<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. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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:
-----------------------------------------------------------------------
<PAGE> 2
[ ] 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> 3
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., local 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. Thank you for
your cooperation and continued support. You may also vote your shares on the
web at http://www.aimfunds.com by following instructions that appear on the
enclosed proxy insert.
November 22, 1999
Charles T. Bauer
Chairman of the Board
<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 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., local 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:
PROPOSAL AFFECTED FUNDS
-------- --------------
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 Both funds
non-fundamental policies
5. Ratifying the Board's selection of independent accountants Both funds
6. Considering other matters Both funds
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
<PAGE> 5
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. 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:
o FOR electing all ten nominees for trustee.
o FOR approving a new advisory agreement for your fund.
o FOR amending your fund's fundamental investment restrictions.
o FOR changing your fund's investment objective from a fundamental
policy to a non-fundamental policy.
o 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 or her 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:
o You may send in another proxy with a later date.
o You may notify the trust's secretary in writing before the
meeting that you have revoked your proxy.
o You may vote in person at the meeting.
o You may vote by telephone.
o 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.
2
<PAGE> 6
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
o 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.
o 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
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.
o 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 the effect
of votes against this proposal.
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.
3
<PAGE> 7
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.
4
<PAGE> 8
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, A I M Management
11 Greenway Plaza Group Inc.; A I M Advisors, Inc., A I M Capital
Suite 100 Management, Inc.; A I M Distributors, Inc.; A I M Fund
Houston, TX 77046-1173 Services, Inc. and Fund Management Company; and Vice
Chairman and Director, AMVESCAP PLC.
Bruce L. Crockett (55) February 5, 1998 Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer,
McLean, VA 22102 COMSAT Corporation; and Chairman, Board of Governors
of INTELSAT (international communications company).
Owen Daly II (75) February 5, 1998 Director, Cortland Trust Inc. (investment company).
Six Blythewood Road Formerly, Director, CF & I Steel Corp., Monumental
Baltimore, MD 21210 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, Mercantile
2 Hopkins Plaza, 20th Floor Mortgage Corporation. Formerly, Vice Chairman of the
Baltimore, MD 21201 Board of Directors and President, Mercantile-Safe
Deposit & Trust Co.; and President, Mercantile
Bankshares.
Jack Fields (47) February 5, 1998 Chief Executive Officer, Texana Global, Inc. (foreign
Texana Global, Inc. trading company) and Twenty First Century Group, Inc.
8810 Will Clayton Parkway (a governmental affairs company). Formerly, Member of
Jetero Plaza, Suite E the U.S. House of Representatives.
Humble, TX 77338
</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.
5
<PAGE> 9
<TABLE>
<CAPTION>
Name, Address and Age Trustee Since Principal Occupation During Past 5 Years
- --------------------- ------------- ----------------------------------------
<S> <C> <C>
**Carl Frischling (62) February 5, 1998 Partner, Kramer Levin Naftalis & Frankel LLP (law
919 Third Avenue firm). Formerly Partner, Reid & Priest (law firm).
New York, NY 10022
*Robert H. Graham (52) February 4, 1998 Director, President and Chief Executive Officer, A I M
11 Greenway Plaza Management Group Inc.; Director and President, A I M
Suite 100 Advisors, Inc.; Director and Senior Vice President,
Houston, TX 77046-1173 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 (48) September 10, 1998 Chief Executive Officer, YWCA of the U.S.A.,
350 Fifth Avenue, Suite 301 Commissioner, New York City Department for the Aging;
New York, NY 10118 and Member, Board of Directors, Metropolitan
Transportation Authority of New York State.
Lewis F. Pennock (56) February 5, 1998 Attorney in private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, TX 77057
Louis S. Sklar (60) February 5, 1998 Executive Vice President, Development and Operations,
Transco Tower, 50th Floor Hines Interests Limited Partnership (real estate
2800 Post Oak Boulevard 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.
6
<PAGE> 10
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:
o meeting with the trust's auditors to review audit procedures and
results for each fund;
o 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
o 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:
o reviewing portfolio compliance, brokerage allocation, portfolio
investment pricing issues, interim dividend and distribution
issues; and
o 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:
o 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;
o reviewing from time to time the compensation payable to the
disinterested trustees; and
o 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
7
<PAGE> 11
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.
