
Volvo Group North America, Inc.; and Assistant Vice President and Houston, TX 77210-4739
Senior Vice President, AB Volvo Assistant Treasurer
CUSTODIAN
Edward K. Dunn Jr. Sheri Morris
Chairman, Mercantile Mortgage Corp.; Assistant Vice President and State Street Bank and Trust Company
Formerly Vice Chairman and President, Assistant Treasurer 225 Franklin Street
Mercantile-Safe Deposit & Trust Co.; and Boston, MA 02110
President, Mercantile Bankshares Renee A. Friedli
Assistant Secretary COUNSEL TO THE FUND
Jack Fields
Chief Executive Officer P. Michelle Grace Ballard Spahr
Twenty First Century, Inc.; Assistant Secretary Andrews & Ingersoll, LLP
Formerly Member 1735 Market Street
of the U.S. House of Representatives Nancy L. Martin Philadelphia, PA 19103
Assistant Secretary
Carl Frischling COUNSEL TO THE TRUSTEES
Partner Ofelia M. Mayo
Kramer, Levin, Naftalis & Frankel LLP Assistant Secretary Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
Prema Mathai-Davis Lisa A. Moss New York, NY 10022
Formerly Chief Executive Officer, Assistant Secretary
YWCA of the U.S.A. DISTRIBUTOR
Kathleen J. Pflueger
Lewis F. Pennock Assistant Secretary A I M Distributors, Inc.
Partner 11 Greenway Plaza
Pennock & Cooper Suite 100
Houston, TX 77046
Louis S. Sklar
Executive Vice President AUDITORS
Hines Interests
Limited Partnership KPMG LLP
700 Louisiana
Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2000, 21% is eligible for the dividends received deduction for
corporations. The Fund distributed long-term capital gains of $396,617,031 for
the Fund's tax year ended October 31, 2000 of which 100% is 20% rate gain.
AIM CHARTER FUND
17
<PAGE> 20
ANNUAL REPORT/CHAIRMAN'S LETTER
AIM CONSTELLATION FUND
AIM Constellation Fund is for shareholders who seek growth of capital by
investing principally in common stocks of companies the portfolio managers
believe are likely to benefit from new or innovative products, services or
processes as well as those that have experienced above-average, long-term growth
in earnings and have excellent prospects for future growth.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Constellation Fund's performance figures are historical, and they
reflect the reinvestment of distributions and changes in net asset value.
o The fund's average annual total return for the period ended 9/30/00 (the
most recent calendar quarter-end) are as follows: one year, 57.87%; five
years, 20.51%; inception (4/8/92), 21.63%.
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.
o Investing in micro-, small- and mid-sized companies may involve risks not
associated with investing in more established companies. Also, micro and
small companies may have business risk, significant stock-price fluctuations
and illiquidity.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The National Association of Securities Dealers Automated Quotation System
Composite Index (the Nasdaq) is a market-value-weighted index comprising all
domestic and non-U.S. based common stocks listed on the Nasdaq system. It
includes more than 5,000 companies, and it 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 Composite Index of 500 Stocks (the S&P 500)
represents the performance of the stock market.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
RESULTS OF A $10,000 INVESTMENT
AIM CONSTELLATION FUND
VS. BENCHMARK INDEXES
4/8/92-10/31/00
in thousands
================================================================================
AIM Constellation Fund,
Institutional Class S&P 500
--------------------------------------------------------------------------------
4/92 $10,000 $10,000
10/92 10,797 10,547
10/93 13,938 12,120
10/94 15,045 12,587
10/95 20,173 15,911
10/96 22,556 19,743
10/97 26,936 26,080
10/98 26,438 31,821
10/99 35,813 39,987
10/00 49,124 42,418
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
Performance results for the indexes are for the period
3/31/92-10/31/00.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/00
================================================================================
AIM CONSTELLATION FUND, INSTITUTIONAL CLASS
Inception (4/8/92) 20.43%
5 years 19.48
1 year 37.16
================================================================================
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.
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
18
<PAGE> 21
ANNUAL REPORT / MANAGER'S OVERVIEW
FUND EXCELS IN CHALLENGING MARKET ENVIRONMENT
AFTER SETTING RECORDS DURING THE FIRST HALF OF THE FISCAL YEAR, STOCK MARKET
INDEXES PLUMMETED IN THE SECOND HALF. HOW DID AIM CONSTELLATION FUND PERFORM?
Although stocks were particularly volatile over the last seven months of the
fiscal year, the fund's performance was excellent. Total return for the
Institutional Class was 37.16%. By comparison, the S&P 500 and the Nasdaq posted
returns of 6.08% and 13.59%, respectively, over the same period.
Fund performance for the fiscal year includes gains made during late 1999
and early 2000, when markets were more exuberant than they became later in the
fiscal year. More recently, the fund's performance has been affected by the
technology sector sell-off and other market difficulties.
WHAT WERE THE MAJOR STOCK-MARKET TRENDS?
A strong market rally in the first half of the fiscal year was followed by a
choppy, downward-trending market in the second half. In late 1999 and early
2000, technology stocks led the market surge. The tech-laden Nasdaq soared to
record levels well into March. Toward the end of the month, however, investors
became concerned that tech stocks might be overvalued, sparking a sharp sell-off
in this sector. The stocks of Internet companies with no earnings were
particularly hard hit. Investors were also concerned that the Federal Reserve
Board (the Fed) might continue to raise interest rates to slow torrid economic
growth and contain inflation. Interest-rate concerns prompted a sell-off that
affected nearly every stock-market sector in April and caused markets to be
extremely volatile.
After raising interest rates in May, the Fed ceased its monetary tightening
policy for the remainder of the fiscal year. Markets rallied in late May and
June amid mounting evidence that economic growth was slowing, reducing the
probability of additional Fed rate hikes. However, in late summer and early
fall, rising oil prices, unrest in the Middle East and, perhaps most
importantly, concern about corporate earnings converged to produce another steep
market decline. A number of major corporations reported earnings disappointments
in September and October, as rising oil prices and a weak euro cut into profit
margins.
Because of strong performance during the first half of the fiscal year, most
market indexes recorded gains for the reporting period. After tech stocks faded,
stocks in several other sectors, such as health care, financial services, energy
and utili ties, posted healthy gains. Mid-cap stocks outperformed large- and
small-cap stocks. During the first half of the year, growth stocks outperformed
value stocks by a wide margin. But in the second half of the year, the situation
was reversed, with value stocks emerging as the clear-cut market leaders.
HOW WAS THE FUND MANAGED?
During the fiscal year, we reduced the number of holdings in the portfolio from
171 to 111 as we sold the stocks of companies that failed to meet our earnings
expectations. Simultaneously, we enhanced the fund's positions in the stocks of
companies that we believe have solid long-term growth prospects.
Relative to its benchmark, the S&P 500, the portfolio was overweighted in
technology and consumer-cyclical stocks. While both sectors struggled at times,
portfolio managers found a number of companies with solid earnings-growth
prospects in these sectors. Indeed, the portfolio's technology holdings boosted
performance, particularly because we avoided volatile dot-com stocks. The
portfolio also benefited from its health-care holdings, especially
pharmaceutical stocks, and its energy holdings. Demand for health-care services
tends to remain constant regardless of economic trends, while energy stocks
benefited from rising oil prices.
Early in the fiscal year, the fund was given increased flexibility to seek
out the most attractive stocks regardless of market capitalization. This
strategy has allowed the fund to take advantage of rallies within vari-
AIM CONSTELLATION FUND
INSTITUTIONAL CLASS
VS. BENCHMARK INDEXES
One-year returns, as of 10/31/00
================================================================================
FUND INSTITUTIONAL CLASS 37.16%
S&P 500 6.08%
NASDAQ 13.59%
================================================================================
-------------------------------------
PERHAPS MOST IMPORTANTLY, CORPORATE
PROFITS, WHILE DECLINING, WERE STILL
IMPRESSIVE FOR MANY COMPANIES.
-------------------------------------
AIM CONSTELLATION FUND
19
<PAGE> 22
ANNUAL REPORT / MANAGER'S OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/00, based on total net assets
<TABLE>
<CAPTION>
=========================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. VERITAS Software Corp. 3.31% 1. Computers (Software & Services) 13.64%
2. Corning Inc. 2.96 2. Communications Equipment 10.98
3. Check Point Software Technologies Ltd. (Israel) 2.66 3. Electronics (Semiconductors) 9.64
4. JDS Uniphase Corp. 2.10 4. Oil & Gas (Drilling & Equipment) 5.37
5. Comverse Technology, Inc. 2.10 5. Investment Banking/Brokerage 4.86
6. Cisco Systems, Inc. 1.77 6. Computers (Networking) 3.53
7. J.P. Morgan & Co., Inc. 1.75 7. Broadcasting (Television, Radio & Cable) 3.45
8. PE Corp. PE Biosystems Group 1.65 8. Health Care (Medical Products & Supplies) 2.92
9. Goldman Sachs Group, Inc. (The) 1.59 9. Computers (Peripherals) 2.77
10. PMC Sierra, Inc. (Canada) 1.59 10. Financial (Diversified) 2.73
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
=========================================================================================================================
</TABLE>
ous segments of the market and to hold on to strong-performing stocks as
they grow in market capitalization. The fund thus got a boost from its mid-cap
holdings. At the end of the fiscal year, large-cap stocks made up about 75% of
the portfolio, while mid-cap stocks made up more than 20%. The fund had
relatively limited exposure to small-cap stocks.
WHAT WERE THE LEADING TECH STOCKS IN THE PORTFOLIO?
The top tech holdings have changed relatively little over the six months since
our last report. At the close of the fiscal year, VERITAS was the fund's top
holding. The company is the world's leading maker of storage-management
software, which protects networks against data loss from crashes and errors,
expedites data recovery and manages corporate storage. Corning, the fund's
second-largest holding, is the inventor and one of the world's top manufacturers
of fiber-optic cable, while Check Point Software Technologies supplies software
that protects corporate networks from unauthorized access.
Other tech stocks in the portfolio included JDS Uniphase, which makes laser
equipment to increase the carrying capacity of optical fibers; Comverse
Technology, the leading maker of voice-mail messaging systems; and Cisco
Systems, a leading provider of products that link networks and power the
Internet.
WHAT OTHER STOCKS PERFORMED WELL FOR THE FUND?
In the financial sector, the fund benefited from owning the stocks of J.P.
Morgan and Goldman Sachs, two leading investment-banking firms. J.P. Morgan,
which also offers commercial-banking services, has agreed to be acquired by
Chase Manhattan, another fund holding. Goldman Sachs, with more than 40 offices
worldwide, went public last year. In the health-care sector, PE Biosystems
provides technology for research in the life sciences.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
At the close of the reporting period, the economic climate appeared favorable
for stocks despite often extreme market volatility. The nation's unemployment
rate was at its lowest level in three decades. Consumer spending, down for much
of the second half of the fiscal year, picked up again in September. And except
for higher oil prices, inflation was moderate.
