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RETAIL CLASSES OF
AIM BLUE CHIP FUND
AIM CHARTER FUND
AIM WEINGARTEN FUND
AIM CONSTELLATION FUND
AIM AGGRESSIVE GROWTH FUND
AIM CAPITAL DEVELOPMENT FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS, INC.)
Supplement dated December 16, 1996
to the Statement of Additional Information dated September 23, 1996
as revised November 5, 1996
On December 11, 1996, the Board of Directors of the AIM Equity Funds,
Inc. approved, subject to shareholder approval, the elimination of or changes
to certain fundamental investment policies of AIM Aggressive Growth Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund and AIM Weingarten Fund (each, a "Fund" and collectively,
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 Restriction (a), (b) and (i) of AIM
Charter Fund ("Charter"), set forth on pages 19 and 20 of the Funds' Statement
of Additional Information (the "SAI"). The Board of Directors 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 21 of the SAI. The Board of Directors
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;
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Reference is made to Investment Restrictions (a) and (f) of AIM
Constellation Fund ("Constellation") on pages 21 and 22 of the SAI. The Board
of Directors 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:
(a) invest for the purpose of exercising control over or
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 (g) of AIM
Aggressive Growth Fund ("Aggressive Growth") on pages 22 and 23, respectively,
of the SAI. The Board of Directors has approved the elimination of Investment
Restriction (g) and a change to Investment Restriction (a) of Aggressive
Growth. In the event shareholders approve the proposed changes, Investment
Restriction (g) will no longer apply and Investment Restriction (a) will read
in full as follows:
(a) with respect to 75% of the total assets of the Fund, purchase
the securities of any issuer if such purchase would cause more than 5%
of the value of its assets to be invested in the securities of such
issuer (except U.S. Government securities including securities issued
by its agencies and instrumentalities and 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 Restriction (a) of AIM Capital
Development Fund ("Capital Development"), set forth on page 23 of the Funds'
SAI. The Board of Directors has approved a change to Investment Restriction
(a) of Capital Development. In the event shareholders approve the proposed
changes, Investment Restriction (a) will read in full as follows:
(a) with respect to 75% of the total assets of the Fund, 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;
Investment in Puts and Covered Calls
Reference is made to Investment Restriction (e) of Charter, set forth
on page 20 of the SAI, and Investment Restriction (g) of Weingarten, set forth
on page 21 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 of Directors 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 of Directors
without shareholder approval) effective March 1, 1997, that will permit each of
Charter and Weingarten to write covered calls or purchase puts. 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
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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 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 17 to 18 of the SAI.
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