Set forth below is information regarding compensation paid or accrued
for each trustee:
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM THE RETIREMENT BENEFITS ACCRUED TOTAL COMPENSATION FROM
TRUST(1) BY ALL AIM FUNDS(2) ALL AIM FUNDS(3)
<S> <C> <C> <C>
TRUSTEE
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.
8
<PAGE> 12
(5) Mr. Kroeger was a trustee until June 11, 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
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.
9
<PAGE> 13
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.
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:
10
<PAGE> 14
o replacing a fee formula based strictly on net asset value with a
performance-based fee;
o omitting references to the provision of administrative services
to the trust;
o omitting certain expense limitations that are no longer
applicable; and
o 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 principal executive officer 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:
o brokerage commissions;
o taxes;
o legal, auditing or governmental fees;
o the cost of preparing share certificates;
o custodian, transfer and shareholder service agent costs;
o expenses of issue, sale, redemption, and repurchase of shares;
11
<PAGE> 15
o expenses of registering and qualifying shares for sale;
o expenses relating to trustee and shareholder meetings;
o the cost of preparing and distributing reports and notices to
shareholders;
o the fees and other expenses incurred by the funds in connection
with membership in investment company organizations;
o the cost of printing copies of prospectuses and statements of
additional information distributed to the funds' shareholders;
and
o 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 trust (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 without further 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 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 primary changes to the proposed advisory agreement that the Board
approved are:
12
<PAGE> 16
o 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;
o 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;
o To omit certain expense limitations that are no longer
applicable; and
o 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 1.50% of the fund's average daily
net assets. If there is less than a 2.00% 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 2.00% or more 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.
13
<PAGE> 17
Performance-Based Fee for Small Cap. Under the proposed advisory
agreement, the base fee for Small Cap will be 1.00% of the fund's average daily
net assets. If there is less than a 2.00% 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 2.00% or more 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 performance was 18%, AIM would be entitled to
receive additional compensation 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 0.20% multiplied by the average daily net assets of Mid 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. The
Board will submit proposed changes in the benchmark index to shareholders for
their approval unless the SEC takes the 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.
14
<PAGE> 18
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 from those used by
other funds managed by AIM and there are few comparable funds being offered to
mutual fund investors, the funds believed that it would be appropriate to limit
the marketing of the funds to investors who are familiar with the types of
investment strategies the funds use. The funds also require a minimum initial
investment ($10,000) that is higher than that required by the other AIM funds
($500). Although there are no other AIM funds with investment strategies similar
to the strategies of the funds, you may find the compensation structures for
other AIM funds with similar investment objectives in Appendix E.
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>
15
<PAGE> 19
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 0.35 0.35 1.00 1.00 1.00 1.00
Service (12b-1) Fees
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 7.52 8.56 8.19 9.23 8.19 9.23
Operating Expenses
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) Class of shares is not currently offered for sale. 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.
16
<PAGE> 20
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 0.35 0.35 1.00 1.00 1.00 1.00
Service (12b-1) Fees
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 2.35% 2.86% 3.03% 3.54% 3.03% 3.54%
Operating Expenses
</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
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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>
17
<PAGE> 21
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
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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>
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 believes that the references to the provision of
administrative services should be omitted from the proposed advisory agreement
because they are unnecessary and potentially confusing. 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 the existing 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.
If you approve the proposed advisory agreement, the Master
Administrative Services Agreement will be amended to omit any references to the
advisory agreement. The amended Master Administrative Services Agreement will
become effective on the same date as the new advisory agreement.
18
<PAGE> 22
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 meetings held on September 24, 1999 and November 4, 1999.
The independent trustees also discussed approval of the proposed advisory
agreement with independent counsel at in-person meetings. 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:
o 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 resources and are more complex to manage than funds that
do not engage in these practices.
19
<PAGE> 23
o 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.
o 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, this fee would generally far exceed the
proposed fee.
o 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.
o The funds are marketed to persons who are familiar with the investment
strategies the funds use. The funds also require a higher minimum
initial investment than that required for other AIM funds.
o 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.
o 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%) 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.
o 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 investment objectives and policies. The Board also
noted that each index is widely recognized and broadly published.
o 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.
