<PAGE> 1
RETAIL CLASSES OF
AIM AGGRESSIVE GROWTH FUND
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM DENT DEMOGRAPHIC TRENDS FUND
AIM LARGE CAP BASIC VALUE FUND
AIM LARGE CAP GROWTH FUND
AIM WEINGARTEN FUND
(SERIES PORTFOLIOS OF AIM EQUITY FUNDS, INC.)
Supplement dated October 1, 1999
to the Statement of Additional Information dated June 7, 1999,
as revised July 15, 1999
The following is added as new paragraph four under the heading "PERFORMANCE" on
page 3 of the Statement of Additional Information:
"Some or all of the Funds may participate in the Initial
Public Offering ("IPO") market, and a significant portion of those
Funds' returns may be attributable to their investment in IPOs,
which have a magnified impact due to the Funds' small asset base.
There is no guarantee that as the Funds' assets grow, they will
continue to experience substantially similar performance by
investing in IPOs."
The following section is added before the heading "PORTFOLIO TRANSACTIONS AND
BROKERAGE - SECTION 28(e) STANDARDS" on page 8 of the Statement Additional
Information:
"ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds may become
interested in participating in security distributions that are
available in an IPO, and occasions may arise when purchases of such
securities by one AIM Fund may also be considered for purchase by
one or more other AIM Funds. In such cases, it shall be AIM's
practice to specifically combine or otherwise bunch indications of
interest for IPO securities for all AIM Funds participating in
purchase transactions for that security, and to allocate such
transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund that
seeks to participate in a particular IPO by reviewing a number of
factors, including suitability of the investment with the AIM Fund's
investment objective, policies and strategies, the liquidity of the
AIM Fund if such investment is purchased, and whether the portfolio
manager intends to hold the security as a long-term investment. The
allocation of limited supply securities issued in IPOs will be made
to eligible AIM Funds in a manner designed to be fair and equitable
for the eligible AIM Funds, and so that there is equal allocation of
IPOs over the longer term. Where multiple funds are eligible,
rotational participation may occur, based on the extent to which an
AIM Fund has participated in previous IPOs as well as the size of
the AIM Fund. Each eligible AIM Fund with an asset level of less
than $500 million will be placed in one of three tiers, depending
upon its asset level. The AIM Funds in the tier containing funds
with the smallest asset levels will participate first, each
receiving a 40 basis point allocation (rounded to the nearest share
round lot that approximates 40 basis points) (the "Allocation"),
based on that AIM Fund's net assets. This process continues until
all of the AIM Funds in the three tiers receive their Allocations,
or until the shares are all allocated. Should securities remain
after this process, eligible AIM Funds will receive their
Allocations on a straight pro rata basis. For the tier of AIM Funds
not receiving a full Allocation, the Allocation may be made only to
certain AIM Funds so that each may receive close to or exactly 40
basis points.
Any AIM Funds with substantially identical investment
objectives and policies will participate in syndicates in amounts
that are substantially proportionate to each other. In these cases,
the net assets of the largest AIM Fund will be used to determine in
which tier, as described in the paragraph above, such
<PAGE> 2
group of AIM Funds will be placed. The price per share of securities
purchased in such syndicate transactions will be the same for each
AIM Fund."
The following replaces in its entirety the paragraph under the heading
"INVESTMENT STRATEGIES AND RISKS - INVESTMENT IN OTHER INVESTMENT COMPANIES" on
page 17 of the Statement of Additional Information:
Each of the Funds may invest in other investment companies
to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and if applicable, exemptive orders granted by the SEC.
The Funds have obtained an exemptive order from the SEC allowing
them to invest in money market funds that have AIM or an affiliate
of AIM as an investment adviser (the "Affiliated Money Market
Funds"), provided that investments in Affiliated Money Market Funds
do not exceed 25% of the total assets of such Fund. With respect to
a Fund's purchase of shares of the Affiliated Money Market Funds,
the Fund will indirectly pay the advisory fees and other operating
expenses of the Affiliated Money Market Funds."
The following section is added before the heading "OPTIONS, FUTURES AND
CURRENCY STRATEGIES" on page 17 of the Statement of Additional Information:
"TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market
conditions, for cash management purposes, or for defensive purposes,
each of the Funds may temporarily hold all or a portion of its
assets in cash, money market instruments, bonds, or other debt
securities. Each of the Funds may also invest up to 25% of its total
assets in Affiliated Money Market Funds for these purposes."
The following is added to the end of the first paragraph under the heading
"OPTIONS, FUTURES AND CURRENCY STRATEGIES-COVER" on page 18 of the Statement of
Additional Information:
"To the extent that a futures contract, forward contract
or option is deemed to be illiquid, the assets used to "cover" the
Fund's obligation will also be treated as illiquid for purposes of
determining the Fund's maximum allowable investment in illiquid
securities.
Even though options purchased by the Funds do not expose
the Funds to an obligation to another party, but rather provide the
Funds with a right to exercise, the Funds intend to "cover" the cost
of any such exercise. To the extent that a purchased option is
deemed illiquid, the Fund will treat the market value of the option
(i.e., the amount at risk to the Fund) as illiquid, but will not
treat the assets used as cover on such transactions as illiquid."
The following sentence replaces in its entirety the first sentence of the first
paragraph under the heading "OPTIONS, FUTURES AND CURRENCY STRATEGIES -
PURCHASING PUT OPTIONS" on page 19 of the Statement of Additional Information:
"Each of the Funds may purchase covered put options on
securities, futures contracts, forward contracts, indices and
currencies."