Interest rates stabilized as the Fed took at least a temporary respite from
its monetary tightening policy, which had periodically roiled markets for more
than a year. Perhaps most importantly, corporate profits growth, while
declining, was still impressive for many companies. However, because of a degree
of uncertainty surrounding near-term economic, political and foreign trends and
developments, markets may continue to be volatile.
-------------------------------------
BECAUSE OF A DEGREE OF UNCERTAINTY
SURROUNDING NEAR-TERM ECONOMIC,
POLITICAL AND FOREIGN TRENDS AND
DEVELOPMENTS, MARKETS MAY CONTINUE
TO BE VOLATILE.
-------------------------------------
AIM CONSTELLATION FUND
20
<PAGE> 23
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY INTERESTS-91.25%
BANKS (MAJOR REGIONAL)-1.56%
Northern Trust Corp. 2,250,000 $ 192,093,750
---------------------------------------------------------------
State Street Corp. 1,125,000 140,332,500
===============================================================
332,426,250
===============================================================
BANKS (MONEY CENTER)-0.64%
Chase Manhattan Corp. (The) 3,000,000 136,500,000
===============================================================
BIOTECHNOLOGY-0.31%
Amgen Inc.(a) 1,137,800 65,921,287
===============================================================
BROADCASTING (TELEVISION, RADIO
& CABLE)-3.45%
Comcast Corp.-Class A(a) 2,500,000 101,875,000
---------------------------------------------------------------
General Motors Corp.-Class H(a) 9,050,000 293,220,000
---------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 5,750,000 179,687,500
---------------------------------------------------------------
Univision Communications
Inc.-Class A(a) 3,329,600 127,357,200
---------------------------------------------------------------
Westwood One, Inc.(a) 1,706,300 32,313,143
===============================================================
734,452,843
===============================================================
COMMUNICATIONS EQUIPMENT-10.98%
ADC Telecommunications, Inc.(a) 13,250,000 283,218,750
---------------------------------------------------------------
Alcatel S.A.-ADR (France) 5,250,000 327,468,750
---------------------------------------------------------------
CIENA Corp.(a) 1,125,800 118,349,725
---------------------------------------------------------------
Comverse Technology, Inc.(a) 4,000,000 447,000,000
---------------------------------------------------------------
Corning Inc. 8,250,000 631,125,000
---------------------------------------------------------------
JDS Uniphase Corp.(a) 5,500,000 447,562,500
---------------------------------------------------------------
Scientific-Atlanta, Inc. 1,250,000 85,546,875
===============================================================
2,340,271,600
===============================================================
COMPUTERS (HARDWARE)-2.69%
Palm, Inc.(a) 4,500,000 241,031,250
---------------------------------------------------------------
Sun Microsystems, Inc.(a) 3,000,000 332,625,000
===============================================================
573,656,250
===============================================================
COMPUTERS (NETWORKING)-3.53%
Cisco Systems, Inc.(a) 7,000,000 377,125,000
---------------------------------------------------------------
Juniper Networks, Inc.(a) 1,250,000 243,750,000
---------------------------------------------------------------
VeriSign, Inc.(a) 1,000,000 132,000,000
===============================================================
752,875,000
===============================================================
COMPUTERS (PERIPHERALS)-2.77%
Brocade Communications Systems,
Inc.(a) 1,425,000 324,009,375
---------------------------------------------------------------
EMC Corp.(a) 3,000,000 267,187,500
===============================================================
591,196,875
===============================================================
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-13.64%
Ariba, Inc.(a) 2,200,000 $ 278,025,000
---------------------------------------------------------------
BEA Systems, Inc.(a) 2,200,000 157,850,000
---------------------------------------------------------------
Business Objects S.A.-ADR
(France)(a) 1,000,000 78,796,875
---------------------------------------------------------------
Check Point Software
Technologies Ltd. (Israel)(a) 3,581,300 567,188,387
---------------------------------------------------------------
Gemstar-TV Guide International,
Inc.(a) 1,000,000 68,562,500
---------------------------------------------------------------
i2 Technologies, Inc.(a) 1,400,000 238,000,000
---------------------------------------------------------------
InfoSpace, Inc.(a) 4,025,000 81,003,125
---------------------------------------------------------------
Intuit Inc.(a) 2,000,000 122,875,000
---------------------------------------------------------------
Oracle Corp.(a) 5,147,200 169,857,600
---------------------------------------------------------------
Portal Software, Inc.(a) 2,500,000 87,968,750
---------------------------------------------------------------
Rational Software Corp.(a) 2,283,700 136,308,452
---------------------------------------------------------------
Siebel Systems, Inc.(a) 2,039,800 214,051,512
---------------------------------------------------------------
VERITAS Software Corp.(a) 5,000,000 705,078,125
===============================================================
2,905,565,326
===============================================================
CONSUMER FINANCE-1.48%
Capital One Financial Corp. 2,000,000 126,250,000
---------------------------------------------------------------
Providian Financial Corp. 1,825,000 189,800,000
===============================================================
316,050,000
===============================================================
ELECTRICAL EQUIPMENT-1.32%
American Power Conversion
Corp.(a) 4,099,100 53,032,106
---------------------------------------------------------------
Sanmina Corp.(a) 2,000,000 228,625,000
===============================================================
281,657,106
===============================================================
ELECTRONICS (INSTRUMENTATION)-0.17%
Newport Corp. 322,000 36,773,406
===============================================================
ELECTRONICS (SEMICONDUCTORS)-9.06%
Altera Corp.(a) 3,000,000 122,812,500
---------------------------------------------------------------
Analog Devices, Inc.(a) 5,138,700 334,015,500
---------------------------------------------------------------
Celestica Inc. (Canada)(a) 3,728,000 267,950,000
---------------------------------------------------------------
Integrated Device Technology,
Inc.(a) 1,386,400 78,071,650
---------------------------------------------------------------
Linear Technology Corp. 2,000,000 129,125,000
---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 2,000,000 132,625,000
---------------------------------------------------------------
Microchip Technology Inc.(a) 3,000,168 94,880,313
---------------------------------------------------------------
PMC-Sierra, Inc. (Canada)(a) 2,000,000 339,000,000
---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 3,575,000 250,026,563
---------------------------------------------------------------
Xilinx, Inc.(a) 2,500,000 181,093,750
===============================================================
1,929,600,276
===============================================================
EQUIPMENT (SEMICONDUCTOR)-0.36%
KLA-Tencor Corp.(a) 2,250,000 76,078,125
===============================================================
</TABLE>
AIM CONSTELLATION FUND
21
<PAGE> 24
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-2.73%
American Express Co. 2,500,000 $ 150,000,000
---------------------------------------------------------------
Freddie Mac 988,200 59,292,000
---------------------------------------------------------------
J.P. Morgan & Co., Inc. 2,250,000 372,375,000
===============================================================
581,667,000
===============================================================
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.19%
Forest Laboratories, Inc.(a) 1,000,000 132,500,000
---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a)(b) 1,654,100 121,783,113
===============================================================
254,283,113
===============================================================
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.01%
Pfizer Inc. 5,000,000 215,937,500
===============================================================
HEALTH CARE (HOSPITAL MANAGEMENT)-1.69%
HCA-Healthcare Corp. (The) 3,000,000 119,812,500
---------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 8,143,900 161,351,019
---------------------------------------------------------------
Tenet Healthcare Corp.(a) 2,000,000 78,625,000
===============================================================
359,788,519
===============================================================
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.92%
Biomet, Inc. 2,962,050 107,189,184
---------------------------------------------------------------
Medtronic, Inc. 3,000,000 162,937,500
---------------------------------------------------------------
PE Corp-PE Biosystems Group 3,000,000 351,000,000
===============================================================
621,126,684
===============================================================
INSURANCE (LIFE/HEALTH)-1.06%
AFLAC, Inc. 3,103,100 226,720,244
===============================================================
INSURANCE (MULTI-LINE)-0.57%
Ace, Ltd. (Bermuda) 3,100,000 121,675,000
===============================================================
INSURANCE BROKERS-0.40%
Aon Corp. 2,046,400 84,797,700
===============================================================
INVESTMENT BANKING/BROKERAGE-4.86%
Goldman Sachs Group, Inc. (The) 3,400,000 339,362,500
---------------------------------------------------------------
Merrill Lynch & Co., Inc. 2,200,000 154,000,000
---------------------------------------------------------------
Morgan Stanley Dean Witter &
Co. 3,900,000 313,218,750
---------------------------------------------------------------
Schwab (Charles) Corp. (The) 6,500,000 228,312,500
===============================================================
1,034,893,750
===============================================================
INVESTMENT MANAGEMENT-0.92%
Federated Investors, Inc.-Class B 538,800 15,692,550
---------------------------------------------------------------
Stilwell Financial, Inc. 4,000,000 179,250,000
===============================================================
194,942,550
===============================================================
LEISURE TIME (PRODUCTS)-1.19%
Harley-Davidson, Inc. 5,250,000 252,984,375
===============================================================
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED)-0.59%
Danaher Corp. 2,000,000 $ 126,250,000
===============================================================
MANUFACTURING (SPECIALIZED)-0.32%
Millipore Corp. 1,286,900 67,562,250
===============================================================
NATURAL GAS-0.54%
Enron Corp. 1,400,000 114,887,500
===============================================================
OIL & GAS (DRILLING & EQUIPMENT)-5.37%
BJ Services Co.(a) 1,000,000 52,437,500
---------------------------------------------------------------
Cooper Cameron Corp.(a) 2,206,200 120,237,900
---------------------------------------------------------------
ENSCO International Inc. 3,500,000 116,375,000
---------------------------------------------------------------
Grant Prideco, Inc.(a) 3,983,300 73,940,006
---------------------------------------------------------------
Nabors Industries, Inc.(a) 4,232,700 215,444,430
---------------------------------------------------------------
R&B Falcon Corp.(a) 2,674,900 66,872,500
---------------------------------------------------------------
Rowan Cos., Inc.(a) 3,622,700 91,246,756
---------------------------------------------------------------
Smith International, Inc.(a) 2,070,600 145,977,300
---------------------------------------------------------------
Transocean Sedco Forex Inc. 3,500,000 185,500,000
---------------------------------------------------------------
Weatherford International, Inc.(a) 2,100,000 76,650,000
===============================================================
1,144,681,392
===============================================================
OIL & GAS (EXPLORATION &
PRODUCTION)-0.72%
Anadarko Petroleum Corp. 1,250,000 80,062,500
---------------------------------------------------------------
Kerr-McGee Corp. 1,115,000 72,823,438
===============================================================
152,885,938
===============================================================
RESTAURANTS-0.49%
Brinker International, Inc.(a) 2,639,400 103,596,450
===============================================================
RETAIL (BUILDING SUPPLIES)-0.86%
Lowe's Cos., Inc. 4,000,000 182,750,000
===============================================================
RETAIL (COMPUTERS & ELECTRONICS)-1.46%
Best Buy Co., Inc.(a) 1,553,900 77,986,356
---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 1,500,000 96,656,250
---------------------------------------------------------------
RadioShack Corp. 2,294,400 136,803,600
===============================================================
311,446,206
===============================================================
RETAIL (DEPARTMENT STORES)-1.02%
Kohl's Corp.(a) 4,000,000 216,750,000
===============================================================
RETAIL (DISCOUNTERS)-0.50%
Dollar Tree Stores, Inc.(a) 2,715,900 106,259,588
===============================================================
RETAIL (SPECIALTY)-1.61%
Bed Bath & Beyond Inc.(a) 10,000,000 258,125,000
---------------------------------------------------------------
Tiffany & Co. 2,000,000 85,375,000
===============================================================
343,500,000
===============================================================
RETAIL (SPECIALTY-APPAREL)-1.14%
Intimate Brands, Inc. 3,000,000 71,625,000
---------------------------------------------------------------
</TABLE>
AIM CONSTELLATION FUND
22
<PAGE> 25
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
Men's Wearhouse, Inc.