20
<PAGE> 24
REVIEW PROCESS OF THE BOARD
In reaching its decision, the Board examined and weighed many factors,
including:
o 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);
o 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;
o 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;
o the organizational capabilities, financial condition and future
capital requirements of AIM and its affiliates;
o an analysis of the proposed performance-based fees, including
information concerning each fund's expense ratio on both an
existing and pro forma basis;
o 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
o 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 fiscal period or year ended July 31, 1999, Mid Cap was ranked 1 by Lipper
out of 421 comparable mutual funds ranked by Lipper, and Small Cap was ranked 11
by Lipper out of 704 comparable mutual funds ranked by Lipper. These rankings do
not take into account the deduction of applicable sales charges.
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:
21
<PAGE> 25
MID CAP OPPORTUNITIES
12/30/98 - 7/31/99
<TABLE>
<CAPTION>
PERCENTAGE
RETURN
-----------
<S> <C>
Mid Cap Opportunities 49.15%
Lipper Mid-Cap Funds Avg* 9.88%
S&P Mid Cap 400 IX Tr 8.69%
</TABLE>
SMALL CAP OPPORTUNITIES
7/31/98 - 7/31/99
<TABLE>
<CAPTION>
PERCENTAGE
RETURN
-----------
<S> <C>
Small Cap Opportunities 43.95%
Lipper Small-Cap Funds Avg 9.08%
Russell 2000 IX 7.41%
</TABLE>
Source: Lipper, Inc. Fund returns include the 5.50% sales charge.
* Lipper Mid-Cap Funds average return for the period 12/31/98 through 7/31/99.
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 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
22
<PAGE> 26
funds' investment strategies. The Board also considered the background of the
portfolio managers and other executive personnel of AIM and its affiliates.
ACTUAL AND PRO FORMA MANAGEMENT FEES AND EXPENSES. The Board considered
the effect of the proposed performance-based fee 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 tables under the heading "Effect of an
Increase in the Management Fee" provide comparative data for the fiscal period
or year ended July 31, 1999, assuming that the proposed performance-based fee
had been in effect throughout the period or year.
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 the 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 the implementation of performance-based fees. The Board also considered
the fact that 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.
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.
23
<PAGE> 27
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 this change 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. These investment objectives and
policies will not change if you approve the proposed investment restrictions.
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.
24
<PAGE> 28
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 plans to adopt internal guidelines
for the funds which AIM must 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.
25
<PAGE> 29
PROPOSAL 3(a): INDUSTRY CONCENTRATION
CURRENT FUNDAMENTAL RESTRICTION: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will concentrate its o The funds will not make investments
investments; that is, invest 25% or that will result in the
more of the value of its assets in concentration (as that term may be
issuers which conduct their defined or interpreted by the 1940
business operations in the same Act, and the rules and regulations
industry. 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 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 adopt 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."
26
<PAGE> 30
PROPOSAL 3(b): PURCHASING SECURITIES OF OTHER INVESTMENT COMPANIES
CURRENT FUNDAMENTAL RESTRICTION: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will invest for o The funds may purchase
the purpose of exercising securities of other investment
control over or management over companies to the extent
a company except that a fund permitted by the 1940 Act laws,
may purchase securities of interpretations and exemptions.
other investment companies to
the extent permitted by
applicable law or exemptive
order.
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: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will act as an o The funds may not underwrite
underwriter, except to the the securities of other
extent that, in connection with issuers. This restriction does
the disposition of portfolio not prevent the funds from
securities, a fund may be engaging in transactions
deemed to be an underwriter for involving the acquisition,
purposes of the 1933 Act. 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: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will purchase or o The funds may not purchase real
sell real estate or any estate or sell real estate
interest therein, except that a unless acquired as a result
fund
27
<PAGE> 31
may, as appropriate and of ownership of securities or
consistent with its investment other instruments. This
policies and other investment restriction does not prevent
restrictions, invest in the funds from investing in
securities of entities secured issuers that invest, deal, or
by real estate or marketable otherwise engage in
interests therein or securities transactions in real estate or
of issuers that engage in real interests therein, or investing
estate operations or interests in securities that are secured
therein, and may hold and sell by real estate or interests
real estate acquired as a therein.
result of ownership in such
securities.
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.
