N-30D 1 h82713n-30d.txt AIM EQUITY FUND - INSTITUTIONAL - ANNUAL REPORT 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-- 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 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. ------------------------------------- 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 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 6 ANNUAL REPORT / MANAGERS' OVERVIEW PORTFOLIO COMPOSITION As of 10/31/00, based on total net assets
========================================================================================================== TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES ---------------------------------------------------------------------------------------------------------- 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. ==========================================================================================================
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 7 SCHEDULE OF INVESTMENTS October 31, 2000
MARKET SHARES VALUE 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 ---------------------------------------------------------------
MARKET SHARES VALUE 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 ---------------------------------------------------------------
AIM CHARTER FUND 5 8
MARKET SHARES VALUE 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 ===============================================================
MARKET SHARES VALUE 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 ===============================================================
PRINCIPAL AMOUNT 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 ===============================================================
AIM CHARTER FUND 6 9
MARKET SHARES VALUE 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 _______________________________________________________________ ===============================================================
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 10 STATEMENT OF ASSETS AND LIABILITIES October 31, 2000 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 _____________________________________________________________ =============================================================
STATEMENT OF OPERATIONS For the year ended October 31, 2000 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 ____________________________________________________________ ============================================================
See Notes to Financial Statements. AIM CHARTER FUND 8 11 STATEMENTS OF CHANGES IN NET ASSETS For the years ended October 31, 2000 and 1999
2000 1999 -------------- -------------- 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 ______________________________________________________________________________________________ ==============================================================================================
See Notes to Financial Statements. AIM CHARTER FUND 9 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 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 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: 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 __________________________________________________________ ==========================================================
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:
CALL OPTION CONTRACTS ------------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ------------ 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 -- $ -- _________________________________________________________________________________________ =========================================================================================
AIM CHARTER FUND 12 15 NOTE 9-SHARE INFORMATION Changes in shares outstanding during the years ended October 31, 2000 and 1999 were as follows:
2000 1999 ----------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ----------- -------------- ----------- ------------- 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 ___________________________________________________________________________________________________________________________ ===========================================================================================================================
NOTE 10-FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS -------------------------------------------------- YEAR ENDED OCTOBER 31, 2000 1999 1998 1997 1996 ------ ------- ------- ------- ------- 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% ________________________________________________________________________________________________________________ ================================================================================================================
(a) Ratios are based on average net assets of $46,641,532. AIM CHARTER FUND 13 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 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:
VOTES WITHHELD/ DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS ---------------- ----------- ---------- ----------- (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
AIM CHARTER FUND 15 18 The Special Meeting of Shareholders of the Company was reconvened on May 31, 2000. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------ ----------- ---------- ----------- (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**
The Special Meeting of Shareholders of the Company was reconvened on June 16, 2000. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------ ----------- ---------- ----------- (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**
--------------- * 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 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.
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND 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
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 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 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 22 ANNUAL REPORT / MANAGER'S OVERVIEW PORTFOLIO COMPOSITION As of 10/31/00, based on total net assets
========================================================================================================================= TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES ------------------------------------------------------------------------------------------------------------------------- 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. =========================================================================================================================
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 23 SCHEDULE OF INVESTMENTS October 31, 2000
MARKET SHARES VALUE 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 ===============================================================
MARKET SHARES VALUE 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 ===============================================================
AIM CONSTELLATION FUND 21 24
MARKET SHARES VALUE 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 ===============================================================
MARKET SHARES VALUE 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 ---------------------------------------------------------------
AIM CONSTELLATION FUND 22 25
MARKET SHARES VALUE 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 ===============================================================
MARKET SHARES VALUE 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 ===============================================================
PRINCIPAL AMOUNT 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 ===============================================================
SHARES 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 _______________________________________________________________ ===============================================================
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 26 STATEMENT OF ASSETS AND LIABILITIES October 31, 2000 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 _____________________________________________________________ =============================================================
STATEMENT OF OPERATIONS For the year ended October 31, 2000 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 _____________________________________________________________ =============================================================
See Notes to Financial Statements. AIM CONSTELLATION FUND 24 27 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2000 and 1999
2000 1999 --------------- --------------- 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 ________________________________________________________________________________________________ ================================================================================================
See Notes to Financial Statements. AIM CONSTELLATION FUND 25 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 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 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: 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.