(The)(a)(b) 2,487,800 $ 72,768,150
---------------------------------------------------------------
Talbots, Inc. (The) 1,250,000 98,828,125
===============================================================
243,221,275
===============================================================
SERVICES (ADVERTISING/MARKETING)-2.10%
Lamar Advertising Co.(a)(b) 4,500,000 216,000,000
---------------------------------------------------------------
Omnicom Group Inc. 2,500,000 230,625,000
===============================================================
446,625,000
===============================================================
SERVICES (COMPUTER SYSTEMS)-0.72%
SunGard Data Systems Inc.(a) 3,000,000 153,375,000
===============================================================
SERVICES (DATA PROCESSING)-1.78%
Ceridian Corp.(a) 1,000,000 25,000,000
---------------------------------------------------------------
Fiserv, Inc.(a) 5,000,000 262,187,500
---------------------------------------------------------------
Paychex, Inc. 1,641,200 93,035,525
===============================================================
380,223,025
===============================================================
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.29%
Crown Castle International
Corp.(a) 3,500,000 106,093,750
---------------------------------------------------------------
Phone.com, Inc.(a) 1,825,000 168,926,563
===============================================================
275,020,313
===============================================================
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-0.24%
Qwest Communications
International Inc.(a) 1,050,000 $ 51,056,250
===============================================================
Total Common Stocks & Other
Equity Interests (Cost
$11,788,064,742) 19,441,930,966
===============================================================
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.59%
ELECTRONICS (SEMICONDUCTORS)-0.59%
Celestica Inc. (Canada), Conv.
Yankee Bonds, 3.19%, 08/01/20
(Cost $122,154,597)(c) $244,200,000 125,152,500
===============================================================
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-7.38%
STIC Liquid Assets Portfolio(d) 786,842,293 786,842,293
---------------------------------------------------------------
STIC Prime Portfolio(d) 786,842,293 786,842,293
===============================================================
Total Money Market Funds
(Cost $1,573,684,586) 1,573,684,586
===============================================================
TOTAL INVESTMENTS-99.22% (Cost
$13,483,903,925) 21,140,768,053
===============================================================
OTHER ASSETS LESS
LIABILITIES-0.78% 166,373,812
===============================================================
NET ASSETS-100.00% $21,307,141,865
_______________________________________________________________
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Affiliated issuer in which the Fund's holdings of the 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 10/31/00 was $410,551,263, which represented 1.93% of
the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) The money market fund and the fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
AIM CONSTELLATION FUND
23
<PAGE> 26
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$13,483,903,925) $21,140,768,053
-------------------------------------------------------------
Receivables for:
Collateral for securities loaned 1,751,204,824
-------------------------------------------------------------
Investments sold 195,686,141
-------------------------------------------------------------
Fund shares sold 102,466,015
-------------------------------------------------------------
Dividends 7,238,899
-------------------------------------------------------------
Investment for deferred compensation plan 240,744
-------------------------------------------------------------
Other assets 1,264,576
-------------------------------------------------------------
Total assets 23,198,869,252
=============================================================
LIABILITIES:
Payables for:
Investments purchased 90,980,392
-------------------------------------------------------------
Collateral upon return of securities
loaned 1,751,204,824
-------------------------------------------------------------
Fund shares reacquired 21,690,805
-------------------------------------------------------------
Deferred compensation plan 240,744
-------------------------------------------------------------
Accrued advisory fees 10,344,044
-------------------------------------------------------------
Accrued administrative services fees 65,764
-------------------------------------------------------------
Accrued distribution fees 8,412,780
-------------------------------------------------------------
Accrued trustees' fees 6,051
-------------------------------------------------------------
Accrued transfer agent fees 7,115,992
-------------------------------------------------------------
Accrued operating expenses 1,665,991
=============================================================
Total liabilities 1,891,727,387
=============================================================
Net assets applicable to shares outstanding $21,307,141,865
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $19,268,977,253
_____________________________________________________________
=============================================================
Class B $ 1,315,523,852
_____________________________________________________________
=============================================================
Class C $ 434,544,168
_____________________________________________________________
=============================================================
Institutional Class $ 288,096,592
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE:
Class A 442,936,863
_____________________________________________________________
=============================================================
Class B 31,116,870
_____________________________________________________________
=============================================================
Class C 10,281,339
_____________________________________________________________
=============================================================
Institutional Class 6,324,588
_____________________________________________________________
=============================================================
Class A:
Net asset value and redemption price per
share $ 43.50
-------------------------------------------------------------
Offering price per share:
(Net asset value of $43.50 divided by
94.50%) $ 46.03
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 42.28
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 42.27
_____________________________________________________________
=============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 45.55
_____________________________________________________________
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$435,333) $ 34,073,020
-------------------------------------------------------------
Dividends from affiliated money market funds 57,256,376
-------------------------------------------------------------
Interest 3,750,253
-------------------------------------------------------------
Security lending income 497,347
=============================================================
Total investment income 95,576,996
=============================================================
EXPENSES:
Advisory fees 128,677,520
-------------------------------------------------------------
Administrative services fees 731,392
-------------------------------------------------------------
Custodian fees 966,983
-------------------------------------------------------------
Distribution fees -- Class A 56,629,759
-------------------------------------------------------------
Distribution fees -- Class B 10,309,561
-------------------------------------------------------------
Distribution fees -- Class C 3,222,875
-------------------------------------------------------------
Transfer agent fees -- Class A 27,560,458
-------------------------------------------------------------
Transfer agent fees -- Class B 2,176,576
-------------------------------------------------------------
Transfer agent fees -- Class C 680,420
-------------------------------------------------------------
Transfer agent fees -- Institutional Class 47,441
-------------------------------------------------------------
Trustees' fees 59,789
-------------------------------------------------------------
Other 5,694,169
-------------------------------------------------------------
Total expenses 236,756,943
=============================================================
Less: Fees waived (6,187,566)
-------------------------------------------------------------
Expenses paid indirectly (428,909)
=============================================================
Net expenses 230,140,468
=============================================================
Net investment income (loss) (134,563,472)
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN SECURITIES,
AND OPTION CONTRACTS
Net realized gain from:
Investment securities 3,909,425,835
-------------------------------------------------------------
Option contracts written 87,874,405
=============================================================
3,997,300,240
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,648,464,708
-------------------------------------------------------------
Foreign currencies (1,500)
-------------------------------------------------------------
Option contracts written 1,248,599
=============================================================
1,649,711,807
=============================================================
Net gain on investment securities, foreign
currencies, and option contracts 5,647,012,047
=============================================================
Net increase in net assets resulting from
operations $5,512,448,575
_____________________________________________________________
=============================================================
</TABLE>
See Notes to Financial Statements.
AIM CONSTELLATION FUND
24
<PAGE> 27
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (134,563,472) $ (76,875,258)
------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, and option contracts 3,997,300,240 1,644,017,203
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, and option contracts 1,649,711,807 2,669,133,759
================================================================================================
Net increase in net assets resulting from operations 5,512,448,575 4,236,275,704
================================================================================================
Distributions to shareholders from net realized gains:
Class A (1,341,534,330) (337,206,115)
------------------------------------------------------------------------------------------------
Class B (59,304,397) (8,290,207)
------------------------------------------------------------------------------------------------
Class C (16,589,886) (2,229,567)
------------------------------------------------------------------------------------------------
Institutional Class (23,400,833) (5,075,580)
------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,156,513,412 (1,783,881,252)
------------------------------------------------------------------------------------------------
Class B 575,351,569 205,093,817
------------------------------------------------------------------------------------------------
Class C 231,744,660 55,508,352
------------------------------------------------------------------------------------------------
Institutional Class (16,568,699) (4,793,973)
================================================================================================
Net increase in net assets 6,018,660,071 2,355,401,179
================================================================================================
NET ASSETS:
Beginning of year 15,288,481,794 12,933,080,615
------------------------------------------------------------------------------------------------
End of year $21,307,141,865 $15,288,481,794
________________________________________________________________________________________________
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $10,009,800,678 $ 7,663,956,851
------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (652,603) (551,737)
------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and option contracts 3,641,131,584 1,617,926,281
------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and option contracts 7,656,862,206 6,007,150,399
================================================================================================
$21,307,141,865 $15,288,481,794
________________________________________________________________________________________________
================================================================================================
</TABLE>
See Notes to Financial Statements.
AIM CONSTELLATION FUND
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds
(the "Trust"). The Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of eleven separate portfolios,
each having an unlimited number of shares of beneficial interest. Prior to June
17, 2000, the Fund was organized as a series portfolio of AIM Equity Funds, Inc.
At a meeting held on February 3, 2000, the Board of Directors of AIM Equity
Funds, Inc. approved an Agreement and Plan of Reorganization (the
"Reorganization") which reorganized the Fund as a series portfolio of the Trust.
Shareholders of the Fund approved the Reorganization at a meeting held on June
16, 2000. 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. Institutional Class shares are
sold without a 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 accounting
principles generally accepted in the United States of America 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 as of the close of the
customary trading session 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 as of the close of
the customary trading session 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 Trust's
officers in a manner specifically authorized by the Board of Trustees.
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 option contracts generally will be
valued 15 minutes after the close of the customary trading session 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 customary
trading session 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 Trustees.
B. Securities Transactions and Investment Income -- 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$134,462,606, undistributed net realized gains decreased by $533,265,491 and
paid in capital increased by $398,802,885 as a result of differing book/tax
differences due to utilization of a portion of the proceeds from redemptions
as distributions for federal income tax purposes and net operating loss
reclassifications. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
D. 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.
E. Covered Call Options -- The Fund may write call options, 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
AIM CONSTELLATION FUND
26
<PAGE> 29
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.
F. 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.
G. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 Trust 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
agreed to waive advisory fees payable by the Fund to AIM at the annual rate of
0.025% for each $5 billion increment in net assets over $5 billion, up to a
maximum waiver of 0.175% on net assets in excess of $35 billion. During the year
ended October 31, 2000, AIM waived fees of $6,187,566. 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. For the year ended October 31, 2000, AIM was
paid $731,392 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. For the year ended October 31, 2000, AFS was
paid $12,000,634 for such services.
