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INSTITUTIONAL CLASSES OF
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS, INC.)
Supplement Dated December 19, 1996
to the Statement of Additional Information dated January 2, 1996
as supplemented June 27, 1996, November 5, 1996 and December 16, 1996
This Supplement replaces in its entirety the "Supplement dated
December 16, 1996 to the Statement of Additional Information dated January 2,
1996 as supplemented June 27, 1996 and November 5, 1996."
On December 11, 1996, the Board of Directors (the "Board") of AIM
Equity Funds, Inc. approved, subject to shareholder approval, the elimination
of or changes to certain fundamental investment policies of AIM Charter Fund,
AIM Weingarten Fund and AIM Constellation Fund (the "Funds"). Shareholders of
each Fund will be asked to approve these changes at an annual meeting of
shareholders to be held on February 7, 1997 (the "Annual Meeting"). If
approved, these changes will become effective as of March 1, 1997.
Investment In Other Investment Companies
Reference is made to Investment Restrictions (a), (b) and (i) of AIM
Charter Fund ("Charter"), set forth on page 22 of the Funds' Statement of
Additional Information (the "SAI"). The Board has unanimously approved the
elimination of Investment Restriction (b) and a change to Investment
Restrictions (a) and (i) of Charter. In the event shareholders approve the
proposed changes, Investment Restriction (b) will no longer apply and
Investment Restrictions (a) and (i) will read in full as follows:
(a) purchase the securities of any one issuer (except
securities issued or guaranteed by the U.S. Government) if,
immediately after and as a result of such purchase, (i) the value of
the holdings of the Fund in the securities of such issuer exceeds 5%
of the value of the Fund's total assets, or (ii) the Fund owns more
than 10% of the outstanding voting securities of any one class of
securities of such issuer, except that the Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order;
(i) invest in companies for the purpose of exercising control
or management, except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or
exemptive order;
Reference is made to Investment Restrictions (f) and (h) of AIM
Weingarten Fund ("Weingarten") on page 23 of the SAI. The Board has approved
the elimination of Investment Restriction (h) and a change to Investment
Restriction (f) of Weingarten. In the event shareholders approve the proposed
changes, Investment Restriction (h) will no longer apply and Investment
Restriction (f) will read in full as follows:
(f) purchase shares in order to control management of a
company, except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or
exemptive order;
Reference is made to Investment Restrictions (a) and (f) of AIM
Constellation Fund ("Constellation") on page 24 of the SAI. The Board has
approved the elimination of Investment Restriction (f) and a change to
Investment Restriction (a) of Constellation. In the event shareholders approve
the proposed changes, Investment Restriction (f) will no longer apply and
Investment Restriction (a) will read in full as follows:
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(a) invest for the purpose of exercising control over or
management of any company, except that the Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order;
Investment in Puts and Covered Calls
Reference is made to Investment Restriction (e) of Charter, set forth on
page 22 of the SAI, and Investment Restriction (g) of Weingarten, set forth on
page 23 of the SAI, which prohibits Charter from investing in puts, calls,
straddles and spreads and prohibits Weingarten from investing in certain puts
and calls. The Board has approved a change of this Investment Restriction. In
the event shareholders approve the proposed change of this Investment
Restriction, Charter and Weingarten will each implement a new nonfundamental
policy (i.e., it may be changed by the Board without shareholder approval) that
will (a) limit the ability of each Fund to write cover call options to no more
than 25% of the value of such Fund's net assets, (b) limit the ability of each
Fund to purchase put options to no more than 25% of the value of such Fund's net
assets, and (c) prohibit each Fund from engaging in the writing and sale of put
options and the writing, sale or purchase of uncovered call options, straddles,
spreads or combinations thereof. Neither Charter nor Weingarten intends to
engage in such transactions for speculative purposes and will engage in such
transactions only for hedging purposes.
By writing a call option, the Fund receives an option premium from the
purchaser of the call option. Writing covered call options is generally a
profitable strategy if prices remain the same or fall. Through receipt of the
option premium, the Fund would seek to mitigate the effects of a price decline.
By writing covered call options, however, the Fund gives up the opportunity,
while the option is in effect, to profit from any price increase in the
underlying security above the option exercise price. In addition, the Fund's
ability to sell the underlying security will be limited while the option is in
effect unless the Fund effects a closing purchase transaction. A call option
is "covered" if the Fund owns or has the right to acquire the underlying
security subject to the call.
A put purchased by a Fund constitutes a hedge against a decline in
the price of a security owned by the Fund. It may be sold at a profit or loss
depending upon changes in the price of the underlying security. It may be
exercised at a profit provided that the amount of the decline in the price of
the underlying security below the exercise price during the option period
exceeds the option premium, or it may expire without value.
A call constitutes a hedge against an increase in the price of a
security which the Fund has sold short, it may be sold at a profit or loss
depending upon changes in the price of the underlying security, it may be
exercised at a profit provided that the amount of the increase in the price of
the underlying security over the exercise price during the option period
exceeds the option premium, or it may expire without value. The maximum loss
exposure involved in the purchase of an option is the cost of the option
contract.
For a discussion of the risks related to these types of transactions,
please see pages 20-22 of the SAI.
In the event shareholders approve the proposed changes, Investment
Restriction (e) of Charter will read in full as follows:
(e) buy or sell physical commodities or physical commodity
contracts, including physical commodities futures contracts, or deal
in oil, gas, or other mineral exploration or development programs.
In the event shareholders approve the proposed changes, Investment
Restriction (g) of Weingarten will read in full as follows:
(g) buy or sell physical commodities or physical commodity
contracts, including physical commodities futures contracts.
Investment in Unseasoned Issuers
Reference is made to Investment Restriction (m) of Charter, set forth
on page 20 of the Funds' SAI. The Board has approved the elimination of the
restriction prohibiting investments in securities if issuers that, together
with their predecessors, have less than five years of continuous operations.
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