<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)
<TABLE>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
</TABLE>
AIM SPECIAL OPPORTUNITIES FUNDS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AIM SPECIAL OPPORTUNITIES FUNDS
AIM MID CAP OPPORTUNITIES FUND
AIM SMALL CAP OPPORTUNITIES FUND
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
---------------------
NOTICE OF MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 20, 1999
---------------------
TO THE SHAREHOLDERS:
AIM Special Opportunities Funds (the trust) is holding a meeting of
shareholders on Monday, December 20, 1999 at 2:00 p.m., Central time. The place
of the meeting is the trust's offices at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
The trust, a Delaware business trust, consists of three series portfolios:
AIM Large Cap Opportunities Fund, AIM Mid Cap Opportunities Fund (Mid Cap) and
AIM Small Cap Opportunities Fund (Small Cap). This proxy statement relates only
to Mid Cap and Small Cap (the funds).
The purposes of the meeting are as follows:
(1) To elect ten trustees, each of whom will serve until his or her
successor is elected and qualified.
(2) To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
(3) To approve amending the funds' fundamental investment restrictions.
(4) To approve changing the funds' investment objectives from fundamental
policies to non-fundamental policies.
(5) To ratify the selection of KPMG LLP as independent accountants for each
of the funds for the fiscal year ending in 2000.
(6) To transact such other business as may properly come before the
meeting.
You may vote at the meeting if you are the record owner of shares of the
funds as of the close of business on September 29, 1999. If you attend the
meeting, you may vote your shares in person. If you expect to attend the meeting
in person, please notify the trust by calling 1-800-952-3502. If you do not
expect to attend the meeting, please fill in, date, sign and return the proxy
card in the enclosed envelope which requires no postage if mailed in the United
States.
It is important that you return your signed proxy card promptly so that a
quorum may be assured. If we do not hear from you after a reasonable amount of
time, you may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote your shares. You may also vote
your shares on the web at http://www.aimfunds.com by following instructions that
appear on the enclosed proxy insert. Thank you for your cooperation and
continued support.
By: /s/ CHARLES T. BAUER
-----------------------------
Charles T. Bauer
Chairman of the Board
November 22, 1999
<PAGE> 3
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE
FUNDS FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND RETURN
THEM IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY CARD BUT
GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE NOMINEES FOR
TRUSTEE NAMED IN THE ATTACHED PROXY STATEMENT AND "FOR" ALL OTHER PROPOSALS
INDICATED ON THE CARDS. IN ORDER TO AVOID THE ADDITIONAL EXPENSES OF FURTHER
SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY CARDS PROMPTLY.
UNLESS PROXY CARDS ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED IN THE
INSTRUCTIONS BELOW, THEY WILL NOT BE VOTED.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you fail
to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
- ------------ ---------------
<S> <C>
Trust Accounts
(1) ABC Trust Account................................ John B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78.............. Jane B. Doe
Partnership Accounts
(1) The XYZ Partnership.............................. Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership............. Jane B. Smith, General Partner
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA....................................... John B. Smith
(2) Estate of John B. Smith.......................... John B. Smith, Jr., Executor
Corporate Accounts
(1) ABC Corp......................................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp......................................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer................ John Doe
(4) ABC Corp. Profit Sharing Plan.................... John Doe, Treasurer
</TABLE>
<PAGE> 4
AIM SPECIAL OPPORTUNITIES FUNDS
AIM MID CAP OPPORTUNITIES FUND
AIM SMALL CAP OPPORTUNITIES FUND
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
Toll Free: (800) 454-0327
---------------------
PROXY STATEMENT
---------------------
MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 20, 1999
PROXY STATEMENT
The Board of Trustees (the Board) of AIM Special Opportunities Funds (the
trust) is sending you this proxy statement and the enclosed proxy card on behalf
of the following two series portfolios of the trust: AIM Mid Cap Opportunities
Fund (Mid Cap) and AIM Small Cap Opportunities Fund (Small Cap) (together, the
funds). The trust has a third series portfolio, AIM Large Cap Opportunities
Fund, that has not commenced operations. The Board is soliciting your proxy to
vote at the 1999 meeting of shareholders of the trust (the meeting). The meeting
will be held at the trust's offices, 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173, at 2:00 p.m., Central time, on Monday, December 20, 1999. If
you expect to attend the meeting in person, please notify the trust by calling
1-800-952-3502.
The following table summarizes each proposal to be presented at the meeting
and the funds that the Board is soliciting with respect to each proposal:
<TABLE>
<CAPTION>
PROPOSAL AFFECTED FUNDS
-------- --------------
<S> <C>
1. Electing trustees........................................ Both funds
2. Approving a new advisory agreement with A I M Advisors,
Inc....................................................... Both funds
3. Amending the funds' fundamental investment
restrictions.............................................. Both funds
4. Changing the funds' investment objectives from
fundamental to non-fundamental policies................... Both funds
5. Ratifying the Board's selection of independent
accountants............................................... Both funds
6. Considering other matters................................ Both funds
</TABLE>
Only shareholders of Mid Cap and Small Cap are voting on proposals 1, 2, 3,
4, 5 and 6 because there were no shareholders of AIM Large Cap Opportunities
Fund on the record date.
UPON YOUR REQUEST, EACH FUND WILL FURNISH YOU A FREE COPY OF ITS MOST
RECENT ANNUAL REPORT. YOU SHOULD DIRECT YOUR REQUEST TO A I M FUND SERVICES,
INC. AT THE ABOVE ADDRESS OR BY CALLING 1-800-347-4246.
The Board plans to begin sending this proxy statement, the attached notice
of meeting and the enclosed proxy card on or about November 22, 1999 to all
shareholders entitled to vote. Shareholders who owned shares of beneficial
interest of any class of a fund at the close of business on September 29, 1999
(the record date) are entitled to vote. You may find the number of shares
outstanding on the record date for each class of each fund in Appendix A. Each
share of beneficial interest of a fund that you own entitles you to one vote on
each proposal set forth in the table above. (A fractional share has a fractional
vote.)
VOTING BY PROXY
Whether you plan to attend the meeting or not, the Board urges you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the meeting and vote.
The Board has named Robert H. Graham and Gary T. Crum as proxies. If you
properly fill in your proxy card and send it to the trust in time to vote, your
proxy will vote your shares as you have directed.
<PAGE> 5
If you sign the proxy card but do not make specific choices, your proxy will
vote your shares as recommended by the Board as follows:
- FOR electing all ten nominees for trustee.
- FOR approving a new advisory agreement for your fund.
- FOR amending your fund's fundamental investment restrictions.
- FOR changing your fund's investment objective from a fundamental policy
to a non-fundamental policy.
- FOR ratifying the Board's selection of independent accountants for your
fund for 2000.
If any other matter is presented, your proxy will vote in accordance with
his best judgment. At the time this proxy statement was printed, the Board knew
of no matters that needed to be acted on at the meeting other than those
discussed in this proxy statement.
If you give a proxy, you may revoke it at any time before it is exercised.
You can do this in one of five ways:
- You may send in another proxy with a later date.
- You may notify the trust's secretary in writing before the meeting that
you have revoked your proxy.
- You may vote in person at the meeting.
- You may vote by telephone.
- You may vote using the Internet.
VOTING IN PERSON
If you do attend the meeting and wish to vote in person, you will be given
a ballot when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring a letter from the nominee
indicating that you are the beneficial owner of the shares on the record date
and authorizing you to vote.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. If
shareholders entitled to vote one-third of all shares outstanding on the record
date are present in person or by proxy, a quorum will exist.
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, the broker will be entitled to vote your shares on Proposals 1 and
5 (election of trustees and ratification of selection of accountants) even if it
has not received instructions from you. Your broker will not be entitled to vote
on Proposals 2, 3, 4 or 6 (approving a new advisory agreement for your fund,
amending your fund's investment restrictions, changing your fund's investment
objective to a non-fundamental policy, and considering other matters) unless it
has received instructions from you. If your broker does not vote your shares on
Proposals 2, 3, 4 or 6 because it has not received instructions from you, these
shares will be considered broker non-votes.
Broker non-votes and abstentions with respect to any proposal will count as
present for establishing a quorum.
VOTE NECESSARY TO APPROVE A PROPOSAL
- The affirmative vote of a plurality of votes cast is necessary to elect
the trustees, meaning that the nominees receiving the most votes will be
elected (Proposal 1). In an uncontested election for trustees, the
plurality requirement is not a factor.
- The affirmative vote of the holders of a majority of the outstanding
shares of each fund, as defined in the Investment Company Act of 1940, as
amended (the 1940 Act), is required to approve the new advisory agreement
for your fund (Proposal 2) and to approve amending your fund's
2
<PAGE> 6
fundamental investment restrictions and investment objective (Proposals 3
and 4). The 1940 Act defines a majority of the outstanding shares of a
fund as the lesser of (a) the vote of holders of 67% or more of the
voting shares of the fund present in person or by proxy, if the holders
of more than 50% of the outstanding voting shares of the fund are present
in person or by proxy, or (b) the vote of the holders of more than 50% of
the outstanding voting shares of the fund. Broker non-votes and
abstentions will not count as votes cast and will have the effect of
votes against these proposals.
- The affirmative vote of a majority of votes cast is necessary to ratify
the selection of KPMG LLP as your fund's independent accountants
(Proposal 5). Abstentions will not count as votes cast and will have no
effect on the outcome.
ADJOURNMENTS
The proxies may propose to adjourn the meeting to permit further
solicitation of proxies or for other purposes. Any such adjournment will require
the affirmative vote of a majority of the votes cast.
PROPOSAL 1 --
ELECTION OF TRUSTEES
INTRODUCTION
For election of trustees at the meeting, the Board has approved the
nomination of Charles T. Bauer, Bruce L. Crockett, Owen Daly II, Edward K. Dunn,
Jr., Jack Fields, Carl Frischling, Robert H. Graham, Prema Mathai-Davis, Lewis
F. Pennock and Louis S. Sklar, each to serve as trustee until his or her
successor is elected and qualified.
The proxies will vote for the election of these nominees unless you
withhold authority to vote for any or all of them in the proxy. Each of the
nominees has indicated that he or she is willing to serve as a trustee. If any
or all of the nominees should become unavailable for election due to events not
now known or anticipated, the persons named as proxies will vote for such other
nominee or nominees as the trustees who are not interested persons of the trust,
as defined in the 1940 Act (the independent trustees), may recommend.
NOMINEES FOR TRUSTEES
All of the nominees presently are trustees of the trust and serve as
directors, trustees or officers of eleven other open-end management investment
companies advised or managed by A I M Advisors, Inc. (AIM) (these investment
companies and their series portfolios, if any, are referred to collectively as
the AIM funds). No trustee or nominee has been a party adverse to the trust or
any of its affiliates in any material pending legal proceedings, nor has any
trustee or nominee had an interest materially adverse to the trust.
The following table sets forth information concerning the nominees:
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE TRUSTEE SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ------------- ----------------------------------------
<S> <C> <C>
*Charles T. Bauer (80) February 4, 1998 Chairman of the Board of Directors,
11 Greenway Plaza A I M Management Group Inc.; A I M
Suite 100 Advisors, Inc., A I M Capital
Houston, TX 77046-1173 Management, Inc.; A I M Distributors,
Inc.; A I M Fund Services, Inc. and
Fund Management Company; and Executive
Vice Chairman and Director, AMVESCAP PLC.
</TABLE>
- ---------------
* A trustee who is an interested person of AIM and the trust because he is an
affiliated person, as defined in the 1940 Act.
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE TRUSTEE SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ------------- ----------------------------------------
<S> <C> <C>
Bruce L. Crockett (55) February 5, 1998 Director, ACE Limited (insurance
906 Frome Lane company). Formerly, Director, President
McLean, VA 22102 and Chief Executive Officer, COMSAT
Corporation; and Chairman, Board of
Governors of INTELSAT (international
communications company).
Owen Daly II (75) February 5, 1998 Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I
Baltimore, MD 21210 Steel Corp., Monumental Life Insurance
Company and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
Edward K. Dunn, Jr. (64) March 10, 1998 Chairman of the Board of Directors,
2 Hopkins Plaza, Suite 805 Mercantile Mortgage Corporation.
Baltimore, MD 21201 Formerly, Vice Chairman of the Board of
Directors, President and Chief Operating
Officer, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile
Bankshares.
Jack Fields (47) February 5, 1998 Chief Executive Officer, Texana Global,
Texana Global, Inc. Inc. (foreign trading company) and Twenty
8810 Will Clayton Parkway First Century Group, Inc. (a governmental
Jetero Plaza, Suite E affairs company); and Director, Telscape
Humble, TX 77338 International and Administaff. Formerly,
Member of the U.S. House of
Representatives.