The Trust 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, Class C and the Institutional Class shares of the Fund. The
Trust has adopted plans 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, 2000, the Class A, Class B and Class
C shares paid AIM Distributors $56,629,759, $10,309,561 and $3,222,875,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $5,088,774 from sales of the Class
A shares of the Fund during the year ended October 31, 2000. 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,
2000, AIM Distributors received $411,140 in contingent deferred sales charges
imposed on redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and AIM Distributors.
During the year ended October 31, 2000, the Fund paid legal fees of $35,398
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
AIM CONSTELLATION FUND
27
<PAGE> 30
NOTE 3-INDIRECT EXPENSES
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $279,535 and reductions in
custodian fees of $149,374 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $428,909.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, 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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities.
At October 31, 2000, securities with an aggregate value of $1,709,326,329 were
on loan to brokers. The loans were secured by cash collateral of $1,751,204,824.
For the year ended October 31, 2000, the Fund received fees of $497,347 for
securities lending.
NOTE 7-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, 2000 was
$17,152,741,955 and $17,749,731,694, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2000 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $8,003,057,896
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (355,852,740)
==========================================================
Net unrealized appreciation of investment
securities $7,647,205,156
__________________________________________________________
==========================================================
Cost of investments for tax purposes is $13,493,562,897.
</TABLE>
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -------------
<S> <C> <C>
Beginning of year 22,091 $ 3,848,894
-----------------------------------------------------------
Written 386,055 173,074,240
-----------------------------------------------------------
Closed (327,716) (147,865,412)
-----------------------------------------------------------
Exercised (78,989) (28,781,664)
-----------------------------------------------------------
Expired (1,441) (276,058)
===========================================================
End of year -- $ --
___________________________________________________________
===========================================================
</TABLE>
AIM CONSTELLATION FUND
28
<PAGE> 31
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 2000 and 1999
were as follows:
<TABLE>
<CAPTION>
2000 1999
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 86,430,817 $3,725,450,424 98,564,141 $ 2,981,238,092
---------------------------------------------------------------------------------------------------------------------------
Class B 16,075,085 679,865,751 10,942,571 332,728,027
---------------------------------------------------------------------------------------------------------------------------
Class C 6,309,791 266,777,259 5,133,893 156,450,704
---------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,694,065 165,186,338 1,596,295 51,100,608
===========================================================================================================================
Issued as reinvestment of dividends:
Class A 34,136,740 1,274,304,836 11,320,463 318,895,308
---------------------------------------------------------------------------------------------------------------------------
Class B 1,560,370 57,000,776 286,888 7,992,642
---------------------------------------------------------------------------------------------------------------------------
Class C 430,722 15,725,642 75,962 2,115,494
---------------------------------------------------------------------------------------------------------------------------
Institutional Class 593,714 23,119,167 170,003 4,957,282
===========================================================================================================================
Reacquired:
Class A (90,168,284) (3,843,241,848) (167,354,090) (5,084,014,652)
---------------------------------------------------------------------------------------------------------------------------
Class B (3,863,116) (161,514,958) (4,443,036) (135,626,852)
---------------------------------------------------------------------------------------------------------------------------
Class C (1,210,375) (50,758,241) (3,390,263) (103,057,846)
---------------------------------------------------------------------------------------------------------------------------
Institutional Class (4,750,277) (204,874,204) (1,915,980) (60,851,863)
===========================================================================================================================
49,239,252 $1,947,040,942 (49,013,153) $(1,528,073,056)
___________________________________________________________________________________________________________________________
===========================================================================================================================
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 36.01 $ 27.25 $ 30.00 $ 26.01 $ 24.05
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09) (0.01) -- 0.02 0.04
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 12.91 9.50 (0.65) 4.86 2.67
======================================================================================================================
Total from investment operations 12.82 9.49 (0.65) 4.88 2.71
======================================================================================================================
Less distributions:
Distributions from net realized gains (3.28) (0.73) (2.10) (0.89) (0.75)
======================================================================================================================
Net asset value, end of period $ 45.55 $ 36.01 $ 27.25 $ 30.00 $ 26.01
______________________________________________________________________________________________________________________
======================================================================================================================
Total return 37.14% 35.46% (1.85)% 19.42% 11.81%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $288,097 $244,369 $189,039 $188,109 $293,035
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.65%(a) 0.64% 0.63% 0.65% 0.66%
----------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.68%(a) 0.66% 0.65% 0.67% 0.67%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.18)%(a) (0.04)% (0.01)% 0.06% 0.21%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 88% 62% 76% 67% 58%
______________________________________________________________________________________________________________________
======================================================================================================================
</TABLE>
(a) Ratios are based on average daily net assets of $316,573,355.
AIM CONSTELLATION FUND
29
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
AIM Equity Funds:
We have audited the accompanying statement of assets and
liabilities of the AIM Constellation Fund (a portfolio of
AIM Equity Funds), including the schedule of investments,
as of October 31, 2000, 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 periods 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 auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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 periods in the five-year period then
ended, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
December 6, 2000
Houston, Texas
AIM CONSTELLATION FUND
30
<PAGE> 33
PROXY RESULTS (UNAUDITED)
A Special Meeting of Shareholders of AIM Constellation Fund (the "Fund"), a
portfolio of AIM Equity Funds, Inc., a Maryland corporation (the "Company"),
reorganized as AIM Equity Funds, a Delaware business trust (the "Trust"), was
held on May 3, 2000. The meeting was held for the following purposes:
(1)* To elect the following Directors: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H.
Graham, Prema Mathai-Davis, Lewis F. Pennock and Louis S. Sklar.
(2)* To approve an Agreement and Plan of Reorganization which provides for the
reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(4) To approve changing the fundamental investment restrictions of the Fund.
(5) To ratify the selection of KPMG LLP as independent accountants of the Fund
for the fiscal year ending in 2000.
The results of the voting on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES WITHHELD/
DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS
---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
(1)* Charles T. Bauer............................................ 880,499,527 N/A 21,899,315
Bruce L. Crockett........................................... 880,943,079 N/A 21,455,763
Owen Daly II................................................ 880,468,204 N/A 21,930,638
Edward K. Dunn, Jr. ........................................ 880,922,500 N/A 21,476,342
Jack M. Fields.............................................. 880,960,800 N/A 21,438,042
Carl Frischling............................................. 880,836,332 N/A 21,562,510
Robert H. Graham............................................ 880,965,547 N/A 21,433,295
Prema Mathai-Davis.......................................... 880,635,296 N/A 21,763,546
Lewis F. Pennock............................................ 880,899,481 N/A 21,499,361
Louis S. Sklar.............................................. 880,825,241 N/A 21,573,601
(2)* Adjournment of approval of an Agreement and Plan of
Reorganization which provides for the reorganization of AIM
Equity Funds, Inc. as a Delaware business trust............. 610,634,359 17,637,580 274,126,903**
(3) Adjournment of approval of a new Master Investment Advisory
Agreement with A I M Advisors, Inc. ........................ 148,815,037 3,775,840 108,949,703**
(4)(a) Adjournment of approval of changing or adding the
Fundamental Restriction on Issuer Diversification........... 146,725,898 4,748,423 110,066,259**
(4)(b) Adjournment of approval of changing the Fundamental
Restriction on Borrowing Money and Issuing Senior
Securities.................................................. 145,567,651 5,945,414 110,027,515**
(4)(c) Adjournment of approval of changing the Fundamental
Restriction on Underwriting Securities...................... 146,308,708 5,185,210 110,046,662**
(4)(d) Adjournment of approval of changing the Fundamental
Restriction on Industry Concentration....................... 146,629,854 4,935,728 109,974,998**
(4)(e) Adjournment of approval of changing the Fundamental
Restriction on Purchasing or Selling Real Estate............ 145,325,584 6,234,164 109,980,832**
(4)(f) Adjournment of approval of changing the Fundamental
Restriction on Purchasing or Selling Commodities............ 144,829,553 6,767,318 109,943,709**
(4)(g) Adjournment of approval of changing the Fundamental
Restriction on Making Loans................................. 144,381,770 7,183,646 109,975,164**
(4)(h) Adjournment of approval of a new Fundamental Investment
Restriction on Investing all of the Fund's Assets in an
Open-End Fund............................................... 143,819,821 7,611,875 110,108,884**
(4)(i) Adjournment of approval of the Elimination of Fundamental
Restriction on Investing for the Purpose of Control......... 145,888,753 5,810,782 109,841,045**
(5) Ratification of the selection of KPMG LLP as Independent
Accountants of the Fund..................................... 252,917,796 1,877,459 6,745,325
</TABLE>
AIM CONSTELLATION FUND
31
<PAGE> 34
The Special Meeting of Shareholders of the Company was reconvened on May
31, 2000. The following matters were then considered:
<TABLE>
<CAPTION>
VOTES WITHHELD/
MATTER VOTES FOR AGAINST ABSTENTIONS
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
(2)* Adjournment of approval of an Agreement and Plan of
Reorganization which provides for the reorganization of AIM
Equity Fund, Inc. as a Delaware business trust.............. 771,237,475 25,045,711 214,550,642**
(3) Approval of a new Master Investment Advisory Agreement with
A I M Advisors, Inc. ....................................... 207,567,563 4,837,946 66,979,021**
(4)(a) Approval of changing or adding the Fundamental Restriction
on Issuer Diversification................................... 204,889,217 6,178,168 68,317,145**
(4)(b) Approval of changing the Fundamental Restriction on
Borrowing Money and Issuing Senior Securities............... 203,431,254 7,697,924 68,255,352**
(4)(c) Approval of changing the Fundamental Restriction on
Underwriting Securities..................................... 204,289,667 6,800,691 68,294,172**
(4)(d) Approval of changing the Fundamental Restriction on Industry
Concentration............................................... 204,842,375 6,345,147 68,197,008**
(4)(e) Approval of changing the Fundamental Restriction on
Purchasing or Selling Real Estate........................... 203,254,575 7,923,816 68,206,139**
(4)(f) Approval of changing the Fundamental Restriction on
Purchasing or Selling Commodities........................... 202,670,638 8,560,026 68,153,866**
(4)(g) Approval of changing the Fundamental Restriction on Making
Loans....................................................... 202,080,016 9,088,427 68,216,087**
(4)(h) Approval of a new Fundamental Investment Restriction on
Investing all of the Fund's assets in an Open-End Fund...... 201,812,739 9,181,293 68,390,498**
(4)(i) Approval of the Elimination of Fundamental Restriction on
Investing for the Purpose of Control........................ 203,831,333 7,497,035 68,056,162**
</TABLE>
The Special Meeting of Shareholders of the Company was reconvened on June
16, 2000. The following matter was then considered:
<TABLE>
<CAPTION>
VOTES WITHHELD/
MATTER VOTES FOR AGAINST ABSTENTIONS
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
(2)* Approval of an Agreement and Plan of Reorganization which
provides for the reorganization of AIM Equity Funds, Inc. as
a Delaware business trust................................... 824,680,935 26,389,312 203,059,248**
</TABLE>
---------------
* Proposal 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Equity Funds, Inc.