PROPOSAL 3(e): PURCHASING OR SELLING COMMODITIES
CURRENT FUNDAMENTAL RESTRICTION: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will purchase or o The funds may not purchase
sell commodity contracts, physical commodities or sell
except that a fund may, as physical commodities unless
appropriate and consistent with acquired as a result of
its investment policies and ownership of securities or
other investment restrictions, other instruments. This
enter into futures contracts on restriction does not prevent
securities, securities indices the funds from engaging in
and currency, options on such transactions involving futures,
futures contracts, forward contracts and options thereon
foreign currency exchange or investing in securities that
contracts, forward commitments are secured by physical
and repurchase agreements. 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
in their statements of additional information 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: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will make loans, o The fund may not make personal
except for collateralized loans loans or loans of their assets
of portfolio securities in an to persons who control or are
amount not exceeding 33 1/3% of under common control
a fund's
28
<PAGE> 32
total assets. This restriction with the funds, except to the
does not prevent a fund from extent permitted by 1940 Act
purchasing government laws, interpretations and
obligations, short-term exemptions. This restriction
commercial paper, master demand does not prevent the funds
notes, or publicly traded debt, from, among other things,
including bonds, notes, purchasing debt obligations,
debentures, certificates of entering into repurchase
deposit, bankers acceptances agreements, loaning their
and equipment trust assets to broker-dealers or
certificates, nor does this institutional investors, or
restriction apply to loans made investing in loans, including
under insurance policies, or assignments and participation
through entry into repurchase interests.
agreements, to the extent they
may be viewed as loans.
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 adopt 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."
PROPOSAL 3(g): BORROWING MONEY AND ISSUING SENIOR SECURITIES
CURRENT FUNDAMENTAL RESTRICTION: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o Neither fund will issue senior o The funds may not borrow money
securities, except to the or issue senior securities,
extent permitted by the 1940 except as permitted by the 1940
Act, including permitted Act laws, interpretations and
borrowings. exemptions.
29
<PAGE> 33
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 adopt 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: AMENDED FUNDAMENTAL RESTRICTION:
- ------------------------------- -------------------------------
o In addition, each fund may, o Each fund may, notwithstanding
notwithstanding any other any other fundamental
fundamental investment policy investment policy or
or limitation, invest all of limitation, invest all of its
its assets in the securities of assets in the securities of a
a single open-end management single open-end management
investment company with investment company with
substantially the same substantially the same
fundamental investment investment objectives, policies
objectives, policies and and limitations as that fund.
limitations as each 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 adopt 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."
30
<PAGE> 34
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 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 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.
31
<PAGE> 35
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 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.
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.
AFFILIATES
You may find information about certain affiliations and affiliated
transactions between the trustees, the nominees and the executive officers of
the trust, on one hand, and AIM and its affiliates, on the other hand, in
Appendix H.
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.
32
<PAGE> 36
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 $[ ].
AIM Management will bear the primary cost of soliciting proxies, although the
trust will bear certain incremental costs. 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
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman of the Board
November 22, 1999
33
<PAGE> 37
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 Mid Cap Opportunities Fund
Class A........................................... 308,799.49
Class B........................................... 0
Class C........................................... 0
AIM Small Cap Opportunities Fund
Class A........................................... 14,966,908.16
Class B........................................... 11,221,748.90
Class C........................................... 649,215.31
</TABLE>
A-1
<PAGE> 38
APPENDIX B
AIM SPECIAL OPPORTUNITIES FUNDS
FORM OF MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this ____ day of __________, ____, 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 "l940 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:
B-1
<PAGE> 39
(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.
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.
B-2
<PAGE> 40
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.
(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
B-3
<PAGE> 41
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.
B-4
<PAGE> 42
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 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-5
<PAGE> 43
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
(SEAL)
Attest: A I M Advisors, Inc.
By:
- ---------------------------------- ------------------------------------
Assistant Secretary President
(SEAL)
B-6
<PAGE> 44
APPENDIX A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT
- ------------ ------------------------------------
AIM Large Cap Opportunities Fund December 31, 1999
AIM Mid Cap Opportunities Fund January 1, 2000
AIM Small Cap Opportunities Fund January 1, 2000
B-A-1
<PAGE> 45
APPENDIX B
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.
B-B-1
<PAGE> 46
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.
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
B-B-2
<PAGE> 47
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-3
<PAGE> 48
APPENDIX C
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> 49
APPENDIX C
EXECUTIVE OFFICERS AND DIRECTORS OF A I M ADVISORS, INC.
The following table provides information with respect to the principal
executive officer and the directors of A I M Advisors, Inc., all of whose
business address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
NAME AND ADDRESS POSITION WITH AIM PRINCIPAL OCCUPATION
- ---------------- ----------------- --------------------
Charles T. Bauer Chairman of the Board This information is provided
Of Directors in the proxy statement.