**Carl Frischling (62) February 5, 1998 Partner, Kramer Levin Naftalis & Frankel
919 Third Avenue LLP firm). Director, Lazard Funds and
New York, NY 10022 Cortland Funds.
*Robert H. Graham (52) February 4, 1998 Director, President and Chief Executive
11 Greenway Plaza Officer, A I M Management Group Inc.;
Suite 100 Director and President, A I M Advisors,
Houston, TX 77046-1173 Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services,
Inc. and Fund Management Company; and
Director, AMVESCAP PLC.
Prema Mathai-Davis (49) September 10, 1998 Chief Executive Officer, YWCA of the
350 Fifth Avenue, Suite 301 U.S.A.
New York, NY 10118
Lewis F. Pennock (56) February 5, 1998 Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
Louis S. Sklar (60) February 5, 1998 Executive Vice President, Development and
Williams Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Boulevard Partnership (real estate development).
Houston, TX 77056
</TABLE>
- ---------------
* A trustee who is an interested person of AIM and the trust because he is an
affiliated person, as defined in the 1940 Act.
** A trustee who is an interested person of the trust because his law firm
provided legal services to the trust within the trust's two most recent
fiscal years.
4
<PAGE> 8
BOARD MEETINGS AND COMMITTEES
The standing committees of the Board are the Audit Committee, the
Investments Committee and the Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock, Sklar and Dr. Mathai-Davis. The Audit
Committee is responsible for:
- meeting with the trust's auditors to review audit procedures and results
for each fund;
- considering any matters arising from an audit of a fund to be brought to
the attention of the Board as a whole with respect to the trust's fund
accounting or its internal accounting controls; and
- considering such matters as may from time to time be set forth in a
charter adopted by the Board and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Dr. Mathai-Davis. The
Investments Committee is responsible for:
- reviewing portfolio compliance, brokerage allocation, portfolio
investment pricing issues, interim dividend and distribution issues; and
- considering such matters as may from time to time be set forth in a
charter adopted by the Board and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for:
- considering and nominating individuals to stand for election as trustees
who are not "interested persons" as long as the trust maintains a
distribution plan pursuant to Rule 12b-1 under the 1940 Act;
- reviewing from time to time the compensation payable to the disinterested
trustees; and
- considering such matters as may from time to time be set forth in a
charter adopted by the Board and such committee.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such person
was a shareholder of record at the time they submit such names and is entitled
to vote at the meeting, and (ii) that the Nominating and Compensation Committee
or the Board, as applicable, shall make the final determination of persons to be
nominated.
During the fiscal year ended July 31, 1999, the Board held 9 meetings, the
Audit Committee held 5 meetings, the Investments Committee held 4 meetings and
the Nominating and Compensation Committee held 6 meetings. All of the current
trustees and committee members then serving attended at least 75% of the
meetings of the Board or applicable committee, if any, held during the fiscal
year ended July 31, 1999.
TRUSTEES' COMPENSATION
Each trustee is reimbursed for expenses incurred in connection with each
meeting of the Board or any committee attended. Each trustee who is not also an
officer of the trust is compensated for his or her services according to a fee
schedule which recognizes the fact that such trustee also serves as a director
or trustee of some or all of the other AIM funds. Each such trustee receives a
fee, allocated among the AIM funds for which he or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
5
<PAGE> 9
Set forth below is information regarding compensation paid or accrued for
each trustee:
<TABLE>
<CAPTION>
TOTAL
RETIREMENT BENEFITS COMPENSATION
AGGREGATE COMPENSATION ACCRUED BY ALL AIM FROM ALL AIM
TRUSTEE FROM THE TRUST(1) FUNDS(2) FUNDS(3)
- ------- ---------------------- ------------------- ------------
<S> <C> <C> <C>
Charles T. Bauer.......................... $ 0 $ 0 $ 0
Bruce L. Crockett......................... 1,600 37,485 96,000
Owen Daly II.............................. 1,600 122,898 96,000
Edward K. Dunn, Jr. ...................... 1,600 0 78,889
Jack Fields............................... 1,595 15,826 95,500
Carl Frischling(4)........................ 1,594 97,971 95,500
Robert H. Graham.......................... 0 0 0
John F. Kroeger(5)........................ 263 107,896 91,654
Prema Mathai-Davis........................ 1,468 0 32,636
Lewis F. Pennock.......................... 1,594 45,766 95,500
Ian Robinson(6)........................... 944 94,442 94,500
Louis S. Sklar............................ 1,589 90,232 95,500
</TABLE>
- ---------------
(1) The total amount of compensation deferred by all trustees of the trust
during the fiscal year ended July 31, 1999, including interest earned
thereon, was $8,778.
(2) During the fiscal year ended July 31, 1999, the total amount of expenses
allocated to the trust in respect of such retirement benefits was $1,391.
Data reflects compensation for the calendar year ended December 31, 1998.
(3) Each trustee serves as director or trustee of a total of 12 registered
investment companies advised by AIM. Data reflects compensation for the
calendar year ended December 31, 1998.
(4) During the fiscal year ended July 31, 1999, Mid Cap and Small Cap paid
$1,758 and $2,606, respectively, in legal fees to Mr. Frischling's law firm,
Kramer Levin Naftalis & Frankel LLP, for services rendered.
(5) Mr. Kroeger was a trustee until June 10, 1998, when he resigned. On that
date, he became a consultant to the trust. Of the amount listed above, $0
was for compensation for services as a trustee and the remainder as a
consultant. Mr. Kroeger passed away on November 26, 1998. Mr. Kroeger's
widow will receive his pension as described below under "AIM Funds
Retirement Plan for Eligible Directors/Trustees."
(6) Mr. Robinson was a trustee until March 12, 1999, when he retired.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees, each trustee (who is not an employee of any of the AIM
funds, A I M Management Group Inc. (AIM Management) or any of their affiliates)
may be entitled to certain benefits upon retirement from the Board. Pursuant to
the plan, the normal retirement date is the date on which the eligible trustee
has attained age 65 and has completed at least five years of continuous service
with one or more of the regulated investment companies managed, administered or
distributed by AIM or its affiliates (the applicable AIM funds). Each eligible
trustee is entitled to receive an annual benefit from the applicable AIM funds
commencing on the first day of the calendar quarter coincident with or following
his or her date of retirement equal to a maximum of 75% of the annual retainer
paid or accrued by the applicable AIM funds for such trustee during the
twelve-month period immediately preceding the trustee's retirement (including
amounts deferred under a separate agreement between the applicable AIM funds and
the trustee) and based on the number of such trustee's years of service (not in
excess of 10 years of service) completed with respect to any of the applicable
AIM funds. Such benefit is payable to each eligible trustee in quarterly
installments. If an eligible trustee dies after attaining the normal retirement
date but before receipt of any benefits under the plan commences, the trustee's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
6
<PAGE> 10
50% of the amount payable to the deceased trustee for no more than ten years
beginning the first day of the calendar quarter following the date of the
trustee's death. Payments under the plan are not secured or funded by any
applicable AIM fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible trustee upon retirement assuming the retainer amount reflected
below and various years of service. The estimated credited years of service for
Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock, Robinson and
Sklar and Dr. Mathai-Davis are 12, 12, 1, 2, 22, 20, 18, 11, 10 and 1 years,
respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
NUMBER OF YEARS OF SERVICE ANNUAL RETIREMENT PAID BY
WITH THE AIM FUNDS ALL APPLICABLE AIM FUNDS
- -------------------------- -------------------------
<S> <C>
10............................................. $67,500
9............................................. $60,750
8............................................. $54,000
7............................................. $47,250
6............................................. $40,500
5............................................. $33,750
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, Sklar and Dr. Mathai-Davis (the
deferring trustees) have each executed a deferred compensation agreement.
Pursuant to the agreements, the deferring trustees may elect to defer receipt of
up to 100% of their compensation payable by the trust, and such amounts are
placed into a deferral account. Currently, the deferring trustees may select
various AIM funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring trustees' accounts will
be paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the agreement) beginning on the date the
deferring trustee's retirement benefits commence under the plan. The Board, in
its sole discretion, may accelerate or extend the distribution of such deferral
accounts after the deferring trustee's termination of service as a trustee of
the trust. If a deferring trustee dies prior to the distribution of amounts in
his deferral account, the balance of the deferral account will be distributed to
his designated beneficiary in a single lump sum payment as soon as practicable
after such deferring trustee's death. The agreements are not funded and, with
respect to the payments of amounts held in the deferral accounts, the deferring
trustees have the status of unsecured creditors of the trust and of each other
AIM fund from which they are deferring compensation.
RECOMMENDATION
YOUR BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
7
<PAGE> 11
PROPOSAL 2 --
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
The Board recommends that you approve a new advisory agreement between AIM
and the trust and applicable to your fund. The Board is asking you to vote on
this amended agreement because the trust may amend its advisory agreement only
with shareholder approval. You may find a form of the trust's proposed Master
Investment Advisory Agreement in Appendix B. The proposed advisory agreement
amends the current advisory agreement by:
- replacing a fee formula based strictly on net asset value with a
performance-based fee;
- omitting references to the provision of administrative services to the
trust;
- omitting certain expense limitations that are no longer applicable; and
- clarifying existing non-exclusivity provisions.
At a meeting held on November 4, 1999, the Board voted to recommend that
you approve a proposal to adopt the proposed advisory agreement.
AIM has served as the investment advisor for the funds since each commenced
operations. AIM is a wholly owned subsidiary of AIM Management, a holding
company that has been engaged in the financial services business since 1976. The
address of AIM and AIM Management is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046. AIM was organized in 1976, and, together with its subsidiaries,
advises or manages approximately 125 investment portfolios encompassing a broad
range of investment objectives. AIM Management is an indirect wholly owned
subsidiary of AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United
Kingdom. AMVESCAP PLC and its subsidiaries are an independent investment
management group engaged in institutional investment management and retain
mutual fund businesses in the United States, Europe and the Pacific Region. You
may find a list of the executive officers and directors of AIM in Appendix C.
Certain directors and officers of AIM are also trustees of the trust.
TERMS OF THE CURRENT ADVISORY AGREEMENT
The current advisory agreement was initially approved by the Board on March
10, 1998 and was amended on December 7, 1998 to add Mid Cap. The Board last
approved the current advisory agreement on May 11, 1999. The initial shareholder
of Small Cap approved the current advisory agreement on May 7, 1998. The initial
shareholder of Mid Cap approved the current advisory agreement on December 30,
1998.
Under the terms of the current advisory agreement, AIM supervises all
aspects of the funds' operations and provides investment advisory services to
the funds. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the funds. AIM
will not be liable to the funds or their shareholders except in the case of
AIM's willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
The current advisory agreement provides that the funds will pay or cause to
be paid all of their expenses not assumed by AIM, including without limitation:
- brokerage commissions;
- taxes;
- legal, auditing or governmental fees;
- the cost of preparing share certificates;
8
<PAGE> 12
- custodian, transfer and shareholder service agent costs;
- expenses of issue, sale, redemption, and repurchase of shares;
- expenses of registering and qualifying shares for sale;
- expenses relating to trustee and shareholder meetings;
- the cost of preparing and distributing reports and notices to
shareholders;
- the fees and other expenses incurred by the funds in connection with
membership in investment company organizations;
- the cost of printing copies of prospectuses and statements of additional
information distributed to the funds' shareholders; and
- all other charges and costs of the funds' operations unless otherwise
explicitly provided.
Under the current advisory agreement, AIM receives fees at the annual rate
of 1.00% of net assets for Small Cap, and 1.00% for the first $1 billion of net
assets and 0.95% for any assets in excess of $1 billion for Mid Cap.
The current advisory agreement will continue in effect from year to year
for each fund only if such continuance is specifically approved at least
annually by (i) the Board or the vote of a majority of the outstanding voting
securities of the applicable fund (as defined in the 1940 Act), and (ii) the
affirmative vote of a majority of independent trustees by votes cast in person
at a meeting called for such purpose. The current advisory agreement provides
that the Board, a majority of the outstanding voting securities of a fund or AIM
may terminate the agreement for a fund on 60 days' written notice without
penalty. The agreement terminates automatically in the event of its assignment.
AIM may from time to time waive or reduce its fee. AIM may rescind
voluntary fee waivers or reductions at any time upon notice to investors. During
periods of voluntary fee waivers or reductions, AIM will retain its ability to
be reimbursed for such fee prior to the end of each fiscal year. If AIM has
agreed to contractual fee waivers or reductions which are set forth in the Fee
Table in a fund's prospectus, AIM may not alter that arrangement to a fund's
detriment during the period stated in the agreement between AIM and the trust.