** Includes Broker Non-Votes
---------------
Effective September 30, 2000, Charles T. Bauer retired from his positions as an
officer and trustee of the Trust and Robert H. Graham succeeded Mr. Bauer as
Chairman of the Board.
AIM CONSTELLATION FUND
32
<PAGE> 35
ABOUT YOUR FUND'S BOARD
The board of trustees is elected by you to look after your interests as a
mutual-fund shareholder. Trustees' responsibilities include choosing investment
advisors for your fund; keeping an eye on performance, operations and expenses;
making decisions regarding dividends and other duties.
Nine of your fund's 10 trustees are independent. In other words, they have
no affiliation with AIM except as independent fund trustees charged with
representing the interest of fund investors. Representing a cross section of
businesses and industries, they have achieved success and recognition in their
respective fields. They bring their considerable expertise and experience to
their positions as trustees.
Listed below are the members of the board of trustees of your mutual fund
and their respective titles.
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman, President and Chairman and President Suite 100
Chief Executive Officer Houston, TX 77046
A I M Management Group Inc. Carol F. Relihan
Senior Vice President and Secretary INVESTMENT ADVISOR
Bruce L. Crockett
Director Gary T. Crum A I M Advisors, Inc.
ACE Limited; Senior Vice President 11 Greenway Plaza
Formerly Director, President, and Suite 100
Chief Executive Officer Edgar M. Larsen Houston, TX 77046
COMSAT Corporation Vice President
SUB-ADVISOR
Owen Daly II Dana R. Sutton
Formerly Director Vice President and Treasurer A I M Capital Management, Inc.
Cortland Trust Inc. 11 Greenway Plaza
Jim A. Coppedge Suite 100
Albert R. Dowden Assistant Secretary Houston, TX 77046
Chairman of the Board of Directors,
The Cortland Trust and DHJ Media, Inc.; and Melville B. Cox TRANSFER AGENT
Director, Magellan Insurance Company, Vice President
Formerly Director, President and A I M Fund Services, Inc.
Chief Executive Officer, Mary J. Benson P.O. Box 4739
Volvo Group North America, Inc.; and Assistant Vice President and Houston, TX 77210-4739
Senior Vice President, AB Volvo Assistant Treasurer
CUSTODIAN
Edward K. Dunn Jr. Sheri Morris
Chairman, Mercantile Mortgage Corp.; Assistant Vice President and State Street Bank and Trust Company
Formerly Vice Chairman and President, Assistant Treasurer 225 Franklin Street
Mercantile-Safe Deposit & Trust Co.; and Boston, MA 02110
President, Mercantile Bankshares Renee A. Friedli
Assistant Secretary COUNSEL TO THE FUND
Jack Fields
Chief Executive Officer P. Michelle Grace Ballard Spahr
Twenty First Century, Inc.; Assistant Secretary Andrews & Ingersoll, LLP
Formerly Member 1735 Market Street
of the U.S. House of Representatives Nancy L. Martin Philadelphia, PA 19103
Assistant Secretary
Carl Frischling COUNSEL TO THE TRUSTEES
Partner Ofelia M. Mayo
Kramer, Levin, Naftalis & Frankel LLP Assistant Secretary Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
Prema Mathai-Davis Lisa A. Moss New York, NY 10022
Formerly Chief Executive Officer, Assistant Secretary
YWCA of the U.S.A. DISTRIBUTOR
Kathleen J. Pflueger
Lewis F. Pennock Assistant Secretary A I M Distributors, Inc.
Partner 11 Greenway Plaza
Pennock & Cooper Suite 100
Houston, TX 77046
Louis S. Sklar
Executive Vice President AUDITORS
Hines Interests
Limited Partnership KPMG LLP
700 Louisiana
Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2000, 0% is eligible for the dividends received deduction for
corporations. The Fund distributed long-term capital gains of $1,973,978,446 for
the Fund's tax year ended October 31, 2000. Of long-term capital gains
distributed, 100% is 20% rate gain.
AIM CONSTELLATION FUND
33
<PAGE> 36
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 performance figures are historical, and they reflect
the reinvestment of distributions and changes in net asset value.
o Average annual total returns for Institutional Class shares for periods
ended 9/30/00, the most recent calendar quarter-end, are as follows: one
year, 27.56%; five years, 22.42%; inception (10/8/91), 18.16%.
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 unmanaged Russell 1000 Index represents the performance of the stocks of
large-capitalization companies.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
represents the performance of the U.S. stock market.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
RESULTS OF A $10,000 INVESTMENT
AIM WEINGARTEN FUND
VS. BENCHMARK INDEX
10/8/91-10/31/00
in thousands
================================================================================
AIM Weingarten Fund,
Institutional Class Russell 1000
--------------------------------------------------------------------------------
10/8/91 $10,000 $10,000
10/92 11,110 11,253
10/93 11,836 13,030
10/94 12,354 13,434
10/95 15,898 17,062
10/96 18,337 20,073
10/97 23,356 27,650
10/98 26,343 33,101
10/99 36,682 41,569
10/00 40,727 45,334
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
Performance results for the indexes are for the period
9/30/91-10/31/00.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/00
================================================================================
AIM WEINGARTEN FUND, INSTITUTIONAL CLASS
Inception (10/8/91) 16.76%
5 years 20.70
1 year 11.03
================================================================================
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.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM WEINGARTEN FUND
34
<PAGE> 37
ANNUAL REPORT / MANAGER'S OVERVIEW
DESPITE MARKET VOLATILITY, FUND BEATS INDEXES
HOW DID AIM WEINGARTEN FUND PERFORM DURING THE FISCAL YEAR?
For the fiscal year ended October 31, 2000, AIM Weingarten Fund performed well
despite the volatility that affected stock markets during most of 2000. Total
return of the Institutional Class was 11.03% for the fiscal year; the S&P 500
returned 6.08% and the Russell 1000 Index returned 9.06%.
The fund's performance for the entire fiscal year includes significant gains
made in late 1999 and early 2000 when the stock market performed quite strongly;
during the second half of the fiscal year performance was adversely affected by
the sell-off in technology stocks and other market difficulties.
WHAT WERE THE MAJOR TRENDS IN THE FINANCIAL MARKETS DURING THE FISCAL YEAR?
U.S. stock markets were volatile for most of 2000, with significant sell-offs in
March through May and again in August through October. In the spring, investors
worried that the Federal Reserve Board (the Fed) would continue raising interest
rates to slow torrid economic growth and to forestall inflation. The Fed raised
the federal funds rate (the rate banks charge one another for overnight loans)
from 6.0% to 6.5% in May--the sixth increase since June 1999. But with data
showing that economic growth was slowing and that inflation was in check, the
Fed kept rates unchanged at its June, August and October meetings.
Early in 2000, investors became concerned that many technology stocks that
had propelled the markets higher in 1999 might have become overvalued. In late
summer and fall, rising oil prices and Middle East tensions made investors
skittish, sparking a second major stock-market sell-off. Investors also became
concerned about a string of corporate earnings warnings and disappointing
third-quarter earnings announcements by a number of major corporations. Higher
oil prices and a weak euro (the common currency adopted in 1999 by 11 European
nations) negatively affected corporate profits.
HOW WAS THE FUND'S PORTFOLIO POSITIONED AT THE CLOSE OF THE REPORTING PERIOD?
Compared to its S&P 500 benchmark, the fund remained overweighted in technology
stocks. While tech stocks have been volatile during much of 2000, we continue to
be bullish about their long-term potential. The fund's investment discipline
prevents us from buying high-flying technology stocks (or any other type of
stock) with little or no earnings. We believe that companies building the
Internet's infrastructure may continue to experience significant long-term
growth; we also believe that companies that are leading the technological
revolution represent attractive long-term holdings. The technology revolution is
a long-term trend, not a short-term phenomenon.
Large pharmaceutical companies were also represented in the fund's holdings.
As market volatility spooked investors for much of the fiscal year,
pharmaceutical stocks were widely viewed as a "safe haven" because of their
relatively predictable earnings. Demand for pharmaceuticals, after all, is
largely inelastic; patients who depend on them for their health must buy them
regardless of economic or market conditions.
The fund was also overweighted in utility stocks at the close of the fiscal
year. Utility stocks enjoyed strong earnings growth during the year, benefiting
from electric-company deregulation and increased demand for energy. Indeed,
utilities were the best-performing sector of the S&P 500 during the fiscal year.
The fund's holdings at the close of the fiscal year consisted overwhelmingly
of large-cap U.S. common stocks. The fund's portfolio was pared from 81 to 71
stocks during the fiscal year as we concentrated on the stocks about which we
were most confident.
WHAT WERE SOME OF THE FUND'S MAJOR HOLDINGS?
The fund's major holdings at the close of the fiscal year included the following
firms:
o General Electric is a diversified company that produces locomotives and
other transportation equipment, household appliances, electric distribution
and control equipment, genera-
AIM WEINGARTEN FUND
INSTITUTIONAL CLASS
BEATS INDEXES
One-year returns, as of 10/31/00
================================================================================
FUND INSTITUTIONAL CLASS 11.03%
S&P 500 6.08%
RUSSELL 1000 9.06%
================================================================================
-------------------------------------
BECAUSE OF A DEGREE OF UNCERTAINTY
SURROUNDING SHORT-TERM ECONOMIC
TRENDS AND INTERNATIONAL DEVELOPMENTS,
MARKETS MAY CONTINUE TO BE
VOLATILE.