NOTE 8-CALL OPTION CONTRACTS Transactions in call options written during the year ended October 31, 2000 are summarized as follows:
CALL OPTION CONTRACTS ------------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ------------- 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 -- $ -- ___________________________________________________________ ===========================================================
AIM CONSTELLATION FUND 28 31 NOTE 9-SHARE INFORMATION Changes in shares outstanding during the years ended October 31, 2000 and 1999 were as follows:
2000 1999 ---------------------------- ------------------------------ SHARES AMOUNT SHARES AMOUNT ----------- -------------- ------------ --------------- 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) ___________________________________________________________________________________________________________________________ ===========================================================================================================================
NOTE 10-FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS -------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- 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% ______________________________________________________________________________________________________________________ ======================================================================================================================
(a) Ratios are based on average daily net assets of $316,573,355. AIM CONSTELLATION FUND 29 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 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:
VOTES WITHHELD/ DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS ---------------- ----------- ---------- ----------- (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
AIM CONSTELLATION FUND 31 34 The Special Meeting of Shareholders of the Company was reconvened on May 31, 2000. The following matters were then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------ ----------- ---------- ----------- (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**
The Special Meeting of Shareholders of the Company was reconvened on June 16, 2000. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------ ----------- ---------- ----------- (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**
--------------- * 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 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.
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND 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
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 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 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 38 ANNUAL REPORT / MANAGER'S OVERVIEW PORTFOLIO COMPOSITION As of 10/31/00, based on total net assets
========================================================================================================= TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES 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. =========================================================================================================
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 39 SCHEDULE OF INVESTMENTS October 31, 2000
MARKET SHARES VALUE 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 ---------------------------------------------------------------
MARKET SHARES VALUE 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 ===============================================================
AIM WEINGARTEN FUND 37 40
MARKET SHARES VALUE 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 ===============================================================
MARKET SHARES VALUE 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 _______________________________________________________________ ===============================================================
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 41 STATEMENT OF ASSETS AND LIABILITIES October 31, 2000 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 _____________________________________________________________ =============================================================
STATEMENT OF OPERATIONS For the year ended October 31, 2000 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 _____________________________________________________________ =============================================================
See Notes to Financial Statements. AIM WEINGARTEN FUND 39 42 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2000 and 1999
2000 1999 --------------- -------------- 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 _______________________________________________________________________________________________ ===============================================================================================
See Notes to Financial Statements. AIM WEINGARTEN FUND 40 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 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 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: 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.
AIM WEINGARTEN FUND 43 46 NOTE 8-CALL OPTION CONTRACTS Transactions in call options written during the year ended October 31, 2000 are summarized as follows:
CALL OPTION CONTRACTS -------------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ------------- Beginning of year 91,902 $ 116,996,621 ---------------------------------------------------------------------------------------- Closed (85,877) (111,818,048) ---------------------------------------------------------------------------------------- Exercised (6,025) (5,178,573) ======================================================================================== End of year -- $ -- ________________________________________________________________________________________ ========================================================================================
NOTE 9-SHARE INFORMATION Changes in shares outstanding during the years ended October 31, 2000 and 1999 were as follows:
2000 1999 ------------------------------ ------------------------------ SHARES AMOUNT SHARES AMOUNT ----------- --------------- ----------- --------------- 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 _____________________________________________________________________________________________________________________________ =============================================================================================================================
44 47 NOTE 10-FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS ------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------- 2000(a) 1999 1998 1997 1996 ------- -------- ------- ------- ------- 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% _______________________________________________________________________________________________________________ ===============================================================================================================
(a) Calculated using average shares outstanding. (b) Ratios are based on average daily net assets of $89,095,334. AIM WEINGARTEN FUND 45 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 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:
VOTES WITHHELD/ DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS ---------------- ----------- ---------- ----------- (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
The Special Meeting of Shareholders of the Company was reconvened on May 31, 2000. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------ ----------- ---------- ----------- (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**
The Special Meeting of Shareholders of the Company was reconvened on June 16, 2000. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------ ----------- ---------- ----------- (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**
--------------- * 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 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.
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND 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
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