AIM may not terminate fee waivers or reductions set forth in the current
advisory agreement without shareholder approval.
For the fiscal period or year ended July 31, 1999, Mid Cap and Small Cap
paid AIM $0 and $2,594,463, respectively, in advisory fees net of any expense
limitations (fee waivers). For the fiscal period or year ended July 31, 1999,
AIM voluntarily waived $16,036 of advisory fees for Mid Cap and did not waive
any advisory fees for Small Cap.
You may find information concerning additional payments to AIM (for
administrative services) and its affiliates, A I M Distributors, Inc. (for
serving as the funds' principal underwriter), and A I M Fund Services, Inc. (for
serving as the funds' transfer agent), in Appendix D.
TERMS OF THE PROPOSED ADVISORY AGREEMENT
The Board approved the following changes to the proposed advisory
agreement:
The primary change is:
- To shift from a fee based strictly on the net asset value of each fund to
a performance-based fee that varies according to each fund's performance,
which may result in an increase in the annual rate of compensation
payable by the funds to AIM. Under the proposed advisory agreement, there
will generally be an increase in the annual rate of compensation payable
by Mid Cap to AIM at all times except for those times when the
performance of Mid Cap lags the applicable index by more than 4.50%, and
there will generally be an increase in the annual rate of compensation
payable by
9
<PAGE> 13
Small Cap to AIM when the performance of Small Cap exceeds the applicable
index by more than 2.00%.
Additional changes have been made:
- To omit references to the provision of administrative services to the
trust by AIM, because such services are covered by a separate
administrative services agreement between AIM and the trust;
- To omit certain expense limitations that are no longer applicable; and
- To clarify non-exclusivity provisions that are set forth in the current
advisory agreement.
Each of these changes is discussed more fully below. Except for these
changes, the terms of the current advisory agreement and the proposed advisory
agreement are substantially similar, except for the effective dates and the
renewal dates.
Performance-Based Fee. The investment advisory fee rate to be paid to AIM
by each fund under the proposed advisory agreement will consist of the sum of a
base fee and a performance adjustment. The proposed advisory fee will be
computed and payable on a monthly basis. In computing the amount of the base fee
for each fund, the fee will be applied against each fund's average daily net
assets computed over the month for which the base fee is paid. In computing the
amount of the performance adjustment, the adjustment will be applied against
each fund's average daily net assets computed over the applicable measurement
period, which is a rolling twelve-month period ending on the last day of the
month immediately preceding the monthly computation called for by the proposed
advisory agreement. If AIM serves as a fund's investment advisor for less than
the whole of any specified period, the compensation payable to AIM with respect
to that fund will be prorated.
Performance-Based Fee for Mid Cap. Under the proposed advisory agreement,
the base fee for Mid Cap will be an annual rate of 1.50% of the fund's average
daily net assets (This base fee is higher than the 1.00% fee that the fund
currently pays.) If there is a 2.00% or less difference between the investment
performance of the fund and the investment record of the S&P MidCap 400 Index
during any measurement period, the base fee paid to AIM will not change. If the
difference between the investment performance of the fund and the investment
record of the S&P MidCap 400 Index is greater than 2.00% during any measurement
period, the base fee will be subject to an upward or downward performance
adjustment. The performance adjustment is made in 0.20% increments for every
1.00% difference in excess of 2.00% in the investment performance of the fund
compared to the investment record of the S&P MidCap 400 Index. Adjustments will
be made on a proportionate basis for differences of less than a full 1.00%. On
an annual basis, the performance adjustment will not exceed 1.00%. The S&P
MidCap 400 Index is a widely recognized, unmanaged index that tracks the
performance of the stocks of 400 companies with market capitalizations between
$200 million and $5 billion.
Performance-Based Fee for Small Cap. Under the proposed advisory agreement,
the base fee for Small Cap will be an annual rate of 1.00% of the fund's average
daily net assets. (This base fee is the same as the fee the fund currently
pays.) If there is a 2.00% or less difference between the investment performance
of the fund and the investment record of the Russell 2000--Registered
Trademark-- Index during any measurement period, the base fee paid to AIM will
not change. If the difference between the investment performance of the fund
and the investment record of the Russell 2000--Registered Trademark-- Index is
greater than 2.00% during any measurement period, the base fee will be
subject to an upward or downward performance adjustment. The performance
adjustment is made in 0.15% increments for every 1.00% difference in excess of
2.00% in the investment performance of the fund compared to the investment
record of the Russell 2000--Registered Trademark-- Index. Adjustments will be
made on a proportionate basis for differences of less than a full 1.00%. On an
annual basis, the performance adjustment will not exceed 0.75%. The Russell
2000--Registered Trademark-- Index is a widely recognized, unmanaged index
that tracks the performance of the stocks of 2,000 companies with market
capitalizations between $100 million and $1.5 billion.
Example of Calculation of Performance-Based Fee for Mid Cap. For example,
if during a measurement period the S&P MidCap 400 Index increases by 15%, and
Mid Cap's investment
10
<PAGE> 14
performance was 18%, AIM would be entitled to receive additional compensation
for the month at the annual rate of 0.20% of the average daily net assets of Mid
Cap during the measurement period. If, however, the S&P MidCap 400 Index
increases by 15% and Mid Cap's investment performance was 11%, the fees
otherwise payable to AIM for the month would be reduced by an amount using an
annual rate of 0.40% multiplied by the average daily net assets of Mid Cap
during the measurement period.
Example of Calculation of Performance-Based Fee for Small Cap. For example,
if during a measurement period the Russell 2000--Registered Trademark-- Index
increases by 15%, and Small Cap's investment performance was 18%, AIM would be
entitled to receive additional compensation for the month at the annual rate
of 0.15% of the average daily net assets of Small Cap during the measurement
period. If, however, the Russell 2000--Registered Trademark-- Index increases
by 15% and Small Cap's investment performance was 11%, the fees otherwise
payable to AIM for the month would be reduced by an amount using an annual
rate of 0.30% multiplied by the average daily net assets of Small Cap during
the measurement period.
If you approve the proposed advisory agreement, the base fee for your fund
will become effective January 1, 2000. The first performance adjustment will be
made in January 2001, based on the performance period ending December 31, 2000.
After AIM determines whether a particular fund's performance was above or
below that fund's benchmark index by comparing the performance of a Class A
share of that fund against the investment record of that fund's benchmark index,
AIM will apply the same performance adjustment (positive or negative) across all
classes of shares of that fund.
The Board may from time to time determine that another securities index is
a more appropriate benchmark than a particular fund's benchmark index, as
identified above, for purposes of evaluating the performance of that fund. In
such event, the Board will substitute a successor index for the fund's benchmark
index. However, the calculation of the performance adjustment for any portion of
the performance period prior to the adoption of the successor index will still
be based upon the fund's performance compared to its former benchmark index.
Although the proposed advisory agreement would permit the Board to change a
benchmark index without obtaining shareholder approval of the change, the Board
will submit proposed changes in the benchmark index to shareholders for their
approval unless the SEC takes the written position that shareholder approval is
not required.
PERFORMANCE INFORMATION
The Board believes that the base fee increase for Mid Cap and the addition
of the performance adjustments for both funds are justified because, under AIM's
management, both funds have enjoyed above-average performance. The discussion
under the heading "Factors Considered by the Trustees" provides a detailed
description of the Board's evaluation of the proposed advisory agreement.
FEES OF SIMILAR FUNDS MANAGED BY AIM
Although other funds advised by AIM have similar investment objectives, AIM
uses investment strategies in managing Mid Cap and Small Cap that differ
markedly from the strategies it uses in managing other funds. Mid Cap and Small
Cap are non-diversified funds, so a larger percentage of their assets can be
invested in a smaller number of issuers. The funds may also use leverage as an
investment technique. If the funds use leverage, they will attempt to earn a
return on the money they borrow that is greater than the interest they pay on
the borrowed money. The funds enter into short sales of securities, including
securities they do not currently own. The funds also engage in other hedging
strategies, including buying and selling puts and calls.
In selecting stocks for the funds, AIM seeks to find companies that involve
a special opportunity, such as an unusual development in a company or a group of
companies.
Because these investment strategies are different than those used by other
funds managed by AIM and there are few comparable funds being offered to mutual
fund investors, the funds believe that it would be appropriate to limit the
marketing of the funds to investors who may be familiar with the types of
11
<PAGE> 15
investment strategies the funds use. For the same reasons as those discussed in
the previous sentence, the funds also require a minimum initial investment
($10,000) that is higher than that required by the other AIM funds ($500). The
compensation structures for other AIM funds with investment objectives similar
to those of the funds may be found in Appendix E. Although these other funds
have investment objectives similar to the funds' investment objectives, they do
not employ the same investment strategies employed by the funds.
EFFECT OF AN INCREASE IN THE MANAGEMENT FEE
The effect of the proposed changes in each fund's management fee is
illustrated below. For the fiscal period or year ended July 31, 1999, this
information illustrates the amount each fund was obligated to pay to AIM under
the current advisory agreement, and the amount each fund would have been
obligated to pay to AIM had the proposed advisory agreement been in effect for
the entire period.
AIM MID CAP OPPORTUNITIES FUND
PERIOD ENDED JULY 31, 1999
<TABLE>
<CAPTION>
% OF AVERAGE
MANAGEMENT FEE DAILY NET ASSETS AMOUNT OF FEE % CHANGE
- -------------- ---------------- ------------- --------
<S> <C> <C> <C>
Current Fee............................................ 1.00% $16,036
Proposed Fee........................................... 2.04 32,775
Difference............................................. 1.04 16,739 104%
</TABLE>
AIM SMALL CAP OPPORTUNITIES FUND
YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
% OF AVERAGE
MANAGEMENT FEE DAILY NET ASSETS AMOUNT OF FEE % CHANGE
- -------------- ---------------- ------------- --------
<S> <C> <C> <C>
Current Fee............................................ 1.00% $2,594,463
Proposed Fee........................................... 1.51 3,922,420
Difference............................................. 0.51 1,327,957 51%
</TABLE>
Shown below is a chart of the expenses and fees each fund incurred during
its fiscal year or period ended July 31, 1999, together with pro forma fees each
fund would have paid had the proposed advisory agreement been in effect for the
entire period.
EXPENSE TABLE
This table describes the fees and expenses that you may pay when you buy,
redeem and hold shares of each fund.
AIM MID CAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B(1) CLASS C(1)
------------------- ------------------- -------------------
CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees........................ 1.00% 2.04% 1.00% 2.04% 1.00% 2.04%
Distribution and/or Service (12b-1)
Fees................................. 0.35 0.35 1.00 1.00 1.00 1.00
Other Expenses....................... 6.14 6.14 6.16 6.16 6.16 6.16
Interest............................. 0.03 0.03 0.03 0.03 0.03 0.03
Total Other Expenses................... 6.17 6.17 6.19 6.19 6.19 6.19
Total Annual Fund Operating Expenses... 7.52 8.56 8.19 9.23 8.19 9.23
Expense Waivers(2)..................... 5.62 5.62 5.62 5.62 5.62 5.62
Net Expenses........................... 1.90% 2.94% 2.57% 3.61% 2.57% 3.61%
</TABLE>
- ---------------
(1) Expenses are based on those of Class A shares.
(2) Has been restated to reflect current agreements. The investment advisor has
contractually agreed to limit Total Other Expenses, excluding interest
expense, taxes, dividend expense on short sales and extraordinary expenses,
to 0.50% on Class A shares. If this limitation results in waivers or
reimbursements, a proportionate amount will be waived or reimbursed on Class
B and C shares.