Robert H. Graham Director & President This information is provided
in the proxy statement.
Gary T. Crum Director & Senior This information is provided
Vice President in Appendix F.
Dawn M. Hawley Director, Senior Vice Senior Vice President and
President & Treasurer Chief Financial Officer, A I M
Management Group, Inc.;
Director, Senior Vice President
and Treasurer, 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.
Carol F. Relihan Director, Senior Vice This information is provided
President, General in Appendix F.
Counsel & Secretary
C-1
<PAGE> 50
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> 51
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 COMPENSATION
NAME OF FUND SIZE OF FUND(1) BASED ON AVERAGE FEE WAIVERS OR
NET ASSETS REDUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM European Development Fund 0.95% of 1st $500 Million None
$ 173,713,645 0.90% of amounts over $500 Million
- ------------------------------------------------------------------------------------------------------------------------------------
0.95% of 1st $500 Million A portion of the fees are being
AIM Asian Growth Fund $ 40,174,299 0.90% of amounts over $500 Million 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 0.75% of 1st $350 Million None
$ 1,046,021,162 0.625% of amounts over $350 Million
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Dent Demographic Trends Fund 0.85% of 1st $2 Billion None
$ 357,424,722 0.80% of amounts over $2 Billion
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Growth Fund 0.75% of 1st $1 Billion All fees are being waived and a
$ 13,093,766 0.70% of next $1 Billion portion of the Fund's expenses
0.625% of amounts over $2 Billion are being reimbursed until the
Fund reaches a larger size.
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Global Aggressive Growth Fund 0.90% of 1st $1 Billion None
$ 1,719,154,002 0.85% of amounts over $1 Billion
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Constellation Fund $ 14,340,866,552 1.00% of 1st $30 Million
0.75% of next $120 Million
0.625% of amounts over $150 Million
0.025% of amounts over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Aggressive Growth Fund 0.80% of 1st $150 Million None
$ 2,720,190,246 0.625% of amounts over $150 Million
</TABLE>
(1) Net Assets as of October 26, 1999
E-1
<PAGE> 52
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 POSITION PRINCIPAL OCCUPATION(S)
WITH THE TRUST OFFICER SINCE DURING PAST 5 YEARS
- ---------------------- -------------- -----------------------
<S> <C> <C>
Gary T. Crum (52), March 10, 1998 Director and President, A I M
Senior Vice President 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. Larson (59), March 12, 1998 Vice President, A I M Capital
Senior Vice President Management, Inc.
Carol F. Relihan (44), March 10, 1998 Director, Senior Vice President,
Senior Vice President & Secretary 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), March 10, 1998 Vice President and Fund Controller,
Vice President & Treasurer A I M Advisors, Inc.; and Assistant
Vice President and Assistant
Treasurer, Fund Management Company.
Melville B. Cox (55), March 10, 1998 Vice President and Chief Compliance
Vice President 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> 53
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. No information is given as to a fund or a class if a trustee 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 FUND (CLASS) SEPTEMBER 29, 1999 OF CLASS
- --------------- ------------ ------------------ --------
<S> <C> <C> <C>
Charles T. Bauer............ AIM Mid Cap Opportunities Fund
Class A................................ 38,639.88 12.51%
AIM Small Cap Opportunities Fund
Class A................................ 50,035.59 0.33%
Robert H. Graham............ AIM Small Cap Opportunities Fund
Class A................................ 9,967.25 0.07%
All Trustees................ AIM Mid Cap Opportunities Fund
Class A................................ 38,639.88 12.51%
AIM Small Cap Opportunities Fund
Class A................................ 60,002.83 0.40%
</TABLE>
- --------------------
* Less than 1% of the outstanding shares of the class.
G-1
<PAGE> 54
SECURITY OWNERSHIP OF CERTAIN RECORD OWNERS
To the best knowledge 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 Percentage of
Shares of Record of Class Class Owned
Name and Address of Owned as of Owned of of Record and
Fund Class Record Owner September 29, 1999 Record* Beneficially
- ---------------------- ------------------------------- ------------------ ---------- ------------
<S> <C> <C> <C> <C>
AIM Mid Cap A I M Advisors, Inc.