-------------------------------------
AIM WEINGARTEN FUND
35
<PAGE> 38
ANNUAL REPORT / MANAGER'S OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/00, based on total net assets
<TABLE>
<CAPTION>
=========================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
<S> <C> <C> <C>
1. Sun Microsystems, Inc. 4.12% 1. Computers (Software & Services) 13.38%
2. General Electric Co. 3.92 2. Communications Equipment 12.72
3. Citigroup Inc. 3.24 3. Electronics (Semiconductors) 9.59
4. American Express Co. 2.97 4. Financial (Diversified) 6.21
5. JDS Uniphase Corp. 2.89 5. Computers (Peripherals) 5.96
6. EMC Corp. 2.66 6. Electrical Equipment 4.93
7. Pfizer Inc. 2.55 7. Computers (Hardware) 4.78
8. Nortel Networks Corp. (Canada) 2.52 8. Investment Banking/Brokerage 3.61
9. VERITAS Software Corp. 2.45 9. Health Care (Drugs-Major Pharmaceuticals) 3.38
10. Xilinx, Inc. 2.36 10. Computers (Networking) 3.19
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
=========================================================================================================
</TABLE>
tors and turbines, nuclear reactors and medical-imaging equipment. Its
recent acquisition of Honeywell is expected to boost its aircraft engine and
plastics operations.
o American Express is far more than just a charge-card issuer. The
financial-services giant is one of the world's largest travel agencies; it
also publishes magazines and provides financial-advisory services. American
Express recently opened an online bank and began offering online mortgage
and brokerage services.
o EMC is the leading maker of mainframe computer disk-memory hardware and
software. While storage hardware accounts for about 80% of its sales, EMC
continues to boost its presence in software and related services, with an
emphasis on overseeing corporations' Internet data. EMC reports that its
earnings have increased by an average of 25% a year for the past
half-decade.
o Citigroup--formed by the merger of one of the world's largest banks
(Citicorp) and one of the world's largest insurers (Travelers Group)--is the
world's largest financial-services company. The company offers credit card,
banking, insurance and investment services in some 100 countries around the
globe. Its e-Citi unit develops online financial products.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
At the close of the fiscal year, we remained cautiously optimistic about the
direction of the U.S. economy. While economic growth is slowing, the economy
continues to grow at a sustainable pace. Unemployment dropped to 3.9% in
September--matching a 30-year low. Consumer spending continues to grow, albeit
at a somewhat more subdued pace than last year, and except for the potential
threat of higher oil prices, inflation remains in check. Corporate profits,
while declining, remain impressive; indeed, fourth-quarter profits among S&P 500
companies are expected to grow an estimated 14.5% from year-ago levels. And the
federal government's record $236 billion budget surplus for fiscal year 2000
will allow it to continue to retire debt and to reduce its future borrowing
costs.
Interest rates seem to have stabilized as the Fed has taken a respite from
its string of interest-rate increases, which have roiled the markets for more
than a year. However, because of a degree of uncertainty surrounding short-term
economic trends and international developments, markets may continue to be
volatile. In such an environment, investors would be well advised to remain
diversified and to maintain a long-term investment perspective.
-------------------------------------
THE FUND'S INVESTMENT DISCIPLINE
PREVENTS US FROM BUYING HIGH-FLYING
TECHNOLOGY STOCKS (OR ANY OTHER
TYPE OF STOCK) WITH LITTLE OR NO
EARNINGS.
-------------------------------------
AIM WEINGARTEN FUND
36
<PAGE> 39
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-80.49%
BIOTECHNOLOGY-0.40%
Amgen Inc.(a) 772,600 $ 44,762,512
===============================================================
BROADCASTING (TELEVISION, RADIO
& CABLE)-2.68%
AT&T Corp.-Liberty Media
Corp.-Class A 5,000,000 90,000,000
---------------------------------------------------------------
Infinity Broadcasting
Corp.-Class A(a) 6,327,400 210,386,050
===============================================================
300,386,050
===============================================================
COMMUNICATIONS EQUIPMENT-9.09%
ADC Telecommunications, Inc.(a) 3,698,300 79,051,162
---------------------------------------------------------------
Comverse Technology, Inc.(a) 2,300,000 257,025,000
---------------------------------------------------------------
Corning Inc. 3,100,000 237,150,000
---------------------------------------------------------------
JDS Uniphase Corp.(a) 3,975,000 323,465,625
---------------------------------------------------------------
Redback Networks Inc.(a) 475,000 50,557,812
---------------------------------------------------------------
Scientific-Atlanta, Inc. 1,030,300 70,511,156
===============================================================
1,017,760,755
===============================================================
COMPUTERS (HARDWARE)-4.78%
Palm, Inc.(a) 1,375,000 73,648,438
---------------------------------------------------------------
Sun Microsystems, Inc.(a) 4,163,000 461,572,625
===============================================================
535,221,063
===============================================================
COMPUTERS (NETWORKING)-3.19%
Cisco Systems, Inc.(a) 2,200,000 118,525,000
---------------------------------------------------------------
Extreme Networks, Inc.(a) 800,000 66,350,000
---------------------------------------------------------------
Juniper Networks, Inc.(a) 625,000 121,875,000
---------------------------------------------------------------
VeriSign, Inc.(a) 384,100 50,701,200
===============================================================
357,451,200
===============================================================
COMPUTERS (PERIPHERALS)-5.96%
Brocade Communications Systems,
Inc.(a) 700,000 159,162,500
---------------------------------------------------------------
EMC Corp.(a) 3,346,300 298,029,844
---------------------------------------------------------------
Network Appliance, Inc.(a) 774,500 92,165,500
---------------------------------------------------------------
QLogic Corp.(a) 1,215,700 117,618,975
===============================================================
666,976,819
===============================================================
COMPUTERS (SOFTWARE &
SERVICES)-11.11%
Adobe Systems Inc. 1,220,000 92,796,250
---------------------------------------------------------------
America Online, Inc.(a) 1,500,000 75,645,000
---------------------------------------------------------------
Ariba, Inc.(a) 900,000 113,737,500
---------------------------------------------------------------
BEA Systems, Inc.(a) 1,050,000 75,337,500
---------------------------------------------------------------
Intuit Inc.(a) 1,800,000 110,587,500
---------------------------------------------------------------
Mercury Interactive Corp.(a) 800,000 88,800,000
---------------------------------------------------------------
Oracle Corp.(a) 3,400,000 112,200,000
---------------------------------------------------------------
Rational Software Corp.(a) 2,750,000 164,140,625
---------------------------------------------------------------
Siebel Systems, Inc.(a) 1,300,000 136,418,750
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
VERITAS Software Corp.(a) 1,946,600 $ 274,501,016
===============================================================
1,244,164,141
===============================================================
CONSUMER FINANCE-0.48%
Capital One Financial Corp. 850,000 53,656,250
===============================================================
ELECTRICAL EQUIPMENT-4.93%
General Electric Co. 8,000,000 438,500,000
---------------------------------------------------------------
Sanmina Corp.(a) 871,900 99,669,069
---------------------------------------------------------------
Symbol Technologies, Inc. 309,000 14,040,188
===============================================================
552,209,257
===============================================================
ELECTRONICS
(SEMICONDUCTORS)-8.20%
Analog Devices, Inc.(a) 3,650,000 237,250,000
---------------------------------------------------------------
Applied Micro Circuits Corp.(a) 1,200,000 91,725,000
---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 1,650,000 61,771,875
---------------------------------------------------------------
Integrated Device Technology,
Inc.(a) 1,400,000 78,837,500
---------------------------------------------------------------
Linear Technology Corp. 2,000,000 129,125,000
---------------------------------------------------------------
TranSwitch Corp.(a) 948,500 54,775,875
---------------------------------------------------------------
Xilinx, Inc.(a) 3,648,800 264,309,950
===============================================================
917,795,200
===============================================================
ENTERTAINMENT-1.25%
Time Warner Inc. 1,850,000 140,433,500
===============================================================
EQUIPMENT (SEMICONDUCTOR)-1.00%
Broadcom Corp.-Class A(a) 505,000 112,299,375
===============================================================
FINANCIAL (DIVERSIFIED)-6.21%
American Express Co. 5,549,900 332,994,000
---------------------------------------------------------------
Citigroup Inc. 6,891,766 362,679,186
===============================================================
695,673,186
===============================================================
HEALTH CARE (DIVERSIFIED)-1.28%
IVAX Corp.(a) 3,289,000 143,071,500
===============================================================
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.99%
Forest Laboratories, Inc.(a) 620,000 82,150,000
---------------------------------------------------------------
Genentech, Inc.(a) 1,700,000 140,250,000
===============================================================
222,400,000
===============================================================
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.38%
Allergan, Inc. 1,100,000 92,468,750
---------------------------------------------------------------
Pfizer Inc. 6,620,000 285,901,250
===============================================================
378,370,000
===============================================================
HEALTH CARE (MANAGED CARE)-1.08%
UnitedHealth Group Inc. 1,100,000 120,312,500
===============================================================
</TABLE>
AIM WEINGARTEN FUND
37
<PAGE> 40
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.09%
PE Corp-PE Biosystems Group 1,045,700 $ 122,346,900
===============================================================
INVESTMENT
BANKING/BROKERAGE-3.61%
Merrill Lynch & Co., Inc. 3,482,200 243,754,000
---------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 2,000,000 160,625,000
===============================================================
404,379,000
===============================================================
LEISURE TIME (PRODUCTS)-0.86%
Harley-Davidson, Inc. 2,000,000 96,375,000
===============================================================
MANUFACTURING
(DIVERSIFIED)-1.03%
United Technologies Corp. 1,650,000 115,190,625
===============================================================
NATURAL GAS-2.18%
Dynegy Inc.-Class A 2,600,000 120,412,500
---------------------------------------------------------------
Enron Corp. 1,500,000 123,093,750
===============================================================
243,506,250
===============================================================
POWER PRODUCERS
(INDEPENDENT)-2.01%
AES Corp. (The)(a) 1,675,000 94,637,500
---------------------------------------------------------------
Calpine Corp.(a) 1,650,000 130,246,875
===============================================================
224,884,375
===============================================================
RETAIL (FOOD CHAINS)-1.15%
Safeway Inc.(a) 2,350,000 128,515,625
===============================================================
RETAIL (SPECIALTY)-0.73%
Bed Bath & Beyond Inc.(a) 3,165,700 81,714,631
===============================================================
SERVICES (ADVERTISING/MARKETING)-0.55%
TMP Worldwide, Inc.(a) 881,900 61,388,508
===============================================================
SERVICES (DATA PROCESSING)-0.02%
DST Systems, Inc.(a) 41,400 2,551,275
===============================================================
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-0.25%
Powerwave Technologies, Inc.(a) 581,000 27,960,625
===============================================================
Total Domestic Common Stocks
(Cost $6,723,018,207) 9,011,756,122
===============================================================
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-10.66%
BERMUDA-1.75%
Tyco International Ltd.
(Manufacturing-Diversified) 3,458,800 $ 196,070,725
===============================================================
CANADA-3.91%
Nortel Networks Corp.
(Communications Equipment) 6,200,000 282,100,000
---------------------------------------------------------------
PMC-Sierra, Inc.
(Electronics-Semiconductors)(a) 920,000 155,940,000
===============================================================
438,040,000
===============================================================
FRANCE-1.12%
Alcatel S.A.-ADR (Communications
Equipment) 2,000,000 124,750,000
===============================================================
HONG KONG-1.26%
China Mobile Ltd.
(Telecommunications-
Cellular/Wireless)(a) 22,000,100 141,044,364
===============================================================
ISRAEL-2.62%
Check Point Software
Technologies Ltd.