12
<PAGE> 16
AIM SMALL CAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees........................ 1.00% 1.51% 1.00% 1.51% 1.00% 1.51%
Distribution and/or Service (12b-1)
Fees................................. 0.35 0.35 1.00 1.00 1.00 1.00
Other Expenses....................... 0.44 0.44 0.47 0.47 0.47 0.47
Interest............................. 0.56 0.56 0.56 0.56 0.56 0.56
Total Other Expenses................... 1.00 1.00 1.03 1.03 1.03 1.03
Total Annual Fund Operating Expenses... 2.35% 2.86% 3.03% 3.54% 3.03% 3.54%
</TABLE>
EXPENSE EXAMPLE
The following example is intended to help you compare the cost of investing
in different classes of each of the funds with the costs of investing in other
mutual funds. The example assumes that (i) you invest $10,000 for the time
period indicated and then redeem all of your shares at the end of the period,
(ii) you reinvest all dividends and distributions, (iii) your investment has a
5% return each year and (iv) the funds' operating expenses remain the same. To
the extent fees are waived or expenses are reimbursed, your expenses will be
lower. Although your actual returns and costs may be higher or lower, based on
these assumptions your costs would be:
AIM MID CAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES IF YOU DO NOT SELL YOUR SHARES
--------------------------------- ---------------------------------
NUMBER OF YEARS YOU OWN YOUR SHARES
---------------------------------------------------------------------
1 3 5 10 1 3 5 10
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
Current Fee............ $1,252 $2,602 $3,886 $6,822 $1,252 $2,602 $3,886 $6,822
Proposed Fee........... 1,345 2,850 4,250 7,336 1,345 2,850 4,250 7,336
Class B
Current Fee............ 1,306 2,642 3,981 6,903 806 2,342 3,781 6,903
Proposed Fee........... 1,403 2,897 4,351 7,412 903 2,597 4,151 7,412
Class C
Current Fee............ 906 2,342 3,781 6,996 806 2,342 3,781 6,996
Proposed Fee........... 1,003 2,597 4,151 7,495 903 2,597 4,151 7,495
</TABLE>
AIM SMALL CAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES IF YOU DO NOT SELL YOUR SHARES
------------------------------- -------------------------------
NUMBER OF YEARS YOU OWN YOUR SHARES
-----------------------------------------------------------------
1 3 5 10 1 3 5 10
---- ------ ------ ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
Current Fee............... $775 $1,243 $1,736 $3,088 $775 $1,243 $1,736 $3,088
Proposed Fee.............. 823 1,387 1,976 3,560 823 1,387 1,976 3,560
Class B
Current Fee............... 806 1,236 1,791 3,188 306 936 1,591 3,188
Proposed Fee.............. 857 1,385 2,036 3,659 357 1,085 1,836 3,659
Class C
Current Fee............... 406 936 1,591 3,346 306 936 1,591 3,346
Proposed Fee.............. 457 1,085 1,836 3,809 357 1,085 1,836 3,809
</TABLE>
13
<PAGE> 17
ADMINISTRATIVE SERVICES
The trust and AIM are parties to a Master Administrative Services Agreement
dated June 24, 1998, as amended on December 7, 1998 and September 27, 1999. The
current advisory agreement states that AIM will provide certain administrative
services to the funds at the Board's request. The Board has traditionally asked
AIM to provide such services to the funds. AIM then provides such services
pursuant to the Master Administrative Services Agreement.
The Board proposes to unbundle the advisory services and the administrative
services that AIM provides to the trust, so that the provision of administrative
services is dealt with solely in a Master Administrative Services Agreement. As
a result, the proposed advisory agreement omits all references to the Master
Administrative Services Agreement. Since this omission will not change the
administrative services that AIM provides to the trust or the compensation AIM
receives for providing administrative services, the Board believes that this
change is a matter of form rather than a substantive change in the relationship
between AIM and the trust.
EXPENSE LIMITATIONS
The current advisory agreement provides that advisory fees will be reduced
in accordance with certain expense limitations set forth in state security
regulations of the states in which the funds' shares are qualified for sale.
This expense limitation provision no longer has any practical effect because
federal law has pre-empted these state regulations. Accordingly, the Board
believes that this inapplicable expense limitation provision should be omitted
from the proposed advisory agreement.
NON-EXCLUSIVITY PROVISIONS
The current advisory agreement provides that neither AIM nor the trustees
or officers of the trust owe an exclusive duty to the trust. The current
advisory agreement expressly permits AIM to render investment advisory,
administrative and other services to other entities (including investment
companies). The current advisory agreement also expressly permits the trustees
and officers of the trust to serve as partners, officers, directors or trustees
of other entities (including other investment advisory companies). The Board
believes that the non-exclusivity provision in the current advisory agreement
should be bifurcated into two separate provisions: one dealing with AIM and the
other dealing with officers and trustees of the trust.
The non-exclusivity provisions of the proposed advisory agreement are
substantially similar to the provision in the current advisory agreement.
However, the proposed advisory agreement explicitly states that the trust
recognizes that AIM's obligations to other clients may adversely affect the
trust's ability to participate in certain investment opportunities. The proposed
advisory agreement also explicitly states that AIM, in its sole discretion,
shall be entitled to determine the allocation of investment opportunities among
the AIM funds in accordance with a formula that AIM believes to be equitable.
FACTORS CONSIDERED BY THE TRUSTEES
At the request of AIM, the Board discussed the approval of the proposed
advisory agreement at a meeting in person held on November 4, 1999. The
independent trustees met separately in person on that date and discussed
approval of the proposed advisory agreement with independent counsel. In
evaluating the proposed advisory agreement, the Board requested and received
information from AIM to assist in its deliberations. The Board utilized reports
by Lipper, Inc. (Lipper), a nationally recognized, independent service that
monitors mutual fund expenses and performance, and significant amounts of
information furnished by AIM. The Board reviewed these materials and considered
various matters, discussed below, in determining the reasonableness and fairness
of the proposed changes in the current advisory agreement with respect to each
fund. In doing so, the Board reached the following conclusions:
- The funds have the ability to use investment leverage through bank
borrowings and make extensive use of short sales and various types of
derivative instruments including puts and calls. These practices require
a significant devotion of management, investment, trading and
administrative
14
<PAGE> 18
resources. As a result, the funds are more complex to manage than funds
that do not engage in these practices.
- To the knowledge of the Board, there are few other registered mutual
funds which use the same investment strategies as the funds. The Board
believes that those that are comparable also provide for
performance-based fees.
- Because there are few registered mutual funds comparable to the funds,
and the funds are most similar to unregistered hedge funds, the Board
compared the funds with these unregistered hedge funds. The Board
understands that the management fee for these unregistered funds is
generally a base fee of 3/4 of 1% to 1 1/2% of net assets per annum, plus
a performance fee of 20% of returns which exceed a so-called "hurdle
rate." The hurdle rate is typically set at 6% to 10% of returns based on
invested capital. While federal securities laws do not allow the same
type of fee to be used in connection with registered mutual funds like
the funds, fees paid by hedge funds would generally far exceed the
proposed fee.
- AIM has provided high quality services with respect to the funds. The
investment performance of each of Mid Cap and Small Cap for the
performance period ended July 31, 1999 exceeded the performance of the
S&P MidCap 400 Index and the Russell 2000--Registered Trademark-- Index,
respectively, and the average fund performance of each fund's
comparable Lipper peer group.
- The funds are marketed to persons who may be familiar with the investment
strategies the funds use. The funds also require a higher minimum initial
investment than that required for other AIM funds.
- The Board believes that a performance-based fee is the most appropriate
method of aligning the interests of AIM with the interests of
shareholders of the funds. If the performance of the funds continues to
exceed applicable indices by more than 2.00%, both shareholders and AIM
will share in that success. If the funds underperform the applicable
indices by more than 2.00%, the fees payable to AIM will decline.
- The fee has been structured so that small differences between a fund's
performance and the investment record of the applicable index do not
result in any fee adjustments. The fee has also been structured to set a
reasonable limit on the percentage by which the fund could outperform or
underperform the applicable index (7.00%) and still be entitled to a fee
adjustment. The Board believes that this fee structure will help ensure
that AIM is not causing the funds to undertake excessive risks to
potentially improve performance.
- The Board believes that each index chosen is an appropriate benchmark
against which each fund's performance should be measured. In reaching
this conclusion, the Board took into account for each fund
diversification of holdings, volatility, types of securities owned by
each fund and each fund's objectives and policies. The Board also noted
that each index is widely recognized and broadly published.
- The Board believes it is in the mutual best interests of the trust and
AIM to clarify the terms under which AIM will provide investment advisory
services to the trust and to omit outdated, or otherwise unnecessary,
provisions from the new advisory agreement.
The Board reached these conclusions after careful discussion and analysis.
The Board believes that it has carefully and thoroughly examined the questions
and alternatives. In recommending that you approve the proposed advisory
agreement, the independent trustees have considered what they believe to be in
your best interests. In so doing, they were advised by independent counsel,
retained by the independent trustees and paid for by the trust, as to the nature
of the matters to be considered and the standards to be used in reaching their
decision.
15
<PAGE> 19
REVIEW PROCESS OF THE BOARD
In reaching its decision, the Board examined and weighed many factors,
including:
- the nature, quality and extent of the services rendered and the results
achieved by AIM for the funds (including investment performance
comparisons with other mutual funds and certain indices);
- the payments received by AIM and its affiliates from all sources
involving each fund and the other investment companies advised by AIM and
its affiliates;
- extensive financial, personnel and structural information as to AIM and
its affiliates including the costs borne by, and profitability of, AIM
and its affiliates in providing service of all types to each fund and to
the other investment companies advised by AIM and its affiliates;
- the organizational capabilities, financial condition and future capital
requirements of AIM and its affiliates;
- an analysis of the proposed performance-based fees, including information
concerning each fund's expense ratio on both an existing and pro forma
basis;
- competitive industry fee structures and expense ratios including,
specifically and where available, performance-based fees paid by other
similar registered mutual funds and unregistered hedge funds; and
- other factors the Board deemed relevant.
Certain of these factors are discussed in more detail below.
Portfolio Performance. The Board determined that AIM has provided high
quality services with respect to each fund. The Board reviewed the performance
of each fund against its applicable Lipper peer group. The Board noted that, for
the seven-month fiscal period ended July 31, 1999, Mid Cap was ranked 1 by
Lipper out of 421 mutual funds ranked by Lipper as comparable. The Board also
noted that Mid Cap had less than $5 million in assets under management during
this period. The Board noted that, for the fiscal year ended July 31, 1999,
Small Cap was ranked 11 by Lipper out of 704 mutual funds ranked by Lipper as
comparable. These rankings do not take into account the deduction of applicable
sales charges.
16
<PAGE> 20
The Board also determined that each fund's absolute performance and
performance relative to comparable mutual funds and indices would not have been
materially affected if the proposed fee had been in effect from the commencement
of each fund's investment operations. Each fund's total return for the fiscal
period or year ended July 31, 1999 in comparison with the Russell
2000--Registered Trademark-- Index, the S&P MidCap 400 Index and each fund's
applicable Lipper peer group was as
follows:
MID CAP OPPORTUNITIES
12/30/98-7/31/99
[MID CAP OPPORTUNITIES GRAPH]
<TABLE>
<CAPTION>
PERCENTAGE
RETURN
----------
<S> <C>
Mid Cap Opportunities Class A Shares........................ 49.15%*
Lipper Mid-Cap Fund Index................................... 9.81%**
S&P MidCap 400 Index........................................ 8.69%
</TABLE>
* Mid Cap returns include the 5.50% sales charge.
** Lipper Mid-Cap Fund Index data as of 12/31/98
Source: Lipper, Inc.
SMALL CAP OPPORTUNITIES
7/31/98-7/31/99
[SMALL CAP OPPORTUNITIES GRAPH]
<TABLE>
<CAPTION>
PERCENTAGE
RETURN
----------
<S> <C>
Small Cap Opportunities Class A Shares...................... 43.95%*
Lipper Small-Cap Fund Index................................. 8.51%
Russell 2000--Registered Trademark-- Index.................. 7.41%
</TABLE>
* Small Cap returns include the 5.50% sales charge.
Source: Lipper, Inc.
The Russell 2000--Registered Trademark-- Index and the S&P MidCap 400
Index are unmanaged indices that assume reinvestment of estimated dividends.
They do not reflect fees and expenses. Investors may not invest
17
<PAGE> 21
directly in an index. The Lipper fund averages and each fund's performance
assume reinvestment of capital gains and dividends and do not reflect the
deduction of sales charges.
Total return information for the funds in this table have been affected by
special market factors, including the funds' investments in initial public
offerings, which have had a magnified impact on the funds due to their small
asset bases. There is no guarantee that as the funds' assets grow, they will
continue to experience substantially similar performance.
The Board also considered the nature, quality and extent of the investment
advisory services rendered by AIM to each fund, including the complexities
involved in pursuing the funds' investment strategies. The Board also considered
the background of the portfolio managers and other executive personnel of AIM
and its affiliates.
Analysis of Proposed Performance-Based Fees. The Board considered the
effect of the proposed performance-based fees on each fund's fee rates and
annual expense ratios (which include the management fee and all other operating
expenses incurred by each fund). The Board reviewed the tables under the heading
"Effect of an Increase in the Management Fee", which provide comparative data
for Mid Cap's fiscal period ended July 31, 1999, and Small Cap's fiscal year
ended July 31, 1999, assuming that the proposed performance-based fees had been
in effect throughout the period or year. The Board noted that had the proposed
fees been in effect during the periods shown, the advisory fees would have been
greater than under the existing arrangements.