The following replaces in its entirety the information appearing under the
heading "OPTIONS, FUTURES AND CURRENCY STRATEGIES - PURCHASING CALL OPTIONS" on
page 19 of the Statement of Additional Information:
"Each of the Funds may purchase covered call options on
securities, futures contracts, forward contracts, indices and
currencies. As the holder of a call option, a Fund would have the
right to purchase the underlying security, contract or currency at
the exercise price at any time until (American style) or on
(European style) the expiration date. A Fund may enter into closing
sale transactions with respect to such options, exercise such
options or permit such options to expire.
Call options may be purchased by a Fund for the purpose of
acquiring the underlying security, contract or currency for its
portfolio. Utilized in this fashion, the purchase of call options
would enable a Fund to acquire the security, contract or currency at
the exercise price of the call option plus the premium paid. So long
as it holds such a call option, rather than the underlying security
or currency itself, the Fund is partially protected from any
unexpected decline in the market price of the underlying security,
contract or currency and, in such event, could allow the call option
to expire, incurring a loss only to the extent of the premium paid
for the option.
Each of the Funds may also purchase call options on
underlying securities, contracts or currencies against which it has
written other call options. For example, where a Fund has written a
call option on an
2
<PAGE> 3
underlying security, rather than entering a closing transaction of
the written option, it may purchase a call option with a different
exercise price and/or expiration date that would eliminate some or
all of the risk associated with the written call. Used in
combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party
contracts (i.e., performance of the obligations of the purchaser and
seller is guaranteed by the exchange or clearing corporation) and
have standardized strike prices and expiration dates. OTC options
are two-party contracts with negotiated strike prices and expiration
dates. A Fund will not purchase an OTC option unless it believes
that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are
transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a
risk of non-performance by the dealer. Since no exchange is
involved, OTC options are valued on the basis of an average of the
last bid prices obtained from dealers, unless a quotation from only
one dealer is available, in which case only that dealer's price will
be used. In the case of OTC options, there can be no assurance that
a liquid secondary market will exist for any particular option at
any specific time. Although a Fund will enter into OTC options only
with dealers that are expected to be capable of entering into
closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a
favorable price prior to expiration. In the event of insolvency of
the dealer, a Fund might be unable to close out an OTC option
position at any time prior to its expiration.
The staff of the SEC considers purchased OTC options
(i.e., the market value of the option) to be illiquid securities. A
Fund may also sell OTC options and, in connection therewith,
segregate assets or cover its obligations with respect to OTC
options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be
calculated by a formula set forth in the option agreement. The cover
for an OTC option written subject to this procedure would be
considered illiquid only to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option."
The following replaces in its entirety the third paragraph under the heading
"OPTIONS, FUTURES AND CURRENCY STRATEGIES-INTEREST RATE, CURRENCY AND STOCK
INDEX FUTURES CONTRACTS" on page 21 of the Statement of Additional Information:
"The Funds will only enter into Futures Contracts that are
traded (either domestically or internationally) on futures exchanges
and are standardized as to maturity date and underlying financial
instrument. Futures exchanges and trading thereon in the United
States are regulated under the Commodity Exchange Act and by the
Commodity Futures Trading Commission ("CFTC"). Foreign futures
exchanges and trading thereon are not regulated by the CFTC and are
not subject to the same regulatory controls. For a further
discussion of the risks associated with investments in foreign
securities, see "Foreign Securities" in this Statement of Additional
Information."
The following paragraph replaces in its entirety the first paragraph after the
first item (h) on page 24 of the Statement of Additional Information:
"In addition, Blue Chip may not (a) with respect to 75% of the
Fund's total assets, invest more than 5% of the total assets of the
Fund (valued at market) in securities of any one issuer (other than
obligations of the U.S. Government and its instrumentalities) or
purchase more than 10% of the outstanding securities of any one
issuer or more than 10% of any class of securities of an issuer
except that the Fund may purchase securities of Affiliated Money
Market Funds to the extent permitted by exemptive order or; (b)
purchase additional securities when any borrowings from banks
exceeds 5% of the Fund's total assets. These additional restrictions
are not fundamental, and may be changed by the Board of Directors of
the Company without shareholder approval."
The following paragraph replaces in its entirety the first paragraph after
item (h) on page 30 of the Statement of Additional Information:
"In addition, Large Cap Growth may not (a) with respect to 75% of
the Fund's total assets, invest more than 5% of the total assets of
the Fund (valued at market) in securities of any one issuer (other
than obligations of the U.S. Government and its instrumentalities)
or purchase more than 10% of the outstanding securities of any one
issuer, except that the Fund may purchase securities of Affiliated
Money Market Funds to the extent
3
<PAGE> 4
permitted by exemptive order; or (b) purchase additional securities
when any borrowings from banks exceeds 5% of the Fund's total
assets. These additional restrictions are not fundamental, and may
be changed by the Board of Directors of the Company without
shareholder approval."
The following paragraph replaces in its entirety the first paragraph after
item (i) on page 31 of the Statement of Additional Information:
"In addition, Weingarten may not (a) invest more than 5% of the
total assets of the Fund (valued at market) in securities of any one
issuer (other than obligations of the U.S. Government and its
instrumentalities), except that the Fund may purchase securities of
Affiliated Money Market Funds to the extent permitted by exemptive
order; (b) purchase more than 10% of the outstanding securities of
any one issuer or more than 10% of any class of securities of an
issuer, except that the Fund may purchase securities of Affiliated
Money Market Funds to the extent permitted by exemptive order; or
(c) purchase additional securities when any borrowings from banks
exceeds 5% of the Fund's total assets. These additional restrictions
are not fundamental, and may be changed by the Board of Directors of
the Company without shareholder approval."
4