(Computers-Software &
Services)(a) 1,600,000 253,400,000
---------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 675,000 39,909,375
===============================================================
293,309,375
===============================================================
Total Foreign Stocks & Other
Equity Interests (Cost
$849,041,022) 1,193,214,464
===============================================================
MONEY MARKET FUNDS-8.15%
STIC Liquid Assets Portfolio(b) 456,311,366 456,311,366
---------------------------------------------------------------
STIC Prime Portfolio(b) 456,311,366 456,311,366
===============================================================
Total Money Market Funds
(Cost $912,622,732) 912,622,732
===============================================================
TOTAL INVESTMENTS-99.30%
(Cost $8,484,681,961) 11,117,593,318
===============================================================
OTHER ASSETS LESS
LIABILITIES-0.70% 78,926,373
===============================================================
NET ASSETS-100.00% $11,196,519,691
_______________________________________________________________
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
AIM WEINGARTEN FUND
38
<PAGE> 41
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$8,484,681,961) $11,117,593,318
-------------------------------------------------------------
Foreign currencies, at market value (cost
$94,552,636) 93,958,307
-------------------------------------------------------------
Receivables for:
Collateral for securities loaned 481,391,900
-------------------------------------------------------------
Investments sold 28,386,536
-------------------------------------------------------------
Fund shares sold 15,376,420
-------------------------------------------------------------
Foreign currency 125,025
-------------------------------------------------------------
Dividends 8,112,276
-------------------------------------------------------------
Securities loaned 44,950
-------------------------------------------------------------
Investment for deferred compensation plan 170,032
-------------------------------------------------------------
Other assets 1,163,815
=============================================================
Total assets 11,746,322,579
=============================================================
LIABILITIES:
Payables for:
Investments purchased 40,692,751
-------------------------------------------------------------
Collateral upon return of securities
loaned 481,391,900
-------------------------------------------------------------
Fund shares reacquired 14,036,122
-------------------------------------------------------------
Deferred compensation plan 170,032
-------------------------------------------------------------
Accrued advisory fees 5,798,989
-------------------------------------------------------------
Accrued administrative services fees 39,955
-------------------------------------------------------------
Accrued distribution fees 5,403,062
-------------------------------------------------------------
Accrued transfer agent fees 1,489,451
-------------------------------------------------------------
Accrued operating expenses 780,626
=============================================================
Total liabilities 549,802,888
=============================================================
Net assets applicable to shares outstanding $11,196,519,691
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $ 8,948,781,148
_____________________________________________________________
=============================================================
Class B $ 1,927,513,800
_____________________________________________________________
=============================================================
Class C $ 301,590,236
_____________________________________________________________
=============================================================
Institutional Class $ 18,634,507
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE:
Class A 317,745,991
_____________________________________________________________
=============================================================
Class B 71,856,609
_____________________________________________________________
=============================================================
Class C 11,234,005
_____________________________________________________________
=============================================================
Institutional Class 642,588
_____________________________________________________________
=============================================================
Class A:
Net asset value and redemption price per
share $ 28.16
-------------------------------------------------------------
Offering price per share:
(Net asset value of $28.16 divided by
94.50%) $ 29.80
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 26.82
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 26.85
_____________________________________________________________
=============================================================
Institutional Class
Net asset value, offering and redemption
price per share $ 29.00
_____________________________________________________________
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$790,408) $ 24,643,007
-------------------------------------------------------------
Dividends from affiliated money market funds 44,169,714
-------------------------------------------------------------
Interest 34,190
-------------------------------------------------------------
Security lending income 151,601
=============================================================
Total investment income 68,998,512
=============================================================
EXPENSES:
Advisory fees 75,254,931
-------------------------------------------------------------
Administrative services fees 473,764
-------------------------------------------------------------
Custodian fees 694,359
-------------------------------------------------------------
Distribution fees -- Class A 29,398,785
-------------------------------------------------------------
Distribution fees -- Class B 18,390,082
-------------------------------------------------------------
Distribution fees -- Class C 2,310,903
-------------------------------------------------------------
Transfer agent fees -- Class A 10,695,312
-------------------------------------------------------------
Transfer agent fees -- Class B 2,939,757
-------------------------------------------------------------
Transfer agent fees -- Class C 369,411
-------------------------------------------------------------
Transfer agent fees -- Institutional Class 13,407
-------------------------------------------------------------
Trustees' fees 50,685
-------------------------------------------------------------
Other 2,394,852
=============================================================
Total expenses 142,986,248
=============================================================
Less: Fees waived (5,181,384)
-------------------------------------------------------------
Expenses paid indirectly (207,062)
=============================================================
Net expenses 137,597,802
=============================================================
Net investment income (loss) (68,599,290)
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES CONTRACTS AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,645,775,410
-------------------------------------------------------------
Foreign currencies 4,466,343
-------------------------------------------------------------
Futures contracts 9,049,301
-------------------------------------------------------------
Option contracts written (152,474,766)
=============================================================
1,506,816,288
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (540,721,720)
-------------------------------------------------------------
Foreign currencies (672,021)
-------------------------------------------------------------
Foreign currency contracts 125,025
-------------------------------------------------------------
Option contracts written 20,384,517
=============================================================
(520,884,199)
=============================================================
Net gain from investment securities, foreign
currencies, futures contracts and option
contracts 985,932,089
=============================================================
Net increase in net assets resulting from
operations $ 917,332,799
_____________________________________________________________
=============================================================
</TABLE>
See Notes to Financial Statements.
AIM WEINGARTEN FUND
39
<PAGE> 42
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (68,599,290) $ (41,231,383)
-----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures contracts and option contracts 1,506,816,288 1,252,613,276
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, futures
contracts and option contracts (520,884,199) 1,427,968,629
===============================================================================================
Net increase in net assets resulting from operations 917,332,799 2,639,350,522
===============================================================================================
Distributions to shareholders from net investment income:
Class A -- (3,691,627)
-----------------------------------------------------------------------------------------------
Institutional Class -- (343,112)
-----------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (377,640)
-----------------------------------------------------------------------------------------------
Institutional Class -- (5,008)
-----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (912,274,100) (404,965,108)
-----------------------------------------------------------------------------------------------
Class B (156,090,644) (49,731,739)
-----------------------------------------------------------------------------------------------
Class C (13,701,366) (1,700,816)
-----------------------------------------------------------------------------------------------
Institutional Class (12,672,994) (4,837,664)
-----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 927,796,775 95,538,920
-----------------------------------------------------------------------------------------------
Class B 724,966,056 347,953,526
-----------------------------------------------------------------------------------------------
Class C 221,312,749 70,937,422
-----------------------------------------------------------------------------------------------
Institutional Class (100,840,055) 16,644,022
===============================================================================================
Net increase in net assets 1,595,829,220 2,704,771,698
===============================================================================================
NET ASSETS:
Beginning of year 9,600,690,471 6,895,918,773
===============================================================================================
End of year $11,196,519,691 $9,600,690,471
_______________________________________________________________________________________________
===============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 7,150,137,050 $5,279,351,381
-----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (388,227) (317,554)
-----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures contracts and
option contracts 1,414,418,150 1,168,419,727
-----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies, futures contracts and
option contracts 2,632,352,718 3,153,236,917
===============================================================================================
$11,196,519,691 $9,600,690,471
_______________________________________________________________________________________________
===============================================================================================
</TABLE>
See Notes to Financial Statements.
AIM WEINGARTEN FUND
40
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of eleven separate portfolios, each
having an unlimited number of shares of beneficial interest. Prior to June 17,
2000 the Fund was organized as a series portfolio of AIM Equity Funds, Inc. At a
meeting held on February 3, 2000, the Board of Directors of AIM Equity Funds,
Inc. approved an Agreement and Plan of Reorganization (the "Reorganization")
which reorganized the Fund as a series portfolio of the Trust. Shareholders of
the Fund approved the Reorganization at a meeting held on June 16, 2000. 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. Institutional Class shares are sold without a
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 to provide growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session 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 as of the
close of the customary trading session 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 Trust's officers in a manner specifically authorized
by the Board of Trustees. 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 option
contracts generally will be valued 15 minutes after the close of the
customary trading session 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 customary
trading session 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 Trustees.
B. Securities Transactions and Investment Income -- 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$68,528,617, undistributed net realized gains decreased by $166,078,761 and
paid-in capital increased by $97,550,144 as a result of differences due to
utilization of a portion of the proceeds from redemptions as distributions
for federal income tax purposes, foreign currency transactions and net
operating loss reclassifications. Net assets of the Fund were unaffected by
the reclassification discussed above.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
D. 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.
AIM WEINGARTEN FUND
41
<PAGE> 44
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 the 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, 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. 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.
I. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 Trust 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 agreed to waive advisory fees payable by the Fund to AIM at the
annual rate of 0.025% for each $5 billion increment in net assets over $5
billion, up to a maximum waiver of 0.175% on net assets in excess of $35
billion. During the year ended October 31, 2000, AIM waived fees of $5,181,384.
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. For the year ended October 31, 2000, AIM was
paid $473,764 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. For the year ended October 31, 2000, AFS was
paid $7,135,544 for such services.
AIM WEINGARTEN FUND
42
<PAGE> 45
The Trust 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, Class C and the Institutional Class shares of the Fund. The
Trust has adopted plans 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, 2000, the Class A, Class B and Class
C shares paid AIM Distributors $29,398,785, $18,390,082 and $2,310,903,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $3,854,495 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $139,887 in contingent deferred sales charges imposed
on redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended October 31, 2000, the Fund paid legal fees of $22,699
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $162,324 and reductions in
custodian fees of $44,738 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $207,062.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, 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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly and failed to return the securities.
At October 31, 2000, securities with an aggregate value of $469,288,729 were
on loan to brokers. The loans were secured by cash collateral of $481,391,900
received by the Fund. For the year ended October 31, 2000, the Fund received
fees of $151,601 for securities lending.
NOTE 7-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, 2000 was
$16,186,039,935 and $16,154,880,126, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2000 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,903,247,458
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (277,218,090)
==========================================================
Net unrealized appreciation of investment
securities $2,626,029,368
__________________________________________________________
==========================================================
Cost of investments for tax purposes is $8,491,563,950.