The Board also noted that the base fee for Mid Cap is at an annual rate of
1.50% of average daily net assets, while the base fee for Small Cap is at an
annual rate of 1.00% of average daily net assets. The Board further noted that
this represents an increase in Mid Cap's base fee rate as compared to the
current fee rate under the existing agreement, while Small Cap's base fee rate
is the same as its current fee rate under the existing agreement. In determining
whether this difference was appropriate, the Board considered that Mid Cap had
been in existence for less than a year and had until recently engaged in a
limited public offering of its shares. On the other hand, Small Cap has been in
operation for nearly one and one-half years, has been publicly distributed and
is currently closed to new investors. The Board also noted that even though the
base fee rate for Mid Cap was increasing, if that fund underperformed the
applicable index by more than 4.50%, the base fee rate could be reduced by the
applicable performance adjustment to a rate that is lower than the current fee
rate.
After considering all of these factors and the other factors discussed in
this proxy statement, the Board concluded that the proposed fee structure for
Mid Cap was appropriate for Mid Cap and that the proposed fee structure for
Small Cap was appropriate for Small Cap.
Costs of Providing Service and Profitability. The Board reviewed
information concerning the profitability of AIM's (and its affiliates')
investment advisory and other activities and its financial condition. The Board
considered that performance-based fees would have positive effects on AIM's
profitability if each fund continues to outperform its applicable index by more
than 2.00%. The Board also considered that Small Cap was recently closed to new
investors, and that closure of such fund would reduce the rate of growth of
assets under management. The Board recognized that the growth of assets under
management by AIM would have positive effects on AIM's profitability even
without implementation of performance-based fees. The Board also considered the
fact that the implementation of performance-based fees would enhance AIM's
ability to attract and retain highly qualified investment and administrative
professionals in a competitive investment management environment, and thus
address the Board's expectations regarding the performance of each fund that
only such professionals can satisfy.
Non-Advisory Services Provided to the Funds. The Board reviewed the general
nature of the non-investment advisory services performed by AIM and its
affiliates, such as administrative, transfer agency and distribution services
and the fees received by AIM and its affiliates for performing such services.
You may find information about these non-investment advisory services in
Appendix D. In addition to reviewing such services, the Board also considered
the organizational structure employed by AIM and its affiliates to provide those
services.
18
<PAGE> 22
IMPLEMENTATION
If approved, the proposed advisory agreement will become effective on
January 1, 2000 and will expire, unless renewed, on June 30, 2001. If you do not
approve the proposed advisory agreement, the current advisory agreement will
continue in effect.
RECOMMENDATION
YOUR BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
PROPOSALS 3(a) THROUGH 3(h) --
AMENDMENT TO YOUR FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS
INTRODUCTION
The Board recommends that you approve amending your fund's investment
restrictions. The Board is asking you to vote on these changes because the
investment restrictions described below are fundamental and shareholders must
approve any change.
The 1940 Act requires mutual funds to adopt fundamental investment
restrictions covering certain types of investment practices. The funds have
adopted such restrictions that generally govern their operations. In addition to
investment restrictions, the funds operate pursuant to investment objectives and
policies. These objectives and policies govern the investment activities of the
funds and further limit their ability to invest in certain types of securities
or engage in certain types of transactions.
The Board is proposing that you approve changes to your fund's fundamental
investment restrictions. The changes will conform these restrictions to a set of
model restrictions under which recently organized AIM funds operate. The Board
approved the amendment of the funds' fundamental investment restrictions at a
meeting held on November 4, 1999. The Board expects that you will benefit from
this amendment in a number of ways. The proposed uniform restrictions will
provide your fund with as much investment flexibility as possible under the 1940
Act. They will also help promote operational efficiencies and monitoring of
compliance and contribute to the overall goal of uniformity and standardization.
Lastly, they will provide the Board with greater flexibility to make future
changes in your fund's non-fundamental investment restrictions.
The proposed restrictions restate the fundamental restrictions currently in
effect for the funds. The Board has modified or eliminated some fundamental
restrictions in accordance with developments in federal regulations since the
inception of the funds. The Board has also redesignated other restrictions
previously deemed fundamental as non-fundamental. By making certain restrictions
non-fundamental, the Board may amend a restriction as it deems appropriate
without incurring the time and the costs of a shareholder vote.
COMPARISON OF CURRENT AND PROPOSED RESTRICTIONS
The table below sets forth each fund's current fundamental investment
restrictions and the proposed amended fundamental restrictions. After each
proposed restriction is a commentary which describes the proposed restriction
and explains the significance of the proposed change to each fund. The Board
does not anticipate that approving these changes will result in any material
change in the way AIM operates the funds at the present time.
The proposed fundamental investment restrictions will provide the funds
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of the change. Even though the funds will have this flexibility if the
proposed restrictions are approved, the Board will implement internal guidelines
for the funds which AIM must
19
<PAGE> 23
follow in managing the funds. These internal guidelines will be in the form of
non-fundamental investment restrictions, which the Board may change without
shareholder approval. The non-fundamental investment restrictions will replace
the funds' existing non-fundamental investment restrictions.
PROPOSAL 3(a): INDUSTRY CONCENTRATION
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will concentrate its investments; that is, invest 25% or more of
the value of its assets in issuers which conduct their business operations in
the same industry.
AMENDED FUNDAMENTAL RESTRICTION:
- - The funds will not make investments that will result in the concentration (as
that term may be defined or interpreted by the 1940 Act, and the rules and
regulations promulgated thereunder, as such statute, rules and regulations are
amended from time to time or are interpreted from time to time by the SEC's
staff (collectively, the 1940 Act laws and interpretations)) or to the extent
that the funds may be permitted to do so by exemptive order or similar relief
(collectively, with the 1940 Act laws and interpretations, the 1940 Act laws,
interpretations and exemptions), of their investments in the securities of
issuers primarily engaged in the same industry. This restriction does not
limit the funds' investments in (i) obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities, or (ii) tax-exempt
obligations issued by governments or political subdivisions of governments. In
complying with this restriction, the funds will not consider a bank-issued
guaranty or financial guaranty insurance as a separate security.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. In addition, the amended restriction clarifies those
entities that are not considered to be part of any industry for concentration
purposes. The amended restriction also provides the funds with maximum
flexibility with respect to future changes in applicable law regarding the
definition of concentration, without incurring the costs of soliciting a
shareholder vote.
If you approve the proposed restriction, the funds will implement the
following non-fundamental investment restriction:
"In complying with this concentration restriction, a fund may invest up to 25%
of its total assets in the securities of issuers whose principal business
activities are in the same industry."
20
<PAGE> 24
PROPOSAL 3(b): PURCHASING SECURITIES
OF OTHER INVESTMENT COMPANIES
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will invest for the purpose of exercising control over or
management over a company except that a fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.
AMENDED FUNDAMENTAL RESTRICTION:
- - The funds may purchase securities of other investment companies to the extent
permitted by the 1940 Act laws, interpretations and exemptions.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. In addition, the amended restriction gives the funds
additional flexibility in their investment strategies because it does not
restrict their ability to invest for purposes of exercising control over or
management over a company.
PROPOSAL 3(c): UNDERWRITING SECURITIES
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will act as an underwriter, except to the extent that, in
connection with the disposition of portfolio securities, a fund may be deemed
to be an underwriter for purposes of the 1933 Act.
AMENDED FUNDAMENTAL RESTRICTION:
- - The funds may not underwrite the securities of other issuers. This restriction
does not prevent the funds from engaging in transactions involving the
acquisition, disposition or resale of its portfolio securities, regardless of
whether the funds may be considered to be underwriters under the Securities
Act of 1933.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. The amended restriction also clarifies that the funds may
engage in acquisitions or resales of their portfolio securities, in addition to
dispositions of such securities, regardless of whether they may be considered to
be underwriters.
PROPOSAL 3(d): PURCHASING OR SELLING REAL ESTATE
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will purchase or sell real estate or any interest therein, except
that a fund may, as appropriate and consistent with its investment policies
and other investment restrictions, invest in securities of entities secured by
real estate or marketable interests therein or securities of issuers that
engage in real estate operations or interests therein, and may hold and sell
real estate acquired as a result of ownership in such securities.
AMENDED FUNDAMENTAL RESTRICTION:
- - The funds may not purchase real estate or sell real estate unless acquired as
a result of ownership of securities or other instruments. This restriction
does not prevent the funds from investing in issuers that invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. Otherwise, the proposed restriction is substantially
similar to the current restriction.
21
<PAGE> 25
PROPOSAL 3(e): PURCHASING OR SELLING COMMODITIES
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will purchase or sell commodity contracts, except that a fund
may, as appropriate and consistent with its investment policies and other
investment restrictions, enter into futures contracts on securities,
securities indices and currency, options on such futures contracts, forward
foreign currency exchange contracts, forward commitments and repurchase
agreements.
AMENDED FUNDAMENTAL RESTRICTION:
- - The funds may not purchase physical commodities or sell physical commodities
unless acquired as a result of ownership of securities or other instruments.
This restriction does not prevent the funds from engaging in transactions
involving futures, contracts and options thereon or investing in securities
that are secured by physical commodities.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. In addition, mutual funds are required to state their
policy with respect to purchasing or selling commodities. The amended
restriction, by explicitly covering physical commodities, fulfills this
requirement. The amended restriction also provides the funds with greater
flexibility, since it allows the funds to invest in securities that are secured
by physical commodities.
PROPOSAL 3(f): MAKING LOANS
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will make loans, except for collateralized loans of portfolio
securities in an amount not exceeding 33 1/3% of a fund's total assets. This
restriction does not prevent a fund from purchasing government obligations,
short-term commercial paper, master demand notes, or publicly traded debt,
including bonds, notes, debentures, certificates of deposit, bankers
acceptances and equipment trust certificates, nor does this restriction apply
to loans made under insurance policies, or through entry into repurchase
agreements, to the extent they may be viewed as loans.
AMENDED FUNDAMENTAL RESTRICTION:
- - The fund may not make personal loans or loans of their assets to persons who
control or are under common control with the funds, except to the extent
permitted by 1940 Act laws, interpretations and exemptions. This restriction
does not prevent the funds from, among other things, purchasing debt
obligations, entering into repurchase agreements, loaning their assets to
broker-dealers or institutional investors, or investing in loans, including
assignments and participation interests.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. The amended restriction also provides the funds with
maximum flexibility with respect to future changes in applicable law regarding
lending restrictions on mutual funds, without incurring the costs of soliciting
a shareholder vote.
If you approve the proposed restriction, the funds will implement the
following non-fundamental investment restriction:
"In complying with these lending restrictions, a fund may lend up to 33 1/3% of
its total assets and may lend money to another AIM Fund, on such terms and
conditions as the SEC may require in an exemptive order."
22
<PAGE> 26
PROPOSAL 3(g): BORROWING MONEY AND ISSUING SENIOR SECURITIES
CURRENT FUNDAMENTAL RESTRICTION:
- - Neither fund will issue senior securities, except to the extent permitted by
the 1940 Act, including permitted borrowings.
AMENDED FUNDAMENTAL RESTRICTION:
- - The funds may not borrow money or issue senior securities, except as permitted
by the 1940 Act laws, interpretations and exemptions.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. The amended restriction also provides the funds with
maximum flexibility with respect to future changes in applicable law regarding
permitted borrowings and issuances of senior securities by mutual funds, without
incurring the costs of soliciting a shareholder vote.
If you approve the proposed restriction, the funds will implement the
following non-fundamental investment restriction:
"In complying with this borrowing restriction, a fund may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings). A fund may borrow from banks,
broker/dealers or other investment companies or their series portfolios that
have AIM or an affiliate of AIM as an investment advisor. A fund may borrow for
leveraging, and may also borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions, or for cash
management purposes."
PROPOSAL 3(h): INVESTING IN AN INVESTMENT COMPANY
WITH THE SAME OBJECTIVES, POLICIES AND LIMITATIONS
CURRENT FUNDAMENTAL RESTRICTION:
- - In addition, each fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies and limitations as each fund.
AMENDED FUNDAMENTAL RESTRICTION:
- - Each fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same investment
objectives, policies and limitations as that fund.
COMMENTARY:
The Board amended the above restriction for improved clarity and uniformity
among the AIM funds. Otherwise, the proposed restriction is substantially
similar to the current restriction.