Opportunities Fund - Attn: David Hessel 100,000.00 32.38%** -0-
Class A Shares 11 Greenway Plaza, Suite 1919
Houston, TX 77046
W. Gary Littlepage and Melinda L.
Littlepage Ten In Common 45,837.13 -0- 14.84%
4623 Banning Dr.
Houston, TX 77027
Charles T. Bauer
C/o AIM Management Group Inc. 38,639.88 -0- 12.51%
11 Greenway Plaza, Suite 100
Houston, TX 77046
CFP Holdings Ltd (Partnership)
Attn: Gary Crum 17,680.34 5.73% -0-
11 Greenway Plaza, Suite 100
</TABLE>
- --------------------------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
** 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-2
<PAGE> 55
<TABLE>
<CAPTION>
Percentage Percentage of
Shares of Record of Class Class Owned
Name and Address of Owned as of Owned of of Record and
Fund Class Record Owner September 29, 1999 Record* Beneficially
- ---------------------- ------------------------------- ------------------ ---------- ------------
<S> <C> <C> <C> <C>
AIM Small Cap Merrill Lynch Pierce 1,242,811.37 8.30% -0-
Opportunities Fund - Fenner & Smith
Class A Shares FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr.,
East 2nd Floor
Jacksonville, FL 32246
AIM Small Cap Merrill Lynch Pierce 2,647,325.41 23.59% -0-
Opportunities Fund - Fenner & Smith
Class B Shares FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr.,
East 2nd Floor
Jacksonville, FL 32246
AIM Small Cap Merrill Lynch Pierce 179,807.79 27.70% -0-
Opportunities Fund - Fenner & Smith
Class C Shares FBO The Sole Benefit of Customers
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.
** 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-3
<PAGE> 56
APPENDIX H
AFFILIATES
Include the Following information, if Applicable:
1. Any substantial interest, direct or indirect, by Security Holdings or
otherwise, of each Nominee, Trustee or Executive Officer since the beginning of
the last fiscal year in any matter to be acted upon, other than the election of
Directors [Items 5(a)(1) and 5(a)(3) of Schedule 14A];
2. Any purchases or sales of shares of AIM, its Parents, or Subsidiaries of
either since the beginning of the last fiscal year by any Nominee or Trustee
[Item 22(a)(3)(v) of Schedule 14A];
3. Each Nominee or Trustee who is, or was during the past 5 years, an Officer,
employee, Director, General Partner or Shareholder of AIM or had any material
direct or indirect interest in AIM or AIM Distributors [Items 22(b)(1), 22(b)(2)
and 22(c)(5) of Schedule 14A];
4. Any material interest, direct or indirect, of any Nominee or Trustee in any
material transactions since the beginning of the last fiscal year, or in any
proposed material transactions, to which AIM, AIM Distributors, any Parent or
Subsidiary of such entities (other than another fund), or any Subsidiary of the
Parent, was or is to be a Party [Items 22(b)(3) and 22(c)(6) of Schedule 14A];
and
5. The information required by Items 401, 404(a) and (c), and 405 of Regulation
S-K [Item 22(b)(5) of Schedule 14A.
H-1
<PAGE> 57
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 [ ] 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 [ ] Cap Opportunities Fund, a portfolio of AIM Special
Opportunities Funds, on December 20, 1999, at 2:00 p.m., local 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)
---------------------------------------------
Dated
<PAGE> 58
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE
TRUSTEES RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE, FILL IN BOX
COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S)'
NAME OR THE RESTRICTION(S), AS APPLICABLE. YOUR SHARES WILL BE
VOTED "FOR" THE REMAINING NOMINEE(S), AS APPLICABLE.
1. To elect ten individuals to the Board of AIM Special Opportunities
Funds, each of whom will serve until his or her successor is elected
and qualified:
WITHHOLD AUTHORITY
FOR FOR ALL NOMINEES FOR ALL EXCEPT
[ ] [ ] [ ]
Charles T. Bauer Carl Frischling
Bruce L. Crockett Robert H. Graham
Owen Daly II Dr. Prema Mathai-Davis
Edward K. Dunn Jr. Lewis F. Pennock
Jack Fields Louis S. Sklar
2. To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve a proposal to amend the fund's fundamental investment
restrictions:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
(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
</TABLE>
<PAGE> 59
4. To approve a proposal to change the fund's investment objective from a
fundamental policy to a non-fundamental policy.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To ratify the selection of KPMG LLP as independent accountants of the
fund for the fiscal year ending in 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
<PAGE> 60
- --------------------------------------------------------------------------------
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> <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, Trustee
</TABLE>