</TABLE>
AIM WEINGARTEN FUND
43
<PAGE> 46
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
--------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -------------
<S> <C> <C>
Beginning of year 91,902 $ 116,996,621
----------------------------------------------------------------------------------------
Closed (85,877) (111,818,048)
----------------------------------------------------------------------------------------
Exercised (6,025) (5,178,573)
========================================================================================
End of year -- $ --
________________________________________________________________________________________
========================================================================================
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 2000 and 1999
were as follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 38,693,394 $ 1,218,409,892 38,697,927 $ 994,480,979
-----------------------------------------------------------------------------------------------------------------------------
Class B 26,508,143 797,286,477 17,982,789 456,125,945
-----------------------------------------------------------------------------------------------------------------------------
Class C 8,102,015 244,073,425 3,622,407 92,753,207
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,045,908 33,206,382 826,477 21,885,030
=============================================================================================================================
Issued as reinvestment of dividends:
Class A 29,963,538 854,837,292 16,540,521 383,078,048
-----------------------------------------------------------------------------------------------------------------------------
Class B 5,414,678 148,085,997 2,102,927 47,274,883
-----------------------------------------------------------------------------------------------------------------------------
Class C 480,423 13,149,166 71,213 1,602,275
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class 428,931 12,554,823 217,868 5,146,039
=============================================================================================================================
Reacquired:
Class A (36,659,424) (1,145,450,409) (50,133,647) (1,282,020,107)
-----------------------------------------------------------------------------------------------------------------------------
Class B (7,393,719) (220,406,418) (6,174,366) (155,447,302)
-----------------------------------------------------------------------------------------------------------------------------
Class C (1,209,352) (35,909,842) (926,007) (23,418,060)
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class (4,771,038) (146,601,260) (391,478) (10,387,047)
=============================================================================================================================
60,603,497 $ 1,773,235,525 22,436,631 $ 531,073,890
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</TABLE>
44
<PAGE> 47
NOTE 10-FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
-------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------
2000(a) 1999 1998 1997 1996
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $28.96 $ 22.18 $ 23.05 $ 20.46 $ 20.48
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) 0.02 0.10 0.08 0.17
---------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.29 8.32 2.43 4.90 2.52
===============================================================================================================
Total from investment operations 3.23 8.34 2.53 4.98 2.69
===============================================================================================================
Less distributions:
Dividends from net investment income -- (0.10) -- (0.15) --
---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (3.19) (1.46) (3.40) (2.24) (2.71)
===============================================================================================================
Total distributions (3.19) (1.56) (3.40) (2.39) (2.71)
===============================================================================================================
Net asset value, end of period $29.00 $ 28.96 $ 22.18 $ 23.05 $ 20.46
_______________________________________________________________________________________________________________
===============================================================================================================
Total return 11.07% 39.20% 12.79% 27.37% 15.34%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,634 $114,076 $72,884 $62,124 $60,483
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.64%(b) 0.63% 0.62% 0.64% 0.65%
---------------------------------------------------------------------------------------------------------------
Without fee waivers 0.68%(b) 0.68% 0.67% 0.68% 0.68%
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.04)%(b) 0.02% 0.49% 0.50% 0.80%
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 145% 124% 125% 128% 159%
_______________________________________________________________________________________________________________
===============================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Ratios are based on average daily net assets of $89,095,334.
AIM WEINGARTEN FUND
45
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
AIM Equity Funds:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds), including the schedule of investments, as
of October 31, 2000, 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 periods
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 auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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 periods in the five-year period then ended in
conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
December 6, 2000
Houston, Texas
AIM WEINGARTEN FUND
46
<PAGE> 49
PROXY RESULTS (UNAUDITED)
A Special Meeting of Shareholders of AIM Weingarten Fund (the "Fund"), a
portfolio of AIM Equity Funds, Inc., a Maryland corporation (the "Company"),
reorganized as AIM Equity Funds, a Delaware business trust (the "Trust"), was
held on May 3, 2000. The meeting was held for the following purposes:
(1)* To elect ten directors as follows: Charles T. Bauer, Bruce L. Crockett,
Owen Daly II, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert
H. Graham, Prema Mathai-Davis, Lewis F. Pennock and Louis S. Sklar.
(2)* Approval of an Agreement and Plan of Reorganization which provides for the
reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(4) To approve changing the fundamental investment restrictions of the Fund.
(5) To ratify the selection of KPMG LLP as independent accountants of the Fund
for the fiscal year ending in 2000.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES WITHHELD/
DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS
---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
(1)* Charles T. Bauer............................................ 880,499,527 N/A 21,899,315
Bruce L. Crockett........................................... 880,943,079 N/A 21,455,763
Owen Daly II................................................ 880,468,204 N/A 21,930,638
Edward K. Dunn, Jr. ........................................ 880,922,500 N/A 21,476,342
Jack M. Fields.............................................. 880,960,800 N/A 21,438,042
Carl Frischling............................................. 880,836,332 N/A 21,562,510
Robert H. Graham............................................ 880,965,547 N/A 21,433,295
Prema Mathai-Davis.......................................... 880,635,296 N/A 21,763,546
Lewis F. Pennock............................................ 880,899,481 N/A 21,499,361
Louis S. Sklar.............................................. 880,825,241 N/A 21,573,601
(2)* Adjournment of approval of an Agreement and Plan of
Reorganization which provides for the reorganization of AIM
Equity Funds, Inc. as a Delaware business trust............. 610,634,359 17,637,580 274,126,903**
(3) Approval of a new Master Investment Advisory Agreement with
A I M Advisors, Inc......................................... 155,905,942 4,347,529 57,181,536**
(4)(a) Approval of changing or adding the Fundamental Restriction
on Issuer Diversification................................... 153,412,321 5,687,335 58,335,351**
(4)(b) Approval of changing the Fundamental Restriction on
Borrowing Money and Issuing Senior
Securities.................................................. 152,109,119 6,958,091 58,367,797**
(4)(c) Approval of changing the Fundamental Restriction on
Underwriting Securities..................................... 152,857,994 6,166,325 58,410,688**
(4)(d) Approval of changing the Fundamental Restriction on Industry
Concentration............................................... 151,163,387 5,866,440 58,405,180**
(4)(e) Approval of changing the Fundamental Restriction on
Purchasing or Selling Real Estate........................... 151,949,770 7,144,793 58,340,444**
(4)(f) Approval of changing the Fundamental Restriction on
Purchasing or Selling Commodities........................... 151,419,855 7,670,579 58,344,573**
(4)(g) Approval of changing the Fundamental Restriction on Making
Loans....................................................... 151,520,720 7,583,526 58,330,761**
(4)(h) Approval of a new Fundamental Investment Restriction on
Investing all of the Fund's assets in an Open-End Fund...... 151,798,097 7,213,173 58,423,737**
(4)(i) Approval of the Elimination of Fundamental Restriction on
Margin Transactions......................................... 149,576,371 9,393,604 58,465,032**
(4)(j) Approval of the Elimination of Fundamental Restriction on
Investing for the Purpose of Control........................ 152,446,648 6,906,673 58,081,686**
(5) Ratification of the selection of KPMG LLP as Independent
Accountants of the Fund..................................... 207,451,687 2,065,807 7,917,513
</TABLE>
The Special Meeting of Shareholders of the Company was reconvened on May
31, 2000. The following matter was then considered:
<TABLE>
<CAPTION>
VOTES WITHHELD/
MATTER VOTES FOR AGAINST ABSTENTIONS
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
(2)* Adjournment of approval of an Agreement and Plan of
Reorganization which provides for the reorganization of AIM
Equity Funds, Inc. as a Delaware business trust............. 771,237,475 25,045,711 214,550,642**
</TABLE>
The Special Meeting of Shareholders of the Company was reconvened on June
16, 2000. The following matter was then considered:
<TABLE>
<CAPTION>
VOTES WITHHELD/
MATTER VOTES FOR AGAINST ABSTENTIONS
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
(2)* Approval of an Agreement and Plan of Reorganization which
provides for the reorganization of AIM Equity Funds, Inc. as
a Delaware business trust................................... 824,680,935 26,389,312 203,059,248**
</TABLE>
---------------
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Equity Funds, Inc.
** Includes Broker Non-Votes
---------------
Effective September 30, 2000, Charles T. Bauer retired from his positions as an
officer and trustee of the Trust and Robert H. Graham succeeded Mr. Bauer as
Chairman of the Board.
AIM WEINGARTEN FUND
47
<PAGE> 50
ABOUT YOUR FUND'S BOARD
The board of trustees is elected by you to look after your interests as a
mutual-fund shareholder. Trustees' responsibilities include choosing investment
advisors for your fund; keeping an eye on performance, operations and expenses;
making decisions regarding dividends and other duties.
Nine of your fund's 10 trustees are independent. In other words, they have no
affiliation with AIM except as independent fund trustees charged with
representing the interest of fund investors. Representing a cross section of
businesses and industries, they have achieved success and recognition in their
respective fields. They bring their considerable expertise and experience to
their positions as trustees.
Listed below are the members of the board of trustees of your mutual fund and
their respective titles.
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman, President and Chairman and President Suite 100
Chief Executive Officer Houston, TX 77046
A I M Management Group Inc. Carol F. Relihan
Senior Vice President and Secretary INVESTMENT ADVISOR
Bruce L. Crockett
Director Gary T. Crum A I M Advisors, Inc.
ACE Limited; Senior Vice President 11 Greenway Plaza
Formerly Director, President, and Suite 100
Chief Executive Officer Edgar M. Larsen Houston, TX 77046
COMSAT Corporation Vice President
SUB-ADVISOR
Owen Daly II Dana R. Sutton
Formerly Director Vice President and Treasurer A I M Capital Management, Inc.
Cortland Trust Inc. 11 Greenway Plaza
Jim A. Coppedge Suite 100
Albert R. Dowden Assistant Secretary Houston, TX 77046
Chairman of the Board of Directors,
The Cortland Trust and DHJ Media, Inc.; and Melville B. Cox TRANSFER AGENT
Director, Magellan Insurance Company, Vice President
Formerly Director, President and A I M Fund Services, Inc.
Chief Executive Officer, Mary J. Benson P.O. Box 4739
Volvo Group North America, Inc.; and Assistant Vice President and Houston, TX 77210-4739
Senior Vice President, AB Volvo Assistant Treasurer
CUSTODIAN
Edward K. Dunn Jr. Sheri Morris
Chairman, Mercantile Mortgage Corp.; Assistant Vice President and State Street Bank and Trust Company
Formerly Vice Chairman and President, Assistant Treasurer 225 Franklin Street
Mercantile-Safe Deposit & Trust Co.; and Boston, MA 02110
President, Mercantile Bankshares Renee A. Friedli
Assistant Secretary COUNSEL TO THE TRUSTEES
Jack Fields
Chief Executive Officer P. Michelle Grace Ballard Spahr
Twenty First Century, Inc.; Assistant Secretary Andrews & Ingersoll, LLP
Formerly Member 1735 Market Street
of the U.S. House of Representatives Nancy L. Martin Philadelphia, PA 19103
Assistant Secretary
Carl Frischling COUNSEL TO THE DIRECTORS
Partner Ofelia M. Mayo
Kramer, Levin, Naftalis & Frankel LLP Assistant Secretary Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
Prema Mathai-Davis Lisa A. Moss New York, NY 10022
Formerly Chief Executive Officer, Assistant Secretary
YWCA of the U.S.A. DISTRIBUTOR
Kathleen J. Pflueger
Lewis F. Pennock Assistant Secretary A I M Distributors, Inc.
Partner 11 Greenway Plaza
Pennock & Cooper Suite 100
Houston, TX 77046
Louis S. Sklar
Executive Vice President AUDITORS
Hines Interests
Limited Partnership KPMG LLP
700 Louisiana
Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2000, 17.40% is eligible for the dividends received deduction for
corporations. The Fund distributed long-term capital gains of $1,073,197,845 for
the Fund's tax year ended October 31, 2000 of which 100% is 20% rate gain.
AIM WEINGARTEN FUND
48
[AIM LOGO APPEARS HERE]
--Registered Trademark--
AIM Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1188
INS-AR-1