If you approve the proposed restriction, the funds will have the ability to
invest all of their assets in another investment company. Because the funds do
not currently intend to do so, the funds will implement the following
non-fundamental investment restriction:
"Notwithstanding this fundamental investment restriction, a fund may not invest
all of its assets in the securities of a single open-end management investment
company with the same fundamental investment objectives, policies and
limitations as the fund."
23
<PAGE> 27
IMPLEMENTATION
If you approve each of the above restrictions, they will replace the
fundamental investment restrictions for each fund. Accordingly, they will become
the only fundamental investment restrictions under which your fund will operate.
If approved, the above restrictions may not be changed with respect to your fund
without the approval of the holders of a majority of your fund's outstanding
shares. The Board anticipates that these proposals, if approved, will be
implemented on December 31, 1999.
RECOMMENDATION
YOUR BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THESE PROPOSALS.
PROPOSAL 4 --
CHANGING EACH FUND'S INVESTMENT OBJECTIVE FROM A
FUNDAMENTAL POLICY TO A NON-FUNDAMENTAL POLICY
The Board recommends that you approve changing your fund's investment
objectives from a fundamental policy to a non-fundamental policy. The Board is
asking you to vote on this change because the investment objective of your fund
presently is fundamental and shareholders must approve any change.
The investment objective of each of the funds is long-term growth of
capital. By making this objective non-fundamental, the Board may amend it as it
deems appropriate, without seeking a shareholder vote. The Board does not
anticipate amending the investment objective of either of the funds at the
present time or in the immediate future.
The Board expects that you will benefit from this proposed change because
it will be able to amend your fund's investment objectives without incurring the
time and the costs of a shareholder vote. The Board believes that this
additional flexibility to respond to new developments and changing trends in the
marketplace should make your fund more competitive among its peers.
IMPLEMENTATION
The Board anticipates that this proposal, if approved, will be implemented
on December 31, 1999.
RECOMMENDATION
YOUR BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
PROPOSAL 5 --
RATIFICATION OF SELECTION OF
KPMG LLP AS INDEPENDENT ACCOUNTANTS
The Board has selected KPMG LLP as independent accountants for each fund
for its fiscal year ending July 31, 2000. As each fund's independent
accountants, KPMG LLP will examine and verify the accounts and securities of the
funds and report on them to us and to each fund's shareholders. The Board's
selection will be submitted for your ratification at the meeting.
The Board expects that a representative of KPMG LLP will be present at the
meeting. The representative will have an opportunity to make a statement should
he or she desire to do so and will be available to respond to shareholders'
questions.
RECOMMENDATION
YOUR BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
24
<PAGE> 28
GENERAL INFORMATION
EXECUTIVE OFFICERS OF THE TRUST
You may find information about the executive officers of the trust in
Appendix F.
SECURITY OWNERSHIP OF MANAGEMENT AND 5% HOLDERS
You may find information about the ownership of each class of each fund's
shares by the trustees and by 5% holders of each class in Appendix G.
INVESTMENT ADVISOR, ADMINISTRATOR AND PRINCIPAL UNDERWRITER
A I M Advisors, Inc., whose principal address is 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, serves as the investment advisor and
administrator for the funds.
A I M Distributors, Inc., whose principal address is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173, serves as the principal underwriter for
the funds.
PROXY SOLICITATION
The trust has engaged the services of Shareholder Communications
Corporation (SCC) to assist it in soliciting proxies for the meeting. The trust
estimates that the aggregate cost of SCC's services will be approximately
$26,000. AIM Management will bear the cost of soliciting proxies if shareholders
approve the proposed advisory agreement. The trust will bear the cost of
soliciting proxies if shareholders do not approve the proposed advisory
agreement. The trust expects to solicit proxies principally by mail, but either
the trust or SCC may also solicit proxies by telephone, facsimile, the Internet
or personal interview. AIM Management may also reimburse firms and others for
their expenses in forwarding solicitation materials to the beneficial owners of
shares of the funds.
SHAREHOLDER PROPOSALS
As a general matter, the funds do not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of a fund, you should send such proposal to the trust at the
address set forth on the first page of this proxy statement. To be considered
for presentation at a shareholders' meeting, the trust must receive proposals a
reasonable time before proxy materials are prepared relating to that meeting.
Your proposal also must comply with applicable law.
OTHER MATTERS
The Board does not know of any matters to be presented at the meeting other
than those set forth in this proxy statement. If any other business should come
before the meeting, the persons named in the accompanying proxy will vote
thereon in accordance with their best judgment.
By order of the Board
Charles T. Bauer
Chairman of the Board
November 22, 1999
25
<PAGE> 29
APPENDIX A
NUMBER OF SHARES OUTSTANDING ON SEPTEMBER 29, 1999
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING ON
NAME OF FUND (CLASS) SEPTEMBER 29, 1999
- -------------------- ------------------
<S> <C>
AIM Large Cap Opportunities Fund
Class A shares............................................ 0
Class B shares............................................ 0
Class C shares............................................ 0
AIM Mid Cap Opportunities Fund
Class A shares............................................ 308,799.49
Class B shares............................................ 0
Class C shares............................................ 0
AIM Small Cap Opportunities Fund
Class A shares............................................ 14,966,908.16
Class B shares............................................ 11,221,748.90
Class C shares............................................ 649,215.31
</TABLE>
A-1
<PAGE> 30
APPENDIX B
AIM SPECIAL OPPORTUNITIES FUNDS
FORM OF MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 4th day of November, 1999, by and between AIM
Special Opportunities Funds, a Delaware business trust (the "Trust") with
respect to its series of shares shown on the Appendix A attached hereto, as the
same may be amended from time to time, and A I M Advisors, Inc., a Delaware
corporation (the "Advisor").
RECITALS
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Trust's Amended and Restated Agreement and Declaration of
Trust (the "Declaration of Trust") authorizes the Board of Trustees of the Trust
(the "Board of Trustees") to create separate series of shares of beneficial
interest in the Trust, and as of the date of this Agreement, the Board of
Trustees has created three separate series portfolios (such portfolios and any
other portfolios hereafter added to the Trust being referred to collectively
herein as the "Funds"); and
WHEREAS, the Trust and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for
the Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities
or other properties comprising the Funds' assets, subject at all times to
the policies and control of the Board of Trustees. The Advisor shall give
the Trust and the Funds the benefit of its best judgment, efforts and
facilities in rendering its services as investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Funds, and whether concerning the individual issuers whose securities
are included in the assets of the Funds or the activities in which such
issuers engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in
the Funds' investment portfolios and regularly report thereon to the
Board of Trustees;
(d) formulate and implement continuing programs for the purchases
and sales of the securities of such issuers and regularly report thereon
to the Board of Trustees;
and take, on behalf of the Trust and the Funds, all actions which appear
to the Trust and the Funds necessary to carry into effect such purchase
and sale programs and supervisory functions as aforesaid, including but
not limited to the placing of orders for the purchase and sale of
securities for the Funds.
B-1
<PAGE> 31
3. Delegation of Responsibilities. Subject to compliance with all
applicable provisions of the 1940 Act, any rules and regulations adopted
thereunder, and any exemptive orders issued by the Securities and Exchange
Commission, the Advisor may delegate to a sub-advisor certain of its duties
enumerated in Section 2 hereof, provided that the Advisor shall continue to
supervise the performance of any such sub-advisor.
4. Control by Board of Trustees. Any investment program undertaken by
the Advisor pursuant to this Agreement, as well as any other activities
undertaken by the Advisor on behalf of the Funds, shall at all times be
subject to any directives of the Board of Trustees.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and the Advisers Act
and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Trust, as
the same may be amended from time to time under the Securities Act of
1933 and the 1940 Act;
(c) the provisions of the Declaration of Trust, as the same may be
amended from time to time;
(d) the provisions of the by-laws of the Trust, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign
law.
6. Broker-Dealer Relationships. The Advisor is responsible for
decisions to buy and sell securities for the Funds, broker-dealer
selection, and negotiation of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain execution at the most favorable price.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Funds on a continuing
basis. Accordingly, the price to the Funds in any transaction may be
less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the fund
execution services offered.
(c) Subject to such policies as the Board of Trustees may from time
to time determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Funds to pay a
broker or dealer that provides brokerage and research services to the
Advisor an amount of commission for effecting a fund investment
transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided
by such broker or dealer, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to a
particular Fund, other Funds of the Trust, and to other clients of the
Advisor as to which the Advisor exercises investment discretion. The
Advisor is further authorized to allocate the orders placed by it on
behalf of the Funds to such brokers and dealers who also provide
research or statistical material, or other services to the Funds, to the
Advisor, or to any sub-advisor. Such allocation shall be in such amounts
and proportions as the Advisor shall determine and the Advisor will
report on said allocations regularly to the Board of Trustees indicating
the brokers to whom such allocations have been made and the basis
therefor.
B-2
<PAGE> 32
(d) In making decisions regarding broker-dealer relationships, the
Advisor may take into consideration the recommendations of any
sub-advisor appointed to provide investment research or advisory
services in connection with the Funds, and may take into consideration
any research services provided to such sub-advisor by broker-dealers.
7. Compensation. The compensation that each Fund shall pay the Advisor
is set forth in Appendices B and C attached hereto.
8. Expenses of the Funds. All of the ordinary business expenses
incurred in the operations of the Funds and the offering of their shares
shall be borne by the Funds unless specifically provided otherwise in this
Agreement. These expenses borne by the Funds include but are not limited to
brokerage commissions, taxes, legal, accounting, auditing, or governmental
fees, the cost of preparing share certificates, custodian, transfer and
shareholder service agent costs, expenses of issue, sale, redemption and
repurchase of shares, expenses of registering and qualifying shares for
sale, expenses relating to directors and shareholder meetings, the cost of
preparing and distributing reports and notices to shareholders, the fees
and other expenses incurred by the Trust on behalf of the Funds in
connection with membership in investment company organizations and the cost
of printing copies of prospectuses and statements of additional information
distributed to the Funds' shareholders.
9. Services to Other Companies or Accounts. The Trust understands that
the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and
as investment manager or advisor to other investment companies, including
any offshore entities, or accounts, and the Trust has no objection to the
Advisor so acting, provided that whenever the Trust and one or more other
investment companies or accounts managed or advised by the Advisor have
available funds for investment, investments suitable and appropriate for
each will be allocated in accordance with a formula believed to be
equitable to each company and account. The Trust recognizes that in some
cases this procedure may adversely affect the size of the positions
obtainable for the Funds.
10. Non-Exclusivity. The Trust understands that the persons employed
by the Advisor to assist in the performance of the Advisor's duties under
this Agreement will not devote their full time to such service and nothing
contained in this Agreement shall be deemed to limit or restrict the right
of the Advisor or any affiliate of the Advisor to engage in and devote time
and attention to other businesses or to render services of whatever kind or
nature. The Trust further understands and agrees that officers or directors
of the Advisor may serve as officers or directors of the Trust, and that
officers or directors of the Trust may serve as officers or directors of
the Advisor to the extent permitted by law; and that the officers and
directors of the Advisor are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, directors or trustees of any other firm or
trust, including other investment advisory companies.
11. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such
Fund, on the Effective Date for such Fund, as set forth in Appendix A
attached hereto. If so approved, this Agreement shall thereafter continue
in force and effect until June 30, 2001, and may be continued from year to
year thereafter, provided that the continuation of the Agreement is
specifically approved at least annually:
(a) (i) by the Board of Trustees or (ii) by the vote of "a majority
of the outstanding voting securities" of such Fund (as defined in
Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the trustees who are
not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such
purpose.
12. Termination. This Agreement may be terminated as to the Trust or
as to any one or more of the Funds at any time, without the payment of any
penalty, by vote of the Board of Trustees or by
B-3
<PAGE> 33
vote of a majority of the outstanding voting securities of the applicable
Fund, or by the Advisor, on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by the party entitled
to receipt thereof. This Agreement shall automatically terminate in the
event of its assignment, the term "assignment" for purposes of this
paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
13. Liability of Advisor. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Trust or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security.
14. Liability of Shareholders. Notice is hereby given that, as
provided by applicable law, the obligations of or arising out of this
Agreement are not binding upon any of the shareholders of the Trust
individually but are binding only upon the assets and property of the Trust
and that the shareholders shall be entitled, to the fullest extent
permitted by applicable law, to the same limitation on personal liability
as shareholders of private corporations for profit.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other
party entitled to receipt thereof at such address as such party may
designate for the receipt of such notice. Until further notice to the other
party, it is agreed that the address of the Trust and that of the Advisor
shall be 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the Advisers Act shall
be resolved by reference to such term or provision of the 1940 Act or the
Advisers Act and to interpretations thereof, if any, by the United States
Courts or in the absence of any controlling decision of any such court, by
rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Acts. In addition, where the effect of a
requirement of the 1940 Act or the Advisers Act reflected in any provision
of the Agreement is revised by rule, regulation or order of the Securities
and Exchange Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order. Subject to the foregoing, this
Agreement shall be governed by and construed in accordance with the laws
(without reference to conflicts of law provisions) of the State of Texas.
