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RETAIL CLASSES OF AIM EQUITY FUNDS, INC.
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
Supplement Dated December 16, 1996
to the Prospectus dated January 2, 1996
as revised October 1, 1996 and as supplemented November 5, 1996
APPROVAL OF NEW ADVISORY, ADMINISTRATIVE SERVICES AND DISTRIBUTION AGREEMENTS
On December 11, 1996, the Board of Directors (the "Board") of AIM
Equity Funds, Inc. (the "Company") approved a new investment advisory
agreement, subject to shareholder approval, between A I M Advisors, Inc.
("AIM") and the Company with respect to AIM Charter Fund, AIM Weingarten Fund
and AIM Constellation Fund (the "Funds"). The Board also approved a new
subadvisory agreement between AIM and A I M Capital Management, Inc.("AIM
Capital"), subject to shareholder approval. Shareholders will be asked to
approve the proposed advisory agreement and subadvisory agreement at an annual
meeting of shareholders to be held on February 7, 1997 (the "Annual Meeting").
The Board has also approved a new administrative services agreement with AIM
and a new distribution agreement with A I M Distributors, Inc. There have been
no material changes to the terms of the new agreements, including the fees
payable by the Funds. No change is anticipated in the investment advisory or
other personnel responsible for the Funds as a result of these new agreements.
The Board has approved these new agreements because each Fund's
corresponding existing agreements will terminate upon the consummation of the
proposed merger of A I M Management Group Inc., the parent of AIM, into a
subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an independent
investment management group engaged in institutional investment management and
retail mutual fund businesses in the United States, Europe and the Pacific
region. It is contemplated that the merger will occur on February 28, 1997.
Provided that each Fund's shareholders approve the new advisory agreement and
subadvisory agreement at the Annual Meeting and the merger is consummated, the
new advisory agreement and subadvisory agreement with respect to each such
Fund, as well as the new administrative services and distribution agreements,
will automatically become effective as of the closing of the merger.
PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT POLICIES
The Board has unanimously approved the elimination of and changes to
certain fundamental investment policies of the Funds, subject to shareholder
approval. Shareholders will be asked to approve these changes at the Annual
Meeting. If approved, they will become effective on March 1, 1997.
Investment in Other Investment Companies
Each of the Funds is currently prohibited from investing in other
investment companies. The Board has approved the elimination of this
prohibition, and the amendment to other fundamental investment policies that
correspond to the proposed elimination. The elimination of the fundamental
investment policy that prohibits each Fund from investing in other investment
companies and the proposed amendments to the corresponding fundamental
investment policies would permit investment in other investment companies to
the extent permitted by the Investment Company Act of 1940, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
Securities and Exchange Commission.
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For additional information regarding the proposed changes described
above, see the Funds' Statement of Additional Information dated September 23,
1996, as supplemented November 5, 1996 and December 16, 1996 (the "Supplemented
Statement of Additional Information").
Investments in Puts and Covered Calls
AIM Charter Fund ("Charter") currently is prohibited from investing in
puts, calls, straddles and spreads. The Board has approved the elimination of
this prohibition, and has approved the adoption of a nonfundamental policy
(which may be changed without shareholder approval) that provides that Charter
may only write calls on a "covered" basis or purchase puts, up to 25% of the
value of Charter's net assets.
AIM Weingarten Fund ("Weingarten") currently is prohibited from
investing in certain puts or calls. (Weingarten is currently permitted to
invest in covered call options.) The Board has approved the elimination of
this prohibition, and has approved the adoption of a nonfundamental policy
(which may be changed without shareholder approval) that provides that in
addition to the ability to write covered calls, Weingarten may purchase puts up
to 25% of the value of Weingarten's net assets.
Additionally, each Fund has adopted a new nonfundamental policy which
states that neither Fund will engage in the writing or sale of puts or the
writing, sale or purchase of uncovered calls, straddles, spreads or
combinations thereof.
Writing a call option obligates a Fund to sell or deliver the option's
underlying security in return for the strike price upon exercise of the option.
A call option is "covered" if the Fund owns or has the right to acquire the
underlying security subject to the call. By purchasing a put option, a Fund
obtains the right (but not the obligation) to sell the option's underlying
security at a fixed strike price. The purpose of put and covered call option
transactions is to hedge against changes in the market value of the Fund's
portfolio securities caused by fluctuating interest rates, fluctuating currency
exchange rates and changing market conditions, and to close out or offset
existing positions in such options. The Funds do not intend to engage in such
transactions for speculative purposes.
For additional information regarding this proposed change, see the
Supplemented Statement of Additional Information.
Investment in Unseasoned Issuers
Charter is currently prohibited from investing in securities of
issuers that, together with their predecessors, have less than five years of
continuous operations. The Board has approved the elimination of this
prohibition. Charter desires to purchase securities of unseasoned issuers
because such securities may provide opportunities for long term capital growth.
Greater risks are associated with investments in securities of unseasoned
issuers than in the securities of more established companies because unseasoned
issuers have only a brief operating history and may have more limited markets
and financial resources. As a result, securities of unseasoned issuers tend to
be more volatile than securities of more established companies.
For additional information regarding this proposed change, see the
Supplemented Statement of Additional Information.
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