17. License Agreement. The Trust shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only
so long as A I M Advisors, Inc. serves as investment manager or advisor to
the Trust with respect to such series of shares.
B-4
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
AIM Special Opportunities Funds
(a Delaware business trust)
Attest:
By:
- --------------------------------- --------------------------------------
Assistant Secretary President
A I M Advisors, Inc.
(SEAL)
Attest:
By:
- --------------------------------- -------------------------------------
Assistant Secretary President
(SEAL)
B-5
<PAGE> 35
APPENDIX A TO MASTER INVESTMENT ADVISORY AGREEMENT
FUNDS AND EFFECTIVE DATES
<TABLE>
<CAPTION>
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
- ------------ ------------------
<S> <C>
AIM Large Cap Opportunities Fund............................ December 31, 1999
AIM Mid Cap Opportunities Fund.............................. January 1, 2000
AIM Small Cap Opportunities Fund............................ January 1, 2000
</TABLE>
B-A-1
<PAGE> 36
APPENDIX B TO MASTER INVESTMENT ADVISORY AGREEMENT
COMPENSATION TO THE ADVISOR
AIM LARGE CAP OPPORTUNITIES FUND
The Trust shall pay the Advisor, out of the assets of AIM Large Cap
Opportunities Fund ("Large Cap"), as full compensation for all services rendered
and all facilities furnished to Large Cap hereunder, a management fee consisting
of the sum of a Base Fee and a Performance Adjustment (whether positive or
negative), computed and paid monthly. If the Advisor shall serve for less than
the whole of any period specified herein, the compensation payable to the
Advisor with respect to Large Cap shall be prorated.
The Base Fee shall be at an annual rate of 1.50% of Large Cap's average
daily net assets. In computing the amount of the Base Fee, the Base Fee shall be
applied against Large Cap's average daily net assets computed over the month for
which the Base Fee is paid. The Trust shall pay the Advisor the Base Fee
beginning on the Effective Date for Large Cap, as set forth in Appendix A.
The Performance Adjustment shall be calculated by (i) subtracting the
Investment Record of the Large Cap Benchmark Index, as set forth in Appendix C,
from the Investment Performance of a Class A share of Large Cap over the
Performance Period, (ii) subtracting 2.00% from the number obtained in (i) if
such number is positive, or adding 2.00% if such number is negative, and (iii)
multiplying the number obtained in (ii) (whether positive or negative) by 0.20%.
In computing the amount of the Performance Adjustment, the Performance
Adjustment shall be applied against Large Cap's average daily net assets
computed over the Performance Period. The Performance Adjustment shall not
exceed 1.00% per annum. The Trust shall pay the Advisor the Performance
Adjustment beginning in the thirteenth month following the Effective Date for
Large Cap, so that for the first twelve months following the Effective Date for
Large Cap the Advisor shall receive only the Base Fee.
As used herein, the term "Performance Period" shall mean the twelve month
period ending on the last day of the month immediately preceding the monthly
computation called for herein and the terms "Investment Record" and "Investment
Performance" shall have the meanings set forth in Rule 205-1 of the Advisers
Act. The average daily net asset value of Large Cap shall be determined in the
manner set forth in the Declaration of Trust and registration statement of the
Trust, as amended from time to time.
AIM MID CAP OPPORTUNITIES FUND
The Trust shall pay the Advisor, out of the assets of AIM Mid Cap
Opportunities Fund ("Mid Cap"), as full compensation for all services rendered
and all facilities furnished to Mid Cap hereunder, a management fee consisting
of the sum of a Base Fee and a Performance Adjustment (whether positive or
negative), computed and paid monthly. If the Advisor shall serve for less than
the whole of any period specified herein, the compensation payable to the
Advisor with respect to Mid Cap shall be prorated.
The Base Fee shall be at an annual rate of 1.50% of Mid Cap's average daily
net assets. In computing the amount of the Base Fee, the Base Fee shall be
applied against Mid Cap's average daily net assets computed over the month for
which the Base Fee is paid. The Trust shall pay the Advisor the Base Fee
beginning on the Effective Date for Mid Cap, as set forth in Appendix A.
The Performance Adjustment shall be calculated by (i) subtracting the
Investment Record of the Mid Cap Benchmark Index, as set forth in Appendix C,
from the Investment Performance of a Class A share of Mid Cap over the
Performance Period, (ii) subtracting 2.00% from the number obtained in (i) if
such number is positive, or adding 2.00% if such number is negative, and (iii)
multiplying the number obtained in (ii) (whether positive or negative) by 0.20%.
In computing the amount of the Performance Adjustment, the Performance
Adjustment shall be applied against Mid Cap's average daily net assets computed
over the Performance Period. The Performance Adjustment shall not exceed 1.00%
per annum. The Trust shall pay the Advisor the Performance Adjustment beginning
in the thirteenth month following the Effective Date for Mid Cap, so that for
the first twelve months following the Effective Date for Mid Cap the Advisor
shall receive only the Base Fee.
B-B-1
<PAGE> 37
As used herein, the term "Performance Period" shall mean the twelve month
period ending on the last day of the month immediately preceding the monthly
computation called for herein and the terms "Investment Record" and "Investment
Performance" shall have the meanings set forth in Rule 205-1 of the Advisers
Act. The average daily net asset value of Mid Cap shall be determined in the
manner set forth in the Declaration of Trust and registration statement of the
Trust, as amended from time to time.
AIM SMALL CAP OPPORTUNITIES FUND
The Trust shall pay the Advisor, out of the assets of AIM Small Cap
Opportunities Fund ("Small Cap"), as full compensation for all services rendered
and all facilities furnished to Small Cap hereunder, a management fee consisting
of the sum of a Base Fee and a Performance Adjustment (whether positive or
negative), computed and paid monthly. If the Advisor shall serve for less than
the whole of any period specified herein, the compensation payable to the
Advisor with respect to Small Cap shall be prorated.
The Base Fee shall be at an annual rate of 1.00% of Small Cap's average
daily net assets. In computing the amount of the Base Fee, the Base Fee shall be
applied against Small Cap's average daily net assets computed over the month for
which the Base Fee is paid. The Trust shall pay the Advisor the Base Fee
beginning on the Effective Date for Small Cap, as set forth in Appendix A.
The Performance Adjustment shall be calculated by (i) subtracting the
Investment Record of the Small Cap Benchmark Index, as set forth in Appendix C,
from the Investment Performance of a Class A share of Small Cap over the
Performance Period, (ii) subtracting 2.00% from the number obtained in (i) if
such number is positive, or adding 2.00% if such number is negative, and (iii)
multiplying the number obtained in (ii) (whether positive or negative) by 0.15%.
In computing the amount of the Performance Adjustment, the Performance
Adjustment shall be applied against Small Cap's average daily net assets
computed over the Performance Period. The Performance Adjustment shall not
exceed 0.75% per annum. The Trust shall pay the Advisor the Performance
Adjustment beginning in the thirteenth month following the Effective Date for
Small Cap, so that for the first twelve months following the Effective Date for
Small Cap the Advisor shall receive only the Base Fee.
As used herein, the term "Performance Period" shall mean the twelve month
period ending on the last day of the month immediately preceding the monthly
computation called for herein and the terms "Investment Record" and "Investment
Performance" shall have the meanings set forth in Rule 205-1 of the Advisers
Act. The average daily net asset value of Small Cap shall be determined in the
manner set forth in the Declaration of Trust and registration statement of the
Trust, as amended from time to time.
B-B-2
<PAGE> 38
APPENDIX C TO MASTER INVESTMENT ADVISORY AGREEMENT
BENCHMARK INDICES
AIM LARGE CAP OPPORTUNITIES FUND
The Large Cap Benchmark Index shall be the S&P
500--Registered Trademark-- Index.
AIM MID CAP OPPORTUNITIES FUND
The Mid Cap Benchmark Index shall be the S&P MidCap 400 Index.
AIM SMALL CAP OPPORTUNITIES FUND
The Small Cap Benchmark Index shall be the Russell
2000--Registered Trademark-- Index.
From time to time, the Board of Trustees, by the affirmative vote of the
trustees voting in person, including the affirmative vote of a majority of the
trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of a party to this Agreement, may determine that
another securities index is a more appropriate benchmark than the respective
Benchmark Index above for purposes of evaluating the performance of a Fund. In
such event, after thirty days' written notice to the Advisor, a successor index
(the "Successor Index") may be substituted for a Fund's Benchmark Index in
prospectively calculating the Performance Adjustment for that Fund. However, the
calculation of that portion of the Performance Adjustment attributable to any
portion of the Performance Period prior to the adoption of the Successor Index
will still be based upon the Fund's performance compared to its former Benchmark
Index.
B-C-1
<PAGE> 39
APPENDIX C
EXECUTIVE OFFICERS AND DIRECTORS OF A I M ADVISORS, INC.
The following table provides information with respect to the executive
officers and the directors of A I M Advisors, Inc., all of whose business
address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH AIM PRINCIPAL OCCUPATION
- ---------------- ----------------- --------------------
<S> <C> <C>
Charles T. Bauer............ Chairman of the Board This information is provided in the proxy
Of Directors statement.
Robert H. Graham............ Director & President This information is provided in the proxy
statement.
Gary T. Crum................ Director & Senior Vice This information is provided in Appendix F.
President
Dawn M. Hawley.............. Director, Senior Vice Chief Financial Officer and Senior Vice
President & Treasurer President, A I M Management Group, Inc.;
Senior Vice President, Treasurer and
Director, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Capital
Management, Inc.; Vice President and
Treasurer, A I M Distributors, Inc.; and
Vice President and Treasurer, A I M Fund
Services, Inc. and Fund Management Company.
Carol F. Relihan............ Director, Senior Vice This information is provided in Appendix F.
President, General
Counsel & Secretary
</TABLE>
C-1
<PAGE> 40
APPENDIX D
FEES PAID TO AFFILIATES
IN MOST RECENT FISCAL YEAR
The following chart sets forth the fees paid during the fiscal year ended
July 31, 1999 by the trust to affiliates of A I M Advisors, Inc. The
arrangements pursuant to which these fees accrue are expected to remain
unchanged during the next fiscal year.
<TABLE>
<CAPTION>
AIM
(ADMINISTRATIVE A I M A I M FUND
AGREEMENT) DISTRIBUTORS, INC.* SERVICES, INC.
--------------- -------------------- --------------
<S> <C> <C> <C>
AIM Special Opportunities Funds
AIM Mid Cap Opportunities Fund................... $ 50,801 $ 5,710 $ 656
AIM Small Cap Opportunities Fund................. 109,921 682,059 197,079
</TABLE>
- ---------------
* Net amount received from sales commissions and Rule 12b-1 fees. Excludes
amounts reallocated to brokers, dealers, agents and other service providers.
D-1
<PAGE> 41
APPENDIX E
COMPENSATION INFORMATION FOR OTHER AIM FUNDS
The following table provides information with respect to the compensation
paid to A I M Advisors, Inc. by certain AIM funds that have the same investment
objective as Mid Cap and Small Cap.
<TABLE>
<CAPTION>
RATE OF FEE WAIVERS OR
NAME OF FUND SIZE OF FUND(1) COMPENSATION(2) REDUCTIONS
- ------------ --------------- --------------- --------------
<S> <C> <C> <C>
AIM European Development Fund........ $ 173,713,645 0.95% of 1st $500 Million None
0.90% of amounts over $500 Million
AIM Asian Growth Fund................ 40,174,299 0.95% of 1st $500 Million A portion of the fees are
0.90% of amounts over $500 Million being waived until the Fund
reaches a larger size.
AIM Global Growth Fund............... 805,523,375 0.85% of 1st $1 Billion None
0.80% of amounts over $1 Billion
AIM Capital Development Fund......... 1,046,021,162 0.75% of 1st $350 Million None
0.625% of amounts over $350 Million
AIM Dent Demographic Trends Fund..... 357,424,722 0.85% of 1st $2 Billion None
0.80% of amounts over $2 Billion
AIM Large Cap Growth Fund............ 13,093,766 0.75% of 1st $1 Billion All fees are being waived
0.70% of next $1 Billion and a portion of the Fund's
0.625% of amounts over $2 Billion expenses are being
reimbursed until the Fund
reaches a larger size.
AIM Global Aggressive Growth Fund.... 1,719,154,002 0.90% of 1st $1 Billion None
0.85% of amounts over $1 Billion
AIM Constellation Fund............... 14,340,866,552 1.00% of 1st $30 Million 0.025% of amounts over $2
0.75% of next $120 Million Billion
0.625% of amounts over $150 Million
AIM Aggressive Growth Fund........... 2,720,190,246 0.80% of 1st $150 Million None
0.625% of amounts over $150 Million
</TABLE>
- ---------------
(1) Net Assets as of October 26, 1999
(2) Based on average net assets.
E-1
<PAGE> 42
APPENDIX F
EXECUTIVE OFFICERS OF AIM SPECIAL OPPORTUNITIES FUNDS
The following table provides information with respect to the executive
officers of the trust, other than Messrs. Bauer and Graham for whom information
can be found in the proxy statement. Each executive officer is elected by the
Board and serves until his or her successor is chosen and qualified or until his
resignation or removal by the Board. The business address of all officers of the
trust is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION(S)
POSITION WITH THE TRUST OFFICER SINCE DURING PAST 5 YEARS
- ----------------------- ------------- -----------------------
<S> <C> <C>
Gary T. Crum (52),
Senior Vice President................ March 10, 1998 Director and President, A I M Capital
Management, Inc.; Director and
Executive Vice President, A I M
Management Group Inc.; Director and
Senior Vice President, A I M
Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
Edgar M. Larsen (59),
Senior Vice President.............. March 12, 1998 Vice President, A I M Capital
Management, Inc.
Carol F. Relihan (45),
Senior Vice President &
Secretary.......................... March 10, 1998 Director, Senior Vice President,
General Counsel and Secretary, A I M
Advisors, Inc.; Senior Vice
President, General Counsel and
Secretary, A I M Management Group
Inc.; Director, Vice President and
General Counsel, Fund Management
Company; Vice President and General
Counsel, A I M Fund Services, Inc;
and Vice President, A I M Capital
Management, Inc. and A I M
Distributors, Inc.
Dana R. Sutton (40),
Vice President & Treasurer......... March 10, 1998 Vice President and Fund Controller,
A I M Advisors, Inc.; and Assistant
Vice President and Assistant
Treasurer, Fund Management Company.
Melville B. Cox (56),
Vice President..................... March 10, 1998 Vice President and Chief Compliance
Officer, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company
</TABLE>
F-1
<PAGE> 43
APPENDIX G
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the ownership
of the shares of beneficial interest of each of the funds by the trustees and
officers of the trust. No information is given as to a fund or a class if a
trustee or officer held no shares of any or all classes of such fund as of
September 29, 1999.
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY AS OF PERCENT
NAME OF TRUSTEE/OFFICER FUND (CLASS) SEPTEMBER 29, 1999 OF CLASS
- ----------------------- ------------ ------------------ --------
<S> <C> <C> <C>
Charles T. Bauer...... AIM Mid Cap Opportunities Fund -- Class A shares 38,639.88 12.51%
AIM Small Cap Opportunities Fund -- Class A shares 50,035.59 *
Gary T. Crum.......... AIM Mid Cap Opportunities Fund -- Class A shares 17,680.34 5.73%
AIM Small Cap Opportunities Fund -- Class A shares 25,017.79 *
Robert H. Graham...... AIM Small Cap Opportunities Fund -- Class A shares 9,967.25 *
Edgar M. Larsen....... AIM Mid Cap Opportunities Fund -- Class A shares 199.20 *
AIM Small Cap Opportunities Fund -- Class A shares 5,003.56 *
Carol F. Relihan...... AIM Small Cap Opportunities Fund -- Class A shares 5,995.34 *
Dana R. Sutton........ AIM Small Cap Opportunities Fund -- Class A shares 993.76 *
All Trustees and
Officers............ AIM Mid Cap Opportunities Fund -- Class A shares 56,519.42 18.30%
AIM Small Cap Opportunities Fund -- Class A shares 97,013.29 *
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of the class.
SECURITY OWNERSHIP OF CERTAIN RECORD OWNERS
To the best knowledge of the trust, the names and addresses of the record
holders of 5% or more of the outstanding shares of each of the funds as of
September 29, 1999, and the amount of the outstanding shares owned of record by
such holders, are set forth below. The trust has no knowledge of shares held
beneficially.
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS OWNED
SHARES OF RECORD PERCENTAGE OF OF RECORD
NAME AND ADDRESS OF OWNED AS OF CLASS OWNED AND
FUND CLASS RECORD OWNER SEPTEMBER 29, 1999 OF RECORD BENEFICIALLY
- ---------- ------------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
AIM Mid Cap A I M Advisors, Inc. 100,000.00 -0- 32.38%*
Opportunities Fund Attn: David Hessel
- -- Class A shares 11 Greenway Plaza, Suite 1919
Houston, TX 77046
W. Gary Littlepage and Melinda L. 45,837.13 -0- 14.84%
Littlepage Ten In Common
4623 Banning Dr.
Houston, TX 77027
Charles T. Bauer 38,639.88 -0- 12.51%
c/o AIM Management Group Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
CFP Holdings Ltd (Partnership) 17,680.34 -0- 5.73%
Attn: Gary Crum
11 Greenway Plaza, Suite 1919
Houston, TX 77046
</TABLE>
- ---------------
* A shareholder who holds 25% or more of the outstanding shares of a fund may be
presumed to be in "control" of such fund as defined in the 1940 Act.
G-1
<PAGE> 44
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS OWNED
SHARES OF RECORD PERCENTAGE OF OF RECORD
NAME AND ADDRESS OF OWNED AS OF CLASS OWNED AND
FUND CLASS RECORD OWNER SEPTEMBER 29, 1999 OF RECORD* BENEFICIALLY
- ---------- ------------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
AIM Small Cap Merrill Lynch Pierce Fenner & Smith 1,242,811.37 8.30% -0-
Opportunities Fund FBO The Sole Benefit of Customers
- -- Class A shares Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM Small Cap Merrill Lynch Pierce Fenner & Smith 2,647,325.41 23.59% -0-
Opportunities Fund FBO The Sole Benefit of Customers
- -- Class B shares Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM Small Cap Merrill Lynch Pierce Fenner & Smith 179,807.79 27.70% -0-
Opportunities Fund FBO The Sole Benefit of Customers
- -- Class C shares Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- ---------------
* The trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
G-2
<PAGE> 45
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY!
Please detach at perforation before mailing.
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF
AIM SMALL CAP OPPORTUNITIES FUND
(A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS)
PROXY FOR MEETING OF SHAREHOLDERS DECEMBER 20, 1999
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Meeting
of Shareholders of AIM Small Cap Opportunities Fund, a portfolio of AIM Special
Opportunities Funds, on December 20, 1999, at 2:00 p.m., Central time, and at
any adjournment thereof, all of the shares of the fund which the undersigned
would be entitled to vote if personally present. IF THIS PROXY IS SIGNED AND
RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR" EACH TRUSTEE
AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER: NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
ON THIS PROXY CARD. All joint owners should
sign. When signing as executor, administrator,
attorney, trustee or guardian or as custodian
for a minor, please give full title as such. If
a corporation, please sign in full corporate
name and indicate the signer's office. If a
partner, sign in the partnership name.
-----------------------------------------------
Signature
-----------------------------------------------
Signature (if held jointly)
-----------------------------------------------
Date 10309 B
(Please see reverse side)
<PAGE> 46
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY!
Please detach at perforation before mailing.
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE,
FILL IN THE BOX COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND WRITE THE NOMINEE NUMBER(S) ON
THE LINE PROVIDED. YOUR SHARES WILL BE VOTED "FOR" THE REMAINING NOMINEE(S).
WITHHOLD
1. To elect ten individuals to the Board of AIM FOR AUTHORITY FOR ALL
Special Opportunities Funds, each of whom will ALL FOR ALL NOMINEES EXCEPT
serve until his or her successor is elected and
qualified:
01 Charles T. Bauer 04 Edward K. Dunn, Jr. 07 Robert H. Graham 10 Louis S. Sklar
02 Bruce L. Crockett 05 Jack Fields 08 Prema Mathai-Davis [ ] [ ] [ ]
03 Owen Daly II 06 Carl Frischling 09 Lewis F. Pennock
To withhold your vote for any individual nominee, mark the "For All Except" box and write
the nominee number(s) on the line provided. _____________________________________________
FOR AGAINST ABSTAIN
2. To approve a new Master Investment Advisory Agreement with A I M Advisors, Inc. [ ] [ ] [ ]
3. To approve a proposal to amend the fund's fundamental investment restrictions:
a) Industry Concentration [ ] [ ] [ ]
b) Purchasing Securities of Other Investment Companies [ ] [ ] [ ]
c) Underwriting Securities [ ] [ ] [ ]
d) Purchasing or Selling Real Estate [ ] [ ] [ ]
e) Purchasing or Selling Commodities [ ] [ ] [ ]
f) Making Loans [ ] [ ] [ ]
g) Borrowing Money and Issuing Senior Securities [ ] [ ] [ ]
h) Investing in an Investment Company with the Same Objectives, Policies and Limitations [ ] [ ] [ ]
4. To approve a proposal to change the fund's investment objective from a fundamental policy
to a non-fundamental policy. [ ] [ ] [ ]
5. To ratify the selection of KPMG LLP as independent accountants of the fund for the fiscal
year ending in 2000. [ ] [ ] [ ]
6. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
<PAGE> 47
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY!
Please detach at perforation before mailing.
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF
AIM MID CAP OPPORTUNITIES FUND
(A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS)
PROXY FOR MEETING OF SHAREHOLDERS DECEMBER 20, 1999
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Meeting
of Shareholders of AIM Mid Cap Opportunities Fund, a portfolio of AIM Special
Opportunities Funds, on December 20, 1999, at 2:00 p.m., Central time, and at
any adjournment thereof, all of the shares of the fund which the undersigned
would be entitled to vote if personally present. IF THIS PROXY IS SIGNED AND
RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR" EACH TRUSTEE
AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER: NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
ON THIS PROXY CARD. All joint owners should
sign. When signing as executor, administrator,
attorney, trustee or guardian or as custodian
for a minor, please give full title as such. If
a corporation, please sign in full corporate
name and indicate the signer's office. If a
partner, sign in the partnership name.
-----------------------------------------------
Signature
-----------------------------------------------
Signature (if held jointly)
-----------------------------------------------
Date 10309 A
(Please see reverse side)
<PAGE> 48
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY!
Please detach at perforation before mailing.
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE,
FILL IN THE BOX COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND WRITE THE NOMINEE NUMBER(S) ON
THE LINE PROVIDED. YOUR SHARES WILL BE VOTED "FOR" THE REMAINING NOMINEE(S).
WITHHOLD
1. To elect ten individuals to the Board of AIM FOR AUTHORITY FOR ALL
Special Opportunities Funds, each of whom will ALL FOR ALL NOMINEES EXCEPT
serve until his or her successor is elected and
qualified:
01 Charles T. Bauer 04 Edward K. Dunn, Jr. 07 Robert H. Graham 10 Louis S. Sklar
02 Bruce L. Crockett 05 Jack Fields 08 Prema Mathai-Davis [ ] [ ] [ ]
03 Owen Daly II 06 Carl Frischling 09 Lewis F. Pennock
To withhold your vote for any individual nominee, mark the "For All Except" box and write
the nominee number(s) on the line provided. _____________________________________________
FOR AGAINST ABSTAIN
2. To approve a new Master Investment Advisory Agreement with A I M Advisors, Inc. [ ] [ ] [ ]
3. To approve a proposal to amend the fund's fundamental investment restrictions:
a) Industry Concentration [ ] [ ] [ ]
b) Purchasing Securities of Other Investment Companies [ ] [ ] [ ]
c) Underwriting Securities [ ] [ ] [ ]
d) Purchasing or Selling Real Estate [ ] [ ] [ ]
e) Purchasing or Selling Commodities [ ] [ ] [ ]
f) Making Loans [ ] [ ] [ ]
g) Borrowing Money and Issuing Senior Securities [ ] [ ] [ ]
h) Investing in an Investment Company with the Same Objectives, Policies and Limitations [ ] [ ] [ ]
4. To approve a proposal to change the fund's investment objective from a fundamental policy
to a non-fundamental policy. [ ] [ ] [ ]
5. To ratify the selection of KPMG LLP as independent accountants of the fund for the fiscal
year ending in 2000. [ ] [ ] [ ]
6